Comment by kelipso
2 days ago
Why would you need institutions to finance building new homes? You think the cost of building a home is more than the cost of buying a home? (Obviously not.) Normal people have been building their own homes using their own money for thousands of years.
> You think the cost of building a home is more than the cost of buying a home? (Obviously not.)
Common misconception, I used to have this as well.
Building is more expensive than buying for 2 reasons:
1- People can build custom houses to their taste, they pay a premium for that. 2- House prices fluctuate, most of the time house prices are below maximums, it's only during brief periods of time that building houses is suddenly bottlenecked by capital.
Yes, there is an industry behind building houses. Sure people can build homes themselves, that's cheaper than both buying a home, and building a commercial home, but for homes that are both a commoditized asset with general appeal and a house to live in, it's a different type of asset.
A house you build by yourself will never be worth much, but you'll live in it for sure. You can even spend a lot in improvements, but you end up with YOUR house, not with a resellable asset.
FWIW, building your house is quite independent of market conditions, so if that's your game you shouldn't care about the macroeconomics of industrial residential construction or tariffs on China's iron.