Fees and permits are a lot higher here because we pay more in advance for infrastructure, as opposed to pay as you go with the higher property taxes.
Labor and workman’s comp insurance costs are a lot more here
The subcontractors and suppliers work off of higher margins, and the developers take 100% of the difference between costs and sale prices. These margins are higher right now because the market will bear them, but they aren’t an entitlement.
When you see a subdivision cut their pricing by 10% and still continue to build, you don’t think they do that because their costs went down and they’re just passing the savings onto their buyers, do you? The prices go down for the same reason they went up – that’s what the market was willing to pay.
Land costs can and will decline (they already are in decline in some cases). Materials costs can and will decline as the suppliers compete with each other for an ever shrinking demand. Subcontractors can work for less, laborers can work for less, especially the English-Second-Language folks. And finally, the developers can work for less.
The only elements that don’t have room for reduction are the fees/permits, and possibly the workmans comp costs.
We could do $120/SqFt construction for similar quality homes here in SD, no problem. That includes the (higher) fees/permits and the lot.
