Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (54582)	5/22/2006 9:58:49 AM
From: Think4Yourself	Read Replies (1) \| Respond to of 306849

That does seem awfully cheap and it has a basement as well. Could be a walkout, which allows them to count the basement in footage. They may also be using old style rafters and 2x lumber for joists, rather than the far superior engineered woods. That would save a lot of money.

To: John Vosilla who wrote (54582)	5/22/2006 1:44:30 PM
From: Tradelite	Read Replies (2) \| Respond to of 306849

<<New 3500 sf home in Indianapolis by Centex for only $159k. How can they make a profit? I thought construction costs have gone through the roof the last couple of years. Jeez $45 psf for the living area and you get everything else for free. Yes it is a two story production boxy home but still seems way to low. Something does not make sense to me<g>>> John, it's all about land costs, not cost of construction of a particular house. We have always had major builders in the Wash DC area who can build the very same model of house on cheaper land in outlying areas at far less than they build the the very same house on expensive land located close-in to major employment areas and commuter routes. The major builders (the guys you folks on this thread love to short) get land at a certain price in areas way outside of "town" and build houses there for the same price they build a house "in town"--only difference is price of land and cutting back on certain fine finishing details that higher-income people expect in a close-in home--such as maybe hardwood floors in kitchen, extensive molding, jacuzzi tubs in master bath. They use the same floorplans in either case. Sames them big money. It all boils down to location, location, location.

To: John Vosilla who wrote (54582)	5/22/2006 3:12:50 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

The building costs experienced by large builders is in no way comparable to what the ordinary public pays. Yes, $159k for a 3,500 sq ft home is $45.43 per square foot, assuming the land is thrown in for free. Builders will quote you $115 per square foot, or even $325 in some areas, to do the same. When I've posted here the price Pardee Homes pays to build homes, self-appointed experts have claimed I'm mistaken - just look in an appraisal cost book, they say. I'm not mistaken. Take an expensive location like San Diego and a pleasant 2,300 sq.ft. Pardee home selling for $1.4 million: _Building cost is $135k or $58.70 per sq.ft. because this is the top of the line model; _Lot cost is $210k because Pardee bought the land a long time ago, and the; _Gross profit margin is 75%. Compare that with an individual builder with a pleasant 2,300 sq.ft. home selling for $1.4 million: _Building cost is $690k or $300 per sq.ft. because this is the top of the line model; _Lot cost is $650k because the builder bought recently, and the; _Gross profit margin is 4%. During a downturn, if Pardee chooses to accept the 4% profit margin of the small builder, Pardee can sell the $1.4 million dollar home for $410k. Like that air-pocket Pulte Homes introduced in Las Vegas two years ago when they lowered the price on their homes by 25%? Previous buyers were outraged and shocked, but not in a position to do anything about it other than continue paying their mortgage on-time. Its possible that Centex may be down to a 4% margin in the particular area you mention to clear out their product. DR Horton was doing that a few years ago on some Houston projects I saw. How can large builder's costs be so much lower? _Major, major price concessions by vendors who make everything which goes into the house and everything used to design and manufacture it due to volume; _Employees on a salary with a long-term contract moving from site to site; _The same home assembly everywhere - I'm sure you've seen the television programs where homes are built in one day after the foundation has set. _Large portions of the home, involving detailed assembly, are often built in factories and often by machines, and trucked to the site on a truck with a built in derrick. _Efficiency of operation through-out. .