Quote:
Originally Posted by Chronamut
Alright fine, but we can definitely have a lowering of the market - there is no reason a house has to cost a million dollars. Yes people somewhere will pay it - but still. I feel it should reflect the average income in the region, should it not? I've never bought a house, so I am admittedly ignorant on this subject. I am just curious.
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Lowering or softening is
very different from "crash".
The cost to build new houses
broadly sets a lower end in the market. If you can build one for say $400k in cost and sell it for $500k (adjust profit as you imagine is reasonable, but there
must be profit for the business to continue).
Then, the equivalent "used" house, in good condition, will be worth
around the same amount, because people are willing to pay $500k for that equivalent new house and there aren't enough new houses. Maybe it's $450k because it's not NEW new, but it's not $250k. If it's beat up and needs a lot work then that gets reflected, but it's not like used cars where it plummets due to age.
But if the market, as defined as what people are willing/able to pay, is truly $250, and the cost to build is truly $400k.... then no new houses get built.