blink. As the selling price of the house is a combination of glitz and location, higher lumber prices probably have more impact on profit to the builder, than “affordability” to the buyer.
Steve
Not sure how that can be since the price of lumber is directly passed to the consumer.
Why is the customer willing to pay a price for a house? Because if it’s design and location, or because of the lumber in it?
Related question: why is there a “shortage” of “affordable” housing.? Because the builder can use the lumber he has to build several small houses in a bad location, or he can use the same lumber, to build a big, flashy, house, in a great location, that can sell for a lot more per sqft, than the small houses in a bad location?
Steve
That has nothing to do with the cost of lumber or what people pay for lumber it only has to do with the price of the land. Let’s say you have the land already. Now you are only paying for the price of the house you are building.
Maybe because the price of land has sky rocketed. You can build affordable housing all over the mid west but now you have to find a job.
Here is a 50 year historical chart on lumber prices. US dollars per 1housand board feet. Whether you are building a McMansion or a cheap home they both consume the same lumber.
That’s my point. The developer can sell the McMansion for a lot more money. You can pull up a graph of average USian house size, and find that the square footage has about doubled in the last 40-50 years.
Steve
My point is that Lumber is passed on to the consumer whether it is in High end or low end so it has nothing to do with profit to the builder. Unless you start talking about molding and cabinets. Framing is just a commodity and everyone pays the same price for it. If they removed the Tariffs from Canada prices of lumber would fall dramatically. I don’t really understand why they do not, although it would put a lot of mills in the United States out of business, because who wants to cut our Trees down when we can use other peoples trees. Fun Fact: Tree sawyers In Montana in 1980 made 35 dollars an hour today they make $18 to $22. Yippee.
2 Likes
A VW and a Porsche are made from the same materials. The VW costs $30k, with a 2% profit margin. A Porsche can cost north of $100k, with a 28% profit margin. Where do you want to put your steel and plastic?
Steve
1 Like
So you are comparing a commodity to a brand? Are they still making VW’s or just Porsche’s ?
The VW division has one plant in the US. For some months, on another forum, I have been saying that, if the tariffs stick, the probabilities of the VW brand being withdrawn from the US market are non-zero. That plant in Chattanooga has a finite capacity. It presently is building VW Atlas SUVs. The dealer near me has Atlases on the lot ranging from $46K to $57K. Let’s assume the Atlas, being the biggest thing VW offers, has an above average GP of 4%.
Inventory at the local Audi dealer ranges from a Q3 at $43K to RS trim Q8s at $150K+ The average GP for the Audi division is 9%
The Porsche dealer’s stock ranges from a Macan at $74K to a Cayenne at $157k. Average Porsche gp is 28%.
Given the limited production capacity available, how would you use it?
Same thinking at VAG.
People laff at me, and say things like “VW won’t leave. They have been here since 1949”
Yes, they have been here a long time…
Steve…always irked by that ad, the Studebaker theyshow is a 50, not a 49
1 Like
Not usually. Most houses are built on spec (speculation). All the costs come out of the builder’s pocket. Then the builder will try to sell the house for however much she can get. That margin might be a lot, or it might be negative.
1 Like
A couple of points:
Depending on the format of construction contracts, either the contractor or the entity hiring the contractor is going to pay more. If it is the contractor (as in supplying his goods/services at an established price), then the entity “buying” the house is off the hook from the price increase. If they have hired on a “time and material” basis, then they have taken on the risk. In the first case, if the house is sold at the new higher market rate, the contractor gets clipped and the builder gets a windfall. In the later case, both the contractor and the builder make a fair markup. In both cases, the end-user home buyer pays the higher price.
Jeff
(Played this game most of his adult life as a holder of numerous competitively-bid long-term contracts - frequently without escalation clauses (similar to Russian roulette, in concept).
3 Likes
Others seem to be close to stop exporting:
1 Like
Now what part of the house did they sell for less or more? So if they received more for the house did they charge more for the lumber or was that just pure speculation?
If the price of the house when sold was genuinely independent of the cost to build the house, then if the cost goes up enough, the builders are either going to go bankrupt or at least stop building more houses.
My brother in law built his pole barn with his own trees. In that case all he paid was his time and labor. If I build a garage and buy the lumber myself, then get a crew to frame it, who get’s to mark up the lumber?
Since there are many parts to a house and lumber makes up about 8% of the cost and land makes up 25% of the cost with everything else thrown in I stand by my statement that Lumber is just a commodity and the price of what you pay is the going rate. By the way if I go to Canada and buy my lumber I can get it cheaper as long as I state it is for personal use.
1 Like
Last week, VAG announced that all rail shipments from the plants in Mexico have been halted, and all shipments by ship are being held at port of entry. VAG also announced they will be adding a “tariff fee” to tariffed cars that are sold. My musical question is who would pay a “tariff fee” on a Jetta, instead of buying a US built Civic or Corolla?
If the tariffs stick, VW, with only one US built model that sells in useful quantity, really would not be viable in the US.
Steve
1 Like