We are getting so screwed

[leostrauss]

And by "we" I mean North Americans in general but specifically Canadians.

I'm talking about the conspiracy by the industry that receives no scrutiny from the average Canadian. The home builders.

I recently got a chance to compare the cost of building a single family home here in Canada and in Poland. Yes, I know Poland has much cheaper labour rates which translates to labour costs that are about 1/3 that of a Canadian worker. But bear with me for a moment.

First, Polish (or Czech or German) homes are typically brick or cement block made which means they are much more labour intensive to begin with. Then there is interior and exterior finishes which are predominantly plaster and stucco respectively. Those finishes are again much more work intensive. Given that a typical Polish home easily takes 10-12 months to build start to finish I figure that the labour cost savings are eaten up by the longer construction time.
Now let's take a budget to build a single family home in both countries and compare what you get for your money. Here is a house that is estimated to cost around 450,000 PLN (~$150,000CAD) from start to finish (kitchen and bathrooms are extra but everything else including floors throughout is priced in).
https://www.archon.pl/projekty-domow/projekt-dom-w-hibiskusie-m465be74e23514

Now let's look at what our builders in Canada will build you for 3x the money! That is let's take a budget of $450,000 and see what that can get us in the True North.
According to this calculator (pick another if you think this isn't representative): http://www.paragonhomes.ca/calculator-new-home.php
You can get a 1800 square feet "traditional home" (i.e. stick frame) built by them for $450,000 once you add a double car garage and "premium finishes" (i.e. hardwood and ceramic).
Most likely something that looks like this: http://www.eplans.com/house-plans/epl/collections/canada-homes-canadian-house-plans/hwepl62746.html

Not only is the Canadian home much smaller - the European example is about 234 square meters (~2500 sqft) of floor space (though it includes some space under slanted walls) in Canada you get a house that requires much more ongoing maintenance what with the vinyl siding and the asphalt shingle. On top of that the thermal properties of the Canadian home will be much worse with wall cavity insulation, more prone to moisture damage and vermin and rodent infestations. Just about the only advantage I can name is the ease of building additions or making major changes like tearing down partition walls.

The house from the Polish builders will probably last much longer, will be cheaper to heat and cool, will look much nicer than a typical vinyl clad split entry, will be resistant to rodents and termites and will require far less maintenance.

I'm not saying that the Canadian/American builders should build at Polish prices. But what I'm saying is that they should raise their standards a bit. Actually, a lot. For just shy of half a miliion frigging dollars excluding land prices we too should be getting masonry built houses with ceramic roof tiles and triple glazed windows.

We are getting screwed because our expectations of what's possible have been eroded by greedy home builders here in  North America.

[KMMK]

No one is forcing you to buy a home though. I agree prices are high for what you are getting but as long as people keep buying, builders will keep charging. It seems fine to me.

[leostrauss]

You missed my point. I'm not complaining about the prices. I'm complaining about what we get for those prices.

I doubt that in the town I live I could even get a masonry home built with concrete levels, ceramic roof tile etc. The know how isn't there. My late boss of some years ago made his fortune in the first dotcom boom and spent more than $5 million on a decked out place on the waterfront. It's all stick frame construction with asphalt shingle. No matter what money you spend they only know one way to build and that is stick frame that might be covered in faux brick or stone if you pay for that (substantially more)

[leostrauss]

I don't understand why this touches the nerve so much. I'm not pulling the smug European superiority card. I'm saying that we as a nation should demand more for our money. The particle board peddlers (otherwise known as home builders) in Canada have been spoiled rotten by being able to offer terrible crap for astounding amounts of money just because nobody protests (everyone just looks at hardwood floors and granite countertops)

[ysette9]

I remember as an exchange student in France being interested to see how all of the new buildings going up were concrete block built with small cranes. Very different from home. I don't know anything about comptable cost or energy efficiency. I do know that as a native Californian I look at any masonry-type building with deep suspicion because unreinforced masonry is a great way to get yourself killed in an earthquake. Stick built homes tend to do pretty well on the other hand.

[leostrauss]

Interesting point about non-reinforced concrete. Would ICF remedy that problem? ICF walls have a shit ton of rebar in them.

[ysette9]

What is ICF? I imagine if the walls have rebar in then then that would do decently well, depending on design.

[leostrauss]

Insulating Concrete Forms. Look it up. It's a neat wall technology.

[waltworks]

Sounds like it's time to start a new business building awesome houses.

The fact that nobody has might mean it's not quite as easy as you think. Or maybe this is the idea that will make you rich!

-W

[acroy]

Canada has high prices because friggnin everything is expensive in Canada, especially the Canadians hired to build in Canada. And they suffer from excess regulatory burden as well.
Canadian home-builder profit margins are not outrageous. If they were, the margins would invite competition and consumer prices would decrease.
Poland (and Poles) be cheap.

[J Boogie]

No one is forcing you to buy a home though. I agree prices are high for what you are getting but as long as people keep buying, builders will keep charging. It seems fine to me.

https://en.wikipedia.org/wiki/Greater_fool_theory

True market value is derived from supply and demand.  Pure economic intrinsic value does not exist in my opinion.  Everything is subject to supply and demand. 

I understand the foolishness of speculative investing, but I also consider it foolish to believe any thing, whether an investment or good meant for personal use, has a value that will remain unchanged in the face of wild swings in supply and demand.

[Fishindude]

Nobody is getting screwed.
Home building is a highly competitive business, and builders are delivering you the best product that they can, as cheaply as they can, given the current; regulations, codes, labor costs, material costs, land costs, etc. 

I think you will also find that home building isn't exactly a "get rich" business.  Margins are thin due to the competitive nature of the business, and many builders go broke every year.  Most home buyers get several quotes to assure they are buying as cheaply as possible.

[GuitarStv]

I don't understand why this touches the nerve so much. I'm not pulling the smug European superiority card. I'm saying that we as a nation should demand more for our money. The particle board peddlers (otherwise known as home builders) in Canada have been spoiled rotten by being able to offer terrible crap for astounding amounts of money just because nobody protests (everyone just looks at hardwood floors and granite countertops)

The point that you brought up which really bugs me is the ubiquitous use of asphalt shingles for roofs.  It's really, really hard to find anyone who will do a metal roof around here, and you pay nearly triple what you would for asphalt because of this.  There's no reason for that.  Materials aren't that much more expensive, and the labor costs are not significantly higher.

I'd also like to see a significant change to building code . . . tar paper is not a sufficient moisture barrier for a basement exterior treatment.  Heavy duty poly is marginally more expensive to buy when the home is being built, but does an exponentially better job at preventing leaks in your basement for decades afterwards.  Once the land around home foundations has been filled in, it's extremely costly to fix the tar paper mistake.

[Drifterrider]

"Greedy home builders" build what people want to buy.

Demand / Supply.  That is how the economy works.

[GuitarStv]

"Greedy home builders" build what people want to buy.

Demand / Supply.  That is how the economy works.

Hahahahahahahaha . . . thank you for the incredibly flawed and simplified version of how the economy works.  In reality there are an awful lot of other factors that completely change what offerings are available in a particular market.

In Toronto for example, condo builders often sell hundreds of units and then refuse to build anything at all.  The people who have made deposits on their new home then may have to wait 5+ years before threatening to sue their builder.  The builder will then very slowly refund the money.  They do this because they're gambling that the property value increase will outpace the money they would have made by actually building and selling stuff . . . if it looks like the gamble was wrong after only a year or two, they'll start construction and legally challenge anyone who wants their deposit back.

[Ayanka]

Polish labour costs are a lot cheaper than in the USA. You also pay peanuts for the ground. And in Poland you just buy more with one Euro than inhere. I wouldn't want to live there though, and not just for the weather. In Belgium we build with those Polish builders, and you would still need about 200-300 k to get the kind of house you seem to describe. We don't have double car garages unless you pay a premium. New build houses are built according to strict energy requirements. Standard roof inhere is shingles. Houses are not earthquake proof, last earthquake was before I was born. All houses are build with at least outside brick walls. I always think its crazy when I see North American real estate. So I agree with the OP. Yes, it would probably go upwards of 500k to build that way, but that is building to last. (My house was built approx 1930).

[Drifterrider]

"Greedy home builders" build what people want to buy.

Demand / Supply.  That is how the economy works.

Hahahahahahahaha . . . thank you for the incredibly flawed and simplified version of how the economy works.  In reality there are an awful lot of other factors that completely change what offerings are available in a particular market.

In Toronto for example, condo builders often sell hundreds of units and then refuse to build anything at all.  The people who have made deposits on their new home then may have to wait 5+ years before threatening to sue their builder.  The builder will then very slowly refund the money.  They do this because they're gambling that the property value increase will outpace the money they would have made by actually building and selling stuff . . . if it looks like the gamble was wrong after only a year or two, they'll start construction and legally challenge anyone who wants their deposit back.

Demand drives supply.  No demand, no supply.  Sometimes things are exceedingly simple.

Edsel.  Bad car.  Didn't survive.
Cell phones.  Big demand, big supply.  People willing to pay more to get more.

You are blaming others for not making you happy. 

[Dicey]

You are blaming others for not making you happy.

LOL! Nailed it.

[clarkfan1979]

If you want to buy a 3 bed/2 bath SFH on Kauai, it will cost you about 500K. The building material cost is only about 150K.


I could....

A) Pay full price from a builder and claim I'm getting screwed.

                           or

B) Buy a lot for 200K, build the house myself and save 150K, and continue to enjoy life and all it's blessings.

[Kalergie]

You cannot compare prices like that. The buying power of polish people I assume is not comparable to the buying power of Canadians. Then there is currency fluctuations and job security. Not to mention the willingness to take out 35 year mortgages. I know from experience (wife is Romanian) that Eastern Europeans have much more respect for debt in general. This all affects, as many mentioned here, demand and supply! Obviously if you want to "trick the system", earn your money in Canada and then move to Poland to buy a house.

[talltexan]

yeah, really a fair discussion about this price would include:

1. average commute times/distances,
2. a comparison of incomes/income growth,
3. a discussion of the credit market, and
4. home ownership rates

[rothwem]

yeah, really a fair discussion about this price would include:

1. average commute times/distances,
2. a comparison of incomes/income growth,
3. a discussion of the credit market, and
4. home ownership rates

Its my understanding that its much tougher to get a mortgage in Europe.  Less people with ability to buy means a decrease in demand for housing, meaning that the housing price has to go down. 

As far as the labor, I'm not sure about Canada, but everything in the US is built by Mexicans.  I supposed Poland is Europe's Mexico.  I suspect that labor costs are not far off, since they're basically paid almost nothing here in the US. I'm just thinking that the homebuilder is taking a slimmer profit over there, and/or the land is cheaper in proportion to the cost of the structure. 

[joonifloofeefloo]

If you want to buy a 3 bed/2 bath SFH on Kauai, it will cost you about 500K. The building material cost is only about 150K.


I could....

A) Pay full price from a builder and claim I'm getting screwed.

                           or

B) Buy a lot for 200K, build the house myself and save 150K, and continue to enjoy life and all it's blessings.

Even this is not always so simple... I looked at doing that here (Canada). I looked at five lots. I would need to pay $250k and up. So far so good! But, I cannot just park my RV on the lot, I must build. But I am not allowed to just build what I need (450 sq ft); I'm required to build 1500 sq feet or larger, two storey, in a design specified by the seller or municipality. Suddenly, the cost of my DIY build skyrockets.

...there are an awful lot of other factors that completely change what offerings are available in a particular market.

In Toronto for example, condo builders often sell hundreds of units and then refuse to build anything at all.  The people who have made deposits on their new home then may have to wait 5+ years before threatening to sue their builder.  The builder will then very slowly refund the money.  They do this because they're gambling that the property value increase will outpace the money they would have made by actually building and selling stuff . . . if it looks like the gamble was wrong after only a year or two, they'll start construction and legally challenge anyone who wants their deposit back.

Yep, they got me on a very similar scam once. I did ultimately sue and got my money back, but it was extremely dicey, and could easily have gone terribly wrong for me, per a certain clause in the contract. Good lawyer saved my butt.

[Dicey]

Oh, Joon, your story made me think of this guy. A little google-fu turned up this article. I love the thought of you pulling off something like this!

http://www.huffingtonpost.com/2013/02/28/johnny-sanphillippo-tiny-home_n_2782947.html

[joonifloofeefloo]

http://www.huffingtonpost.com/2013/02/28/johnny-sanphillippo-tiny-home_n_2782947.html

haha, awesome trick he pulled!!!

Alas, they're onto us here... We have to have the excessive build complete and inspection-ready within a year of lot purchase. D'oh!

I do have friends that worked around some other regs (maximum number of bedrooms per sq footage of back-up septic field). They called one area an alcove, completed inspection, then put the door on. The owners are working five jobs to pay for its minimum required size, though!

I could move to an area a couple of hundred kms away that has fewer regs (for now), but I'm happy renting my tiny home in paradise for $500/mo all inclusive.

[J Boogie]

How are they going to do a story on him without mentioning his sweet blog??

I only read a few blogs, and his is one of them.  Consistent themes but always fresh and relevant.

Granola shotgun is the blog btw

[maizefolk]

450,000 PLN (~$150,000CAD)

This is 3:1 exchange rate, which is about what you'd actually get if you shipped money back and forth between the two countries (one dollar canadian gets you polish zloty 3.08 right now), but a lot of that has to do with balance of trade. If you look at the purchasing power parity between the two currencies which looks at the actual cost of equivalent goods between the two countries and isn't as impacted by balance of trade issues, a one canadian dollar is only worth 1.63 polish złoty.* So relative to the overall cost of goods in the two countries, that's a $276,000 CAD house in Poland, not a $150k one.

*Calculated based on PPP of 2.02 zloty per USD and 1.24 canadian dollars per USD.

[Landslave]

In Florida, every home, just about, is built on a concrete slab of concrete blocks.  Stick (we call them wood frame, or just "frame") homes are available, but no one who can afford masonry chooses to build a frame home.  It is very interesting that in St. Petersburg, a city booming with construction just after WWII, the frame on piers homes transitioned to block on slab SUDDENLY and dramatically, and never looked back.  Almost every St. Petersburg home built in 1947 was frame, and almost every home built in 1953 was block.  So, about 20% more of new homes were built of block EACH YEAR during the transition.
 
 As you rightly note, block homes give durability and much reduced maintenance.  While the cost of concrete block construction is only slightly higher, the value of a block house over a frame house is immediate and permanent, so no one in our specialized climate (hot subtropical very humid with termites and vermin) really wants a troublesome frame house.  This is because it is widely recognized that any extra cost of a block house is rapidly recovered over a frame house in reduced maintenance. 

But ask for a basement in Florida and there would be some head scratching.  I'm not sure anyone would remember how to build one.  A basement in this climate would be a DISASTER!  And, I understand from reading, the reason that basements are built in temperate zones is to warm the underneath of the house and to provide extra storage space.  Heating is not a consideration for 2/3 of Florida. 

I do agree that when I hire my own labor to perform the building skills normally left to a contractor, I generally can have stuff done for 1/3 the cost.  Some of that might be that I avoid costs that the residential contractors have, but at least some of that is that contractors are outrageously price goughing, too.

Landslave.