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August 4, 2008
Losing Money on Every Home Sale, etc.
I was leafing through a recent NBER paper today when I came across a table comparing housing construction costs versus average sale prices in various U.S. cities. As you might imagine, there are huge premiums in most cities, but there are, however, a slug of cities where you can buy houses for less than it costs to build 'em.
Leading the list: Detroit, Fort Wayne, and Pittsburgh --- all places where you can buy homes for a 30% discount, or better, on what it costs to build new. That can't be good for the homebuilding business -- unless you think you can make up the difference on volume.
Source:
Housing Supply and Housing Bubbles
Edward L. Glaeser, Joseph Gyourko, Albert Saiz
NBER, July 2008
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