I don’t think he’s including land price appreciation into his increase in construction costs.
In addition to astronomical land prices, soaring builder insurance costs and accelerating governmental exactions, this price-shaving strategy also faces the headwind of sharply rising construction costs due to the China effect, Hurricane Katrina and other macro-economic factors.
I think he’s clearly separating the land cost from the construction cost. Certainly the price of building materials is up due to increased demand. The same is true of the skilled labor needed. For his number of 40%, you need ~18% per year increases. I don’t think that’s unrealistic in today’s building environment.
