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solvertoo

08:37AM | 10/09/06
Member Since: 10/08/06
8 lifetime posts
Bvtools
Aside from land costs, and insurance. Why is it that building costs are higher in Southern California than the MidWest. I compared a home built by KB Homes in Indiana vs one built out here in So Cal and the differnce was like 300k. How is that possible?

Derrick

Billhart

01:44PM | 10/09/06
Member Since: 04/25/05
1915 lifetime posts
There are many things that can make up the cost differences.

Impact fees. In some areas impact fees are very high and that adds to the saling cost.

Likewise utility tap fees.

In some areas is can take years to get approvals for developements and that take both money for evironmental studies, engineering studies, etc. But you also have hold cost for the property and all of the developement expenses that have come out of the end sales.

Cost of living is different which in turn affects the cost of labor.

Building code requirements.

The most common is earthquake resistance which requires lot more engineer. Lots more steel. Lots more wood (sheet). Lots more labor. Lots more inspections.

Fire resistance construction. This is often required in areas with brush fires. But also areas with very closely spaced homes also often require more fire resistance construction. And some places sprinkler systems.


solvertoo

04:25PM | 10/09/06
Member Since: 10/08/06
8 lifetime posts
Well, I inquired about having a panelized home delivered to a Texas lot and the same one to be delivered to a So Cal lot. The Texas lot was much further than the So Cal lot. I got hit with a price that was almost double. I was told that it was priced relative to the economy of the area. So, in other words, if I live in Beverly Hills I get charged a Beverly Hills Price, but if I live in the sticks somewhere, I get a sticks price.

Now, I know that there's more engineering required per local codes, however, material is still material, with the only difference being taxes and delivery charges per zone. It really sounds more like labor gouging than anything else, and it in turn seems to be governed by the quality card and the going rate of homes. I also remember that we had some pretty nice sized homes going up over here near an outdoor mall that was being constructed simultaneously.

The homes that were built first 1 1/2 years ago were selling for like $375,000 to $550,000. However, the moment the mall opened the prices started at $600,000 and went up to $900,000. Im aware that materials have jumped up tremendously but nothing near that hike.

It also feels like someone else is spinning the wheels too. Land also went up too, and I noticed that land value became the difference of construction costs of the average home against actual existing property value.

So, if a persons could by a 2,000 square foot home for $400,000 and the cost were a $100.00 a square than that meant that the land value of any nearby lots would be $200,000. It feels like someone is really controlling the market so as to not allow anyone a chance to get a break.

Another example that I noticed was in an area nearer to the San Andreas Fault like by Apple Valley, homes were being built last year for about $50.00 a square foot by some developers, and an 1,800 square foot home could be picked up for a little over 200 at the end of last year. Yet at the same time further south by about 20 miles down the mountain pass the same size home couldn't be touched for under $400,000.

I know that this an argument that attacks profit margins of those whom are milking the system for every penny they can get, but there should be some form of regulation or the likes development. Heck, even according to the Means and Standards book for West Coast construction, it to is way off. I know a couple of contractors whom are charging $300.00 and $400.00 a square and the only difference is mild in terms of quality of finish material. Where as I know a couple of other guys out there whom are charging a moderate rate of $125.00 a square for standard finish all the way around, and their still making a profit.

Now our Architect whom makes 10% of the cost even quoted going rates of $300.00 plus for slightly above standard, and of course I was surprised that the amount that was quoted wasn't like $500.00, especially when he's making 10%. I had to show him some of the going rates from outside Generals that I had spoken to in order to convince him. Even still he still has his doubts, and rightfully so. This is a really screwy industry. Especially when the larger percentage of workers are even legal and are being taken advantage of. So, who's really making the profit?

Thanks,

Derrick

I also don't understand how alternative materials that are supposedly "GREEN" have to cost so much more than conventional material. After all these are the materials that are supposed to be swaying us away from using conventional materials. Instead, the marketing focus is waged toward the quality being superior. There should be a national government sponsored organization that regulates costs of alternative materials.

They shouldn't be allowed to be sold at a cost that supercedes those of conventional materials. However, again, It feels like theirs another beast at the wheels again trying to make it harder and harder for everyone.

Where does it end? The construction industry shouldn't be run the way the Saudis run the oil industry.

Thanks again
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