Adding on to the growing canon of writing on housing affordability, Buildzoom.com's chief economist Issi Romem wrote a new blog "Paying For Dirt: Where Have Home Values Detached From Construction Costs". "Paying for dirt," refers to the unparalleled swell of land costs calculated in housing value for many severely unaffordable metro areas.
In response, New Geography's Wendell Cox concludes that well-functioning housing markets, and land use regulations in harmony with building low cost housing tracts in the exurbs creates housing affordability.
The research suggests that the variation in construction costs between US metropolitan areas pales by comparison to the differences in the land costs. In the most expensive housing market, San Jose, the average house value is seven times that of Buffalo, the least expensive. By contrast, the highest cost construction market (San Francisco) is only twice as expensive as the least (Las Vegas). The land cost differences are stark, exceeding a 40 times difference in San Jose compared to Buffalo or Indianapolis.
