There have been big advances in materials, labor saving devices and building technology. Why hasn't the price gone down for new SFH?
Why don't houses follow Moore's law?
By CL Follow Thu, 31 May 2012, 12:23pm 6,283 views 68 comments
In Emeryville CA 94608
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Corning, NY
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The physical house is only part of the cost. The dirt under it is what you pay for. They're not making any more land.
In places like they Bay Area you can pay $400k for a run-down shack. The shack itself isn't worth much. It's the dirt under it that's valuable.
The dirt is valuable because there are lots of high-paying jobs near that dirt. And the dirt has nice weather just above it and is near the ocean.
In places like Houston, the dirt is much less valuable, since there's so much of it just waiting for development. There, most of your hard-earned money goes into building the house rather than fighting off other humans. It's a much more productive use of your hard-earned money.
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Emeryville, CA
wthrfrk80 says
I've heard that too. But they do manage to build upwards, like all around me in SF. And there are vacant lots.
And there are places not too far from the Bay where building could occur. Now, I know there is some NIMBYism, and regulations, etc, but they can and do develop around here. I wonder if we all drank that Kool-aid?
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CL, I think you're missing one salient point: Moore's law means you build smaller.
That said, prefab/modular will continue to make the homebuilding process more efficient. And speaking of smaller, there are some pretty cool 'tiny house' videos on youtube.
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Corning, NY
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CL says
Wealthy white liberals in coastal CA use the environment as a "sacred cow" to stifle development and keep land prices (and rents) high. How else do the land-owning elites stay in power? Prop 13 helps too. So does illegal immigration since it increases the demand for housing. And it's all done under the guise of "compassion." Ha!
I lived near Santa Rosa, CA for 3 months for a job. That was in 2006 at the hight of the bubble. I quickly realized I was being milked for all I was worth. Half of my monthly income went to the landlord. And it would have been far worse if I'd been suckered into one of those exotic mortgages.
I quit that job and moved back home. ;-)
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Corning, NY
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Related: Houston has no zoning. That's right...no zoning. There are negatives that go along with that of course. But it's not the disaster the urban planning elites would have you believe.
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46 male
Menlo Park, CA
I believe there are usually zoning laws against building really tiny houses.
This is to prevent people from buying or building really inexpensive tiny houses on tiny lots. Letting buyers escape the cost of land just wouldn't benefit banks or current owners.
And pretty much all our laws are made to protect people with money.
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Corning, NY
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God Bless America.
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Emeryville, CA
EBGuy says
Yeah, but that's because smaller is desirable. I'd say homes have generally gotten bigger and easier to build, which should reduce the $/square foot.
And old computers depreciate, not even keeping static or up with inflation!
wthrfrk80 says
I've heard this too. Yet, there's massive construction happening all around me and directly out my window. They've torn down small buildings and parking lots and are replacing them with much larger buildings. SF has a lot of multi-tenant high-density buildings being built as we speak.
I've driven through parts of the Hills where lots are sold and properties built. And they could build on Treasure Island, West Oakland, San Leandro, Alameda.
But even outside of the BA. Chicago has a near limitless supply of land, but prices typically increase.
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46 male
Menlo Park, CA
Interesting video about tiny houses and zoning:
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I lived near Santa Rosa, CA for 3 months for a job. That was in 2006 at the hight of the bubble.
Talk about bad timing. Prices are now around 1/3 to half off the peak in Santa Rosa. IMHO, that was the real crime of the bubble -- massive appreciation in outlying areas that should be affordable.
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South Pasadena, CA
The real reason is that in our economy housing is mostly a token designating a debt obligation. Housing units are created against mortgages, which are created of the thin air. When a mortgage is created you get that token, bank gets the asset worth your loan + interest. Most of this assets are immediately convertable to cash, lenders sell them to Government agencies like FMA, FMC etc. As the result, banks get all newly created money without doing any productive work and we pay for this in taxes and in the "inflation tax". We also pay for all bailouts necessary to support bad loans.
Therefore, lenders want higher housing prices and constantly push them up. So, why housing prices go up? Simply because banks are more clever than people and have much more infuence.
Similarly, higher education has lower quality today than it used to be 30-40 years ago, but it's more expesive. You would think technology advances should make it less expensive, but they do not, because higher education today is merely a token created to justify all those student loans.
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Denver, CO
Patrick says
There is more to it than that, I think. Higher population density brings about other issues. More trash, more sewage, more energy use, more traffic, etc. Infrastructure for a given area is designed for a certain load, and without updating the infrastructure, it can't support 6 tiny houses instead of one big one.
I think there are benefits to living in high density as well as low density places, and I have done both...I wouldn't be super psyched about a high rise, high density building going in near me, and I have no financial interest in the area (I rent, not own).
My 2 cents
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Shutdown The Liars says
And you're willing to live in the other 95% you can live there for dirt-cheap. Buy a remote cabin in Alaska and collect the annual oil subsidy and it's like they're paying you to live. Or you can even buy a home in Detroit, MI for under 20k if you want.
Is that cheap enough?
http://www.trulia.com/MI/Detroit/48208/
Oh wait, you'd rather live in the 94925 instead of the 48208? Well, I think you'll have some competition.
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Much of Moore's law is based on shrinking the size of the transistors. In the early 1970s feature sizes were about 10 micrometers. By comparison, Intel's new Ivy Bridge processors have feature size of 22 nanometers. While many people bought 1800 square foot houses in 1970, few would be happy living in a 4 square foot house today!
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Emeryville, CA
Peter94087 says
Right, and TVs are bigger. So technological improvements have allowed us to do more with less, and shrink computers that would fill a room in 80s into pocket sized phones!
With the advances in construction technology, like I see right now out my window (they're building a quarter billion dollar building in a year-year and half) why haven't these translated into bigger houses for less money? Or small Bay Area houses for less money; cheap enough to do a tear down, rip and replace?
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Corning, NY
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Yeah comparing Moore's Law to housing is pretty ridiculous.
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Emeryville, CA
wthrfrk80 says
Piffle. We expect more for less in every other endeavor we put our hand to, why do we settle for less in housing?
Why do we pay so much for small boxes, especially in the Bay Area, 70 or 80 years old, with knob and tube wiring and a converted garage for your mother-in-law?
Technology should have ushered in a new era of cheap and easy to build houses, with prices falling as it did in chips. Why hasn't it?
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I do agree with the above commenters that say technology should have allowed us to build houses for cheeper than in the past. However, I don't think using Moore's law is the right metric. Why? Because a transistor whose circuitry is 0.2% the size will work just as well (better, actually) than the full sized one at a cost roughly proportional to the size decrease when made in huge quantities. That is a fundamental difference between transistors and buildings.
Around here (94087) the dirt is the most expensive part of buying the house, but aside from that even the housing structures are more than in most other parts of the country. I blame that on extra regulation and the fact that labor costs much more here (also partially due to extra regulation and the fact that the cost of living is higher so salaries must be higher).
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Los Angeles, CA
Dont forget that MOBILE/MODULAR homes are illegal in almost all cities in coastal CA. Its at the city level where they outlawed mobile homes (the true affordable home).
Its the big banks+elitism at work. Cheap housing is NOT what they want they want 'affordable payments' on a 700k shack thus we have that.
Its really odd how coastal democrat states are living hell (housing affordability wise) to working class but Red states like TX,AZ are heaven for working class (at least for housing prices).
Basically coastal CA is controlled by a bunch of smug NIMBY prop13 voting a-holes who pretend to care about the poor but dont want them living near them or in same city even.
Make fun of mobile homes all u want but it would be sweet to buy one for 20k and plop it on a lot in palo alto and live cheap.
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Emeryville, CA
But chips are smaller because it's desirable for them to be so; that's where my analogy rings true.
Further, the construction technology I see all around me is so far advanced compared to the stuff I used when I was in the trade. The miracles they employ on the Bay Bridge, for example, are breathtaking.
If they can apply technology to transistors, then certainly the housing industry should have seen better, more efficient, and cheaper products (as you said).
I think it's the right metric, but understand your point. I just think we're hung up on size.
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PockyClipsNow says
Agree with your overall point, but wasn't PROP13 a "taxpayer" revolt product? Hardly a left-wing cause.
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Technology should have ushered in a new era of cheap and easy to build houses, with prices falling as it did in chips. Why hasn't it?
Freedom is just a Walmart parking lot away. Thanks to technology, we can live a nomadic life while remaining connected to friends, family (and work!).
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46 male
Menlo Park, CA
Given that worker productivity has increased so much over the last decades, why is it that we still have to work 40 hours per week?
It's the same reason houses still cost so much: all of the extra wealth we produce is redistributed upward to the 1%, and most of that to the 0.1%.
Wealth redistribution upward is the main problem. It's vastly larger than any wealth redistribution downward.
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Belgium, WI
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michaelsch says
Yes. The Realtors and Mortgage lenders push hard to keep up the myth of Intrinsic Value, and that "They aren't making any more land" and the continuous population growth: all while pushing just as hard (along with politicians) against real disclosure of resources, logistics, and decay of communities being "harvested" for their historical value.
Now, they try to tell people that live in bedroom communities that their "quaint" little town has some trumped up "heritage" of a sister city in some backwater European kingdom like Luxembourg or Transylvania to sell tickets to the yearly beer drinking festival.
Somewhere in that confusion, people need places to live while they work 3 jobs to buy gas to work 3 jobs, and after the free money debt-fest of the 80's and 90's, they ain't going back to the trailer parks, and the zoning laws won't let them build Tiny House(shanty) towns, even though the vegetable farmers could use the help next door.
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robertoaribas's website
homes today are built much more quickly and cheaply than in the past. You don't see too many 3000 square foot 3 car garage homes 50 years ago for a reason!
as to "why don't houses follow moore's law" my answer is " because houses aren't computer chips" batteries also don't follow moore's law, their improvement curve has been much slower...
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CL says
You may have mistaken falling prices to Moores law. Actually the cost to produce has risen not fallen. Consumer prices have fallen due to Asian producer dumping below their own costs to take away market share from US producers of Semi. Intel or any other Semi company did not foresee the Japanese entering the US market, had they known Moores Law would have been different.
Moores laws stated...
http://en.wikipedia.org/wiki/Moore's_law
As the cost of computer power to the consumer falls, the cost for producers to fulfill Moore's law follows an opposite trend: R&D, manufacturing, and test costs have increased steadily with each new generation of chips. Rising manufacturing costs are an important consideration for the sustaining of Moore's law. This had led to the formulation of "Moore's second law", which is that the capital cost of a semiconductor fab also increases exponentially over time
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Actual costs to produce SFH hasnt increased as some would think... prices yes, they have increased.
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Ross, CA
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When Moore penned his paper describing what became his "law", there was silicon manufacturing in Silicon Valley on a massive scale with armies of employees in all ranks.
One way to reduce the cost is the scale up the manufacturing on a massive scale, to do it with local government giveaways, tax deals, etc., and for extra cost savings, do it in places with lower pay. First, exploit those giveaways to relocate to lower cost states like New Mexico, etc., then Japan, Taiwan, finally Communist China.
So there's a way to Moore's Law your housing cost just like the semiconductor manufacturing did to reduce its "cost per component": leave the Bay Area.
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Baltimore, MD
For one thing, hasn't the cost of the raw materials risen over the years (even though the quality of the materials have dropped substantially).
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El Cerrito, CA
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Business is war. In 1973 the world reserve currency became a totally fiat creation. As a result the bullets (dollars/credit) are now distributed (or withheld) to the competing parties in any way the issuing bodies see fit. Having unlimited funds with which to motivate and choose winners and losers, the only thing important is that others not have enough.
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Corning, NY
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CL says
It has. They're called "mobile homes." And modular homes. The quality of the latter is getting better.
CL says
You have to pay so much to fight off the other humans who covet that same parcel of dirt. Location location location.
In places like Houston, there are less humans to fight off since there is so much land available. So your money goes toward mainly house construction rather than economic warfare against other humans.
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Patrick says
Because Jesus says if you don't spend most of your time working, you'll go to Hell.
And if you're a Calvinist, you have to work constantly to prove you're a member of God's Elect.
We're God's Chosen Nation (tm), remember? It says so in the Bible.
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Reston, VA
Why don't houses follow Moore's law?
Because they are not semiconductors?
Semiconductors were 10^5 times as slow in 1975 as they are now. Can you imagine if houses were 10^5 times as small or 10^5 times as expensive in 1975 as they are now? 1975 would have sucked.
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El Cerrito, CA
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Davis, CA
Because making housing cheaper does not sell more houses and realize more profits. Keeping prices propped up enables all the fee extracting machinery.
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Belgium, WI
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Vicente says
The point to accumulating wealth is to play Keep Away from the weaker kids in the playground. That's how it stays valuable. Once you let everyone have a fair shot at touching the ball, it's just kickball again and the fun gets spread around.
The ball is only valuable if someone ELSE really WANTS it and can't GET it.
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Patrick says
Good Question. Increased Productivity should lead to greatly expanding wages or less work hours at same pay. Neither has happened - but the top 1% captured a bigger chunk of the national income.
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zzyzzx says
nope! they are down, have been, in a very big way.
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thunderlips11 says
Today we compete on a global basis. They cut their prices, we cut our prices, and both have to keep expenses in check.