Posted by: union03g | February 15, 2010

Fascinating Article About Raw Land Economics

Hat tip to Irvine Housing Blog for providing some great insight into how developers consider land costs, density, construction costs and how they manage risk by scaling their business. The article details how a small move in housing prices can cause large swings in land values just as we have seen over the past couple years.

“Land for residential home use has no intrinsic value. It is a commodity useful for the production of houses just like lumber or concrete. A finished lot is a manufactured product, and it is subject to many of the same market forces as commodity markets.”

One of the most important tasks for developers is to creatively fit as many saleable units onto a lot without eroding the price. Density has a multiplier effect and it’s where developers make all their money (think of the configuration of courtyard apartment buildings). I’ve heard that Lake Point Towers downtown on Navy Pier has the most units for a building of that height because the builder cheated the ceiling heights down on each floor. This trick probably made them millions. Anyway, check out the article below.

Article Here

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