alt Hacker NewsHow can real estate have zero margin when housing rises exponentially in price?
No other good behaves like this. A midsize sedan didn't increase in price (in real term) over time, while new cars improved.
New houses don't really improve that much over time, yet are getting more more and more expensive.
Why is that?
> How can real estate have zero margin when housing rises exponentially in price?
Well let's think about it...
It would suggest that costs are going up, correct?
What are the main costs? Land: Goes up alongside housing prices. Labor: Also goes up alongside housing prices.
Unlike cars, there are very few economies of scale in real estate development. In fact, due to the dynamic above, there are actually diseconomies of scale in housing development. The more you develop an area, the more expensive it gets to continue development.
We normally don't scale goods that have diseconomies of scale because, like we see in housing, they become unaffordable and cease to exist. Unfortunately, housing is a necessity, and so we must build it against increasingly disfavorable economics.
Same is true of healthcare and education. Other goods/services that have diseconomies of scale simply don't scale. That is not an option for housing, education, and healthcare.