Why are houses so damned expensive?

This is a big topic, so I will break it into two threads. I see two classes of factors at play, the socioeconomic group and the manufacturing group.

This post will deal with my observations on the socioeconomic factors, in part because I don’t think that 3DPHC can affect them very much, and I want to get that topic dealt with and set aside so that I can use future posts to dive into how we CAN help.

For as long as I have been alive, house prices in Western Canada have trended upward. Part of the rise is due to plain old inflation, a factor that Finance Ministers and Central Bankers work very hard to keep in the positive. If nothing else changed house values would appreciate by the inflation rate. In an ideal world, wages would increase by at least the inflation rate, keeping housing as affordable this year as it was last. Unfortunately wages for the lower three quartiles of earners have risen at less than the national inflation rate. Each year, again if considering inflation alone, houses get less affordable to most Canadians.

Single family homes in Calgary have shown a long-term trend to get bigger. In the 1940s through the early 1960s, houses tended to be between 900 and 1200 square feet. Today’s single family homes are often 1400 square feet and larger, sometimes much larger. Larger homes take more material. More material costs more money and more labour.

Fit and finish preferences have changed. Arborite countertops have been swapped for granite, marble, and quartz quarried stone, often from off-continent. Oak floors have given way to Brazilian Cherry. Aluminum framed sliding windows have been upgraded to vinyl framed triple-pane, argon filled, tinted units. (This is a very good thing, but more expensive.)

Until recently, central air conditioning was a rarity in Calgary. While not yet universal in new homes, it is becoming far more common.

Resale homes have not fared much better. Even if they were built using older materials and styles, they are often upgraded before being offered on the market, raising the selling price.

Every time a house is resold, several thousand dollars in real estate and legal fees are charged. The seller needs to recoup those costs and still hopes to sell at a profit.

Most of these circumstances are outside the ability of homebuilders to change significantly. The exception are the fit and finish details and house size. But how does a builder reduce the use of exotic materials and still build a house that people really want to buy?

More to come, next post.

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