[jenniferhooley]

Huh? I have a 650sqft house, it costs 430K in a small town. I looked at building a new place, it would cost roughly the same to hire a building team to make it - not to mention years of waiting on development. The land is fairly affordable if I buy a little bit out of town. It's the cost of building that is stopping me.

[AlotOfReading]

If I look at the value of the place where I'm living, a bit more than 2/3rds of it is attributable to land instead of structure. This ratio will change depending on whether you have a multistory structure on a small plot of land, or a SFH with a yard on a larger plot, but land/value ratios > 50% are typical.

[win311fwg]

Houses depreciate. Markets can do funny things (remember the COVID days when a used car could sell for more than the same new car?), but generally the remaining value of a standing structure is going to be a fair bit less than the cost to build the same thing new. It is likely that the parent also sees >50% land value on the current property now that the house has been lived in and is showing some wear and tear, but key here is that to rebuild the building from scratch it would cost as much as the land plus current building is worth just to build the same structure again.

[phil21]

I guess it depends on how you look at the numbers.

My current place would sell for say $1.4M or so.

The lot itself is worth around $600-700k if it was empty.

A similarly sized home would cost well over $1m to construct to similar quality levels - normalizing a bit for modern construction techniques and all that.

So about $2.4m to build new, or $1.4m to buy a fairly similar 25 year old home next door. New construction here costs more than the older structures on the land in most cases. This ignores permitting and financing costs which throws a light wrench into those calculations, likely making it a bit more expensive on the build side.

That is using numbers I would pay a custom builder for, but even if you add in 20-30% profit for the builder the math isn't super great for the new build end of things.

[runako]

If it's costing $650+ per sqft to build, it sounds like there may be some externalities about the site(s) that might be relevant here?

For scale, in much of the country it is possible to build a new home for well under $200/sf. New detached homes retail for <$175/sf, which includes the builder's profit.

[CalRobert]

I had a 1200 sqft house built for about €180,000 in Ireland.