[bsder]

If labor defined the cost, buyers would renovate. If materials defined the cost, buyers would renovate.

The fact that buyers demolish shows that the cost of labor and materials is significantly less than the value of the land. "losing money on destroying the old house but prefer that location" === value of the land is higher than the cost of the rebuild.

[operatingthetan]

That doesn't show that improvements to land have negative value. You're also assuming that landowners always make the most rational value decisions with their properties and that's frankly just not the case. People aren't tearing down high value homes to build new ones, you're only looking at low value ones and applying incorrectly as a generalization to both.

In most real estate transactions where the home is clearly a tear down, it's priced in.

It seems like might have never viewed a property tax bill.

Here's my neighbor's house built in 2022 appraised values:

land: $465,000 improvements: $620,000