Why does a new house cost so much more today than ten yer as ago?

Answer 1

I'll assume you are talking about a suburban home... A NEW house costs more for several reasons:

- Our sense of what size a home should be has changed. It is not rare for today's new homes to be over 2000 square feet. If you look at most homes built 50 years ago, they would be closer to 1000 square feet. This seems to increase over time.

- Land has become more scarce. As investors and developers realized the potential for land, they have bought more to hold as an investment for when they are ready to develop. This makes land more expensive because fewer people are selling it. That is why townhomes/condominiums have become so expensive.

- Our expectations have changed. People now demand at least a 2-car garage, and those garages are now as nice as some living rooms. Basements are waterproof and finished. We demand stainless steel appliances and natural materials (stone, real woods, etc) and more luxury features.

- Building code has become more stringent. This changes the game related to architecture, approvals process, construction, etc. That all costs more.

- More households are dual-income than ever before. In the 1950's, most households were single-income and in the housing market buyers would compete with other single-income homes. Having 2-incomes at that point was a distinct advantage to buy a bigger or nicer home. These days it is common to have dual-income households. That extra salary is now taken for granted and no longer provides a distinct advantage.

- Inflation. With positive inflation, prices should generally increase. However in the case of the real estate market, housing has surpassed inflation and it is now much costlier to own the median-priced home relative to the median income.

- Greed. When real estate prices went up, people bought homes with the sole intention to sell them at a higher price to someone else. Years ago, a home was where you lived. Today it is a commodity and a piggy-bank.

Answer 2

Land and Zoning restriction reduce the supply of homes, and people expectation of what they want in a home. Prices are coming back to realty soon so im not too concerned here. Still , ten years ago house prices are less money, but people made less money. Purchasing power on a house is more expensive today its becaus of people wanting more things in the house than they really need, and then add on top of that more single men, and mothers out there buying houses too. Housing prices will land back to realty soon. Still, housing codes on the west coast need to be losen up or else people will leave the coasts and move inland because why spend 800k on a 1600 sq ft house when 100 miles inland its a third of that price.

Answer 3

It is not 'inflation' - housing prices have skyrocketed relative to everything else.

It is not land/population- even though population has increased, we have had an unprecedented rise in the cost of housing.

I think it is partially racism - as the society has gotten more unequal, housing prices in minority areas have gone up quite less than other areas. Also, they are the first to drop.

In California, it may have had something to do with the dot com boom: and once a boom like that starts people go into housing with the idea to sell, and you get a housing bubble. Bubbles of all kinds can start when people start buying things just in order to sell them.

I think ryno has it right: the two-family income is the major reason. These families compete for good housing (with good school districts) in the face of declining equality and economic environment.

Also, it is not just housing that has gone up. All labor has gone up relative to other things because we don't make anything anymore so we all compete for service type professional jobs. That is why Doctors don't come to your house, milkmen don't deliver milk, you can't talk to an operator, a manager or anyone these days, and it is no longer profitable to pay someone to fix your television, your shoes or often times your car. Getting a contractor is impossible and plumbers charge hundreds of dollars for little work. I don't want to exaggerate this effect, and in part is ameliorated my immigration, but you get the idea.

Answer 4

Inflation OF COURSE is one of the reasons. Price SHOULD rise (preferable) 2-3% a year. Another thing, increased demand. Another thing, I would guess, decrease in supply. It's aways supply and demand. In this case, I think it's the market for money and the market for houses and the market for land. All contribute to said prices.

One who studied ecomics would also point something in the way you phrased your question. It's hard to quantify COST per se. The price may have risen, but, has the cost? This always depends on your situation. The cost of something is what (everything) you give up to get it. For instance: a house with the price of $100,000 would cost more than $100,000. Let's suppose your best alt. was a 10% return on a mutual fund. If we were to further suppose that you would pay for this house in 20 years, the cost of the house would be $100,000+$200,000=$300,000. If you want to get technical. So, it's rather hard to determine the cost because the best alt. is rather hard to determine. NEVER equate cost and price. They, most likely, will never be equal.

Answer 5

Because the land on which it sits is more expensive. This, of course, begs the question of why the land is so expensive. Well, that's crowding for you. Everyone wants to have a decent commute downtown, so there is quite a bit of competition for certain locations...

Low interest rates help, too... A $200,000 30-year mortgage at 9% would have a monthly payment of about $1,600. At 6%, the same $1,600 a month translates into a $270,000 loan.

Answer 6

People were making more money. They figured to spend it instead of saving it. They bought houses way out of their spending limit and these subprime loans are eating their lunch right now. The bank figures what you make, then gives you this crazy idea that you can afford a half a million dollar house. Then the rates go up and you are screwed, and thats what they want. But now its backfiring, the house people bought at a half a million dollars arent worth that anymore. I have seen it in my area that houses were selling for $500,000 and up. After 9 months on the market, they are selling around $200,000. And if they arent selling, they are being forclosed on.

Answer 7

Inflation on the differing components. Firstly good building land in the right location is getting scarcer. Secondly the costs of actual construction are going up not least because there are new regulations on insulation, fire proofing, energy efficiency and so on. Thirdly the price of labour does fluctuate but there is a permanent upwards pressure on the labour cost of craftsmen such as plumbers and electricians because they also have to obey new regulatory rules.

Answer 8

It's because of the supposed nonexistent inflation. That and flat out greed. The end product quality being produced today is no where near even close to what it was10 yrs ago as well. Shame really, when both speed at which it was delivered and quality after completion was better 10 yrs ago.

Answer 9

Inflation.

Cities tend to grow so there is a higher demand for real estate.

People have more money to spend, they bid houses up.

It's become easier to finance it.

Answer 10

it's inflation. prices go up over time. all prices, not just houses. food too, gas, everything!