Why are builders building all of these expensive houses people can't afford?

Question

I live in a typical middle class town, however, for the past few years builders have been building all of these expensive, massive, monster homes that nobody can afford. Despite, the bid price tag, the builders seem to be in cahoots with some mortgage lender who ends up approving a loan for unqualified buyers. In as little as 1-2 years, the property winds up going into foreclosure. This apparently is a nationwide problem seeing foreclosure is now at an all-time high. Why don't builders build homes that people can afford? For the record it only costs builders $150,000 to build a house they charge $300,000 for.

Answer 1

Unfortunately there are a lot of crooked business people out there. I think the foreclosure problem is a combination of the mortgage lender, real estate agent and buyer. The builder just builds and puts a price on it. I'm sure there are less expensive houses out there that the buyers should have considered. But unfortunately everyone wants to live like the Beverly Hillbillies. Most people don't have a good plan or idea of expenses involved with a $2500 mortgage. Real Estate agents are great. But if you run into a bad one, they will try to pull their voodoo magic and do 80/20 loans, etc. A good rule of thumb is if you can't afford it with a conventional mortgage or get turned down, give it up and go for something more affordable.

A good rule of thumb for the typical home buyer is 3x your annual salary. That's if you don't have high car payments, credit card debt, children, and already have furniture to put in the house.

Answer 2

Typically high income earning families are more resilient to economic downturns. Since this group of people still spend a considerable amount even when things seem bad, many companies cater to this class.

Homebuilders are no exception. The problem doesn't lay with the homebuilders, it is with the mortgage lenders. They are misleading people into thinking they can afford a home that is truly beyond their means.

The high rate of foreclosures is a blessing in disguise. Eventually in a few years a large number of people will have bought valuable real estate at very low prices. When prices begin to stabilize and rise, this will build a large amount of wealth in the form of home equity.

Many will tap this equity and spend or invest it. This will in turn boost growth rates for GDP and create a bull run in many markets.

Answer 3

I don't think there is a good answer to your question. Obviously the people who purchase these homes and then lose them share some of the blame - they should know how much they can really afford despite what a mortgage company tells you. I think the mortgage lenders are on crack - my boyfriend and I were approved for a $450,000 mortgage. That's about 4 times our combined annual salaries. Now isn't that ridiculous? We ended up buying a home for around $200k.

Answer 4

Are in you in UK? Then you need to ask why he's selling several acres for only £16,000, this seems ludicriously cheap. I know where we live in N Ireland 1/4 acre with full planning permission was sold recently for £225k. You need to find out if there is planning permission or is it zoned for building. Try and get an architect to give advice and maybe also a solicitor. If this land is farming land with no chance of ever getting permission to build then that would be about the right price.

Answer 5

I've seen the same problem. It would seem that building costs are too high, and that the builders seem to feel that people will have to buy at a high price, as they need some place to live. However a lot of builders are going down the tubes due to over speculation.

Answer 6

They know that everyone wants a beautiful house for their family and will try to do what it takes...so they make money off regardless. I live in Orlando and they do the same here! Like million dollar homes in areas that homes use to cost like 90k. Saddest thing here is there are still tiny homes that now have huge taxes..here if you can't afford 300k for a home you live in apt or condo

Answer 7

Greed. Supply and demand. The builder gets his money and walks away. People are stupid enough to buy homes they can't afford. If people didn't buy them, builders wouldn't build them.

Answer 8

Because as a nation we have decided only the wealthy will be served. This will continue until hard working middle class people discover that they are bankrupt. Then they will rebel against the super wealthy,

But at the moment, we worship the super-wealhty. That's why everything is so expensive... not just houses.

Answer 9

They wouldn't build them if they didn't sell. Why do people buy more house than they can afford?

Answer 10

good questionand will vote this for you as it is very confusing