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We are building a house, and before I even contemplate typing the next sentence I must add that we are not rich. Not at all. Nor am I the guy who can hew his own timbers with a chainsaw and a jig.

The next sentence, then, says that the process of building this house has given me some insights into the construction industry, one of the few remaining viable trades in this country which employs people who are tool smart. Since construction is tied to the housing bubble, and housing remains where most of us hide our great wealth (sic), if you'll follow me below the fold, and endure my usual pointedly pointless rambling, I'll share some observations.

Let me start with why, because I think it matters. We are building a house out in the country, next to the garden we tend on one side, and the orchard we began planting four or five years back on the other side. We are building on land my wife would inherit some day. We moved here from a larger market, and were able to buy our present house without a mortgage. We live frugally, without making frugality a sport, nor a lifestyle. And we benefited from having bought and remodeled a house in an emerging neighborhood. Which is to say there were three crack houses within walking distance when we bought, and none when we left.

(The people next door lived in Section 8 housing, an old shotgun place so dilapidated that they put the coffee table over the hole in the living room floor. They had two large, territorial huskies, and I suspect others who looked at the house when it was on the market drove on. We stopped. My wife liked the house, and I looked at the dogs and the people who lived there and realized that nobody who took such loving care of their animals would make bad neighbors. We were, of course, white people moving into a black neighborhood. We were not...welcomed, exactly...by the older community, who, best we could tell from those who did talk to us figured we were raising property values and they'd sell in time so they could move to a neighborhood the white folks hadn't yet gentrified. I am uncomfortable with that. I wish they had stayed, as we liked living in a mixed neighborhood. But that's not how it played out.)

We are building a house out in the country because we want to live there, and because our 1950s ranch has no insulation in the walls. We seek the most energy-efficient dwelling we can manage, smaller than our in-town house, with the slightest carbon footprint we can manage.

I am sensitive about money because I've been mostly out of work for two years. Well, partially employed. Sometimes a freelancer, still. And because I've always identified working-class, even though it would've been my grandparents who really fit that designation.

To the point, then, Shocko. Points.

(1) One would think, in a down economy which has sunk in particular because the construction industry ground to a halt, that building a new home would be less expensive. With the possible exception of labor costs, we are finding that not to be the case. The materials cost the same, or more than. My strong suspicion is that wood products is managed much like the paper industry was, back when I was in publishing. The megacorps consolidated the paper plants, then shut them down so as to keep the demand curve in their favor. Prices kept going up even as workers kept being fired.

That seems to hold true for every component of our home. Nothing seems to be less expensive than it was before the crash.

But it's no longer in stock. The local big box no longer has dookie in stock. Everything that's not on display on the floor is a special order. And that doesn't mean it has to come on a truck tomorrow from their nearest supply depot. It means it comes, I guess, from the manufacturer with their next delivery, a process which takes many weeks. This is frustrating. It's not yet costing us money, but it may before we're done.

So...new construction costs about what it did two years ago, when money was plentiful, right? Then...riddle me this...

(2) Why is our existing house worth less than it would cost to build? I don't care that it's worth less than it was two years ago. I get that. I should be buying/building in the same market, but I'm not. I ran into one of the local bankers earlier today. He said there have been so few real estate sales in our county that they can't even find comps on which to base loans. And he thought there had been one sale over $200,000 in the whole county for the last eight months. He may be a house or two wrong, but not far wrong.

We are building what we think to be a frugal house, at something north of $100 a square foot. If our present house had that same value, we'd be in great shape. We could even afford solar panels. If, of course, we could sell it. There's the gamble, eh? (We can rent it, and probably cover our mortgage. We think!)

(3) With all this push for renewable energy, with all the concerns about carbon and global warming, with the virtual certainty that we are at or near peak oil, why in the hell isn't the price of alternative energy solutions and components coming down? Maybe it has, some. I haven't followed the market. But it sure doesn't seem like it.

Now, we live on the edge of coal country, and so I'm not surprised the state of Kentucky isn't all that keen on us becoming self-sufficient contributors to the grid. But why aren't the components yet emerging as simple, easy to operate appliances, instead of Popular Mechanics gadgets?

Because, I fear, the demand isn't there. There simply isn't enough demand -- nationally or regionally -- to drive the prices down on things like solar panels. (Again, somebody may know more and be able to correct me on that. But we've been researching this for two years, and I haven't seen the prices change.)

Some of us have the message, or think we have the message. Some of us think, gee, maybe we better start building an ark in which to nurture future generations. But we are a painfully small minority.

We live in a country driven by weekly sales and profit reports. We live in a world groaning under the weight of economic and ecological disasters.

And we do nothing.

There is much chat today about Krugman's column, about where the economy is headed.

What I would say from my vantage point in the hinterlands is that it's headed nowhere good. It still doesn't make sense. It still doesn't reward actions taken to better the world, it still doesn't embolden one to start a new business or hire a new employee or believe that one's children should have grandchildren, much less to believe that such mythical grandchildren (my daughter's seven, OK?) will inherit an earth that is anything short of the dystopias written about at length by the hysterical left and right.

There are no new jobs. There aren't going to be any new jobs. The stock market has nothing to do with the world in which I live, but everything to do with the puppet masters controlling the world.

It's enough to make a life-long pacifist contemplate that shotgun in the window.

Originally posted to Shocko from Seattle on Mon Aug 09, 2010 at 04:45 PM PDT.

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Comment Preferences

  •  Interesting questions (3+ / 0-)

    #1, I suspect that in a down economy supplies cost the same because much of the suppliers costs are the same.  They may be discounting, but on the other hand if their volume is lower, their fix costs have to be spread over fewer sales.  Clearly no one wants to tie up precious capital in inventory when the turnover slows down.

    #2, the price of existing houses is much more linked to the interest rate and the demand -- probably also the expectation of future increases.  It actually has little to do with what it currently costs to build.  Materials generally increase in cost the current housing stock was built with cheaper materials.  My house was built in 1983, clearly materials, permitting, etc. has gone up.

    #3, while there is a push for renewable energy, all of the current candidates are much more expensive than the less renewable alternatives.  They simply cost more for less energy.  Only subsidies and incentives make them remotely competitive.  You can want, solar to be cheaper than land lines, for example, but people need to make the solar cells and install them as well as the batteries.  This costs money -- as you point out.

    •  ordinarily (2+ / 0-)
      Recommended by:
      207wickedgood, pdx kirk

      (1) when you have too much of something, you cut the price to sell it

      don't you?

      one of the mills in town said, over the winter, that he was losing high five figures a month but couldn't afford to shut down because the equipment would rust and he'd lose his qualified staff; and he didn't want to

      the big corps, they don't have to care about that, I guess

      (2) if existing homes are cheaper to buy than new construction (and they seem to be), then our economy is on a long road to I don't know where

      (3) I understand that renewable energy is more expensive than conventional; I'm simply surprised that there isn't more demand for it, pushing the cost down and opening up economics of scale

      thanks for reading

      "Good Lord, how can the rich bear to die?" -- Nikos Kazantzakis

      by Shocko from Seattle on Mon Aug 09, 2010 at 05:09:16 PM PDT

      [ Parent ]

      •  Shocko - I am an architect/builder (1+ / 0-)
        Recommended by:
        Shocko from Seattle

        I specialize in residential work 25 years or so now. Some new houses but mostly remodels. Its always been a tough arena to survive in. The last 2 years have been the worst I have ever known.

        My clients have similar questions as you do. "If its so bad out there why are construction prices pretty much the same?"

        The key is that construction prices were never very high in the first place!

        You say no way. Trust me. Its true. The money in housing is made by developers, realtors and mortgage brokers. The builders have good years and bad years but they are bid workers so they can never get too over the top with prices.

        Not always true if you work your way into the high end markets or specialty niches, but your basic sole proprietor contractor has been on slim margins boom or not.

        During a good year Joe and Jane contractor can pencil in average labor at about 25/hr plus 8 to 10 percent profit.
        Slim years are 25 plus 3-4 percent profit.
        Bad years are 20 plus 2 percent.
        These years? You go out of business.

        You are right that residential building is one of the last remaining areas that offer jobs that many folks can work in. Its still a sector that can make sense to our econ 101 understandings. You can't off shore window installation! But that fact means that when its boom time lots of folks get in the business. Builder prices can and do go up some...but competitive bidding keeps it from jumping way up.

        So when times get bad. The light weights get out and the lifers trim costs, hunker down and hang on.

        But the difference in cost per square foot from boom to bust is not dramatic. The difference in developers selling price can be dramatic. But the worker bees don't see much of that.

        Materials are different. They are subject to the large scale effects that have changed pricing (and local jobs) in so many sectors. Home Depot has "Wal Marted" building materials into a pretty tight price range. They won't change too much either.

        However if you can find locals who make stuff (home lumber mills, recycled materials and contractor return windows...you can save a good bit.

        Regarding solar - I recommend high insulation, passive orientation/ventilation and Tromb walls. Low costs - high returns.

        Enjoy the build!

        "There are no bad architectural styles, well except the boring ones." F.LL.W.

        by pdx kirk on Mon Aug 09, 2010 at 08:56:53 PM PDT

        [ Parent ]

      •  The demand is on the other side of the planet (3+ / 0-)
        Recommended by:
        alizard, relentless, pdx kirk

        As is the manufacturing. One of the last US-based solar manufacturers (Evergreen in MA), is moving their manufacturing to China, to be closer to their customers.

        The cost of solar PV panels has plummeted over the last few years - some brands have dropped to almost half the price per watt from when we first started looking. Other components in the system have become much more sophisticated, to ensure that you're getting the most energy for your buck. For example, there are now multi-power-point charge controllers, which allow you to connect panels of different wattages up to a single controller without dragging down the charge rate to that of the lowest wattage panel. There are now inverters that have an intelligent sleep mode - that put themselves into a low power state while there's no load, and turn themselves up to full power when a load is detected.

        There have been significant advances that make solar more efficient (so your investment gets you more energy) than it used to be. The dollar price overall for a system hasn't changed a lot - labor's about half the cost of installing a system, but what you get for that price is more energy and a system of significantly higher quality.

        Beware the everyday brutality of the averted gaze.

        by mataliandy on Mon Aug 09, 2010 at 09:35:23 PM PDT

        [ Parent ]

  •  The jobs will come back. (3+ / 0-)

    Just you wait. They've started trickling back already. It does take time.

    I'm not sure why the cost of materials hasn't come down, but it would be an interesting question to look into. What are the components of the costs of materials? Some commodity prices fell in 2009 but have sinced recovered. Perhaps that has something to do with it. Perhaps consolidation and monopoly pricing power has something to do with it, and there is a legitimate antitrust suit lurking somewhere.

    As an environmentalist worried about sustainable economic development, I'd love to say that the price of solar panels are a matter of demand, and to some extent it is. But solar panels are still relatively more expensive compared to coal. That's a big reason why there isn't more demand. Of the renewable technologies, wind power or nuclear power are the closest to being viable.

    Overall, I would say that things always go in cycles. Ten years ago, we felt at the top of the world. Today we feel at the bottom. Things will turn around again. Economics especially tends to balance itself out. If you need a cheer up-- at least we are better off than Japan. 20 years ago we were so afraid of Japan taking over everything, buying up America. That's proven unfounded.

    •  wish I believed you (4+ / 0-)

      but I don't think the jobs will come back

      I think 10 percent unemployment is the new, sustainable normal

      look at this morning's headlines about people taking social security as quickly as they qualify, because they have no other options

      MOST of my friends from the creative industries who are over 50 are out of work, or "freelancing" and no matter your career path, nothing kills your future prospects like being over 50

      that's only part of it

      the entire nature of our economy has been transformed by the information age over these last two decades, while we simultaneously moved manufacturing overseas and allowed big corporations to be come too large to fail, and too powerful to be governed (but not yet large enough TO govern, which in my nightly bout of paranoia seems not so far off...)

      OK...I'll take the tinfoil off.

      I just don't believe the jobs are coming back. I can't imagine would would BRING them back.

      "Good Lord, how can the rich bear to die?" -- Nikos Kazantzakis

      by Shocko from Seattle on Mon Aug 09, 2010 at 05:16:36 PM PDT

      [ Parent ]

      •  Oh if I knew you we could make a bet! (3+ / 0-)

        The age question is interesting because the baby boom really started in 1946. If you look at the statistics that's when the rise in births really took off. That means they're turning 65 in 2011. Retired people are no longer in the workforce, so when they retire that frees up an open spot for younger people. But retired people still spend money, they spend the savings they built up or Social Security. That means they still help the economy make final demand for goods and services, which means jobs. So I think we are really going to hit this wave in the next 10 or 15 years where the job market will get a lot better just because of demographics.
        Also if you look at the echo boom-- there was a bump in the number of births around the early '80s when the baby boomers starting having kids. It wasn't as dramatic but it's noticeable. Right now a lot of these kids are living in apartments or at home with their parents. But eventually they'll want to start their own families and live in their own home or their own condos. When that happens, demand for housing will come back.
        If you're over 50 and out of work that's tough. It's always easier to find work when you already have work. And it's always easier to find new work at a younger age. That's two strikes against you. There are openings out there though. There was a piece in the Wall Street Journal about openings that don't get filled. But a lot of those jobs aren't very good.

        •  well, I hang out here intermittently (3+ / 0-)

          but I think I'm gambling enough simply by having a child!

          the retirees will spawn...yeah, I heard the guy who wrote AgeWave decades ago...so I see your point

          but my guess is those are low-wage service jobs

          "Good Lord, how can the rich bear to die?" -- Nikos Kazantzakis

          by Shocko from Seattle on Mon Aug 09, 2010 at 05:28:29 PM PDT

          [ Parent ]

        •  That is good to hear (0+ / 0-)

          that the boomers won't be this big burden.

          They would buy more travel trailors or travel more staying in motels if gas would go down.  You don't see all that many travel trailors running around now.  

          There is very few years between retirement until most of the elderly will not be able to drive so that is why they like to retire at 62 while they can still see to drive.

          They say if rent is cheaper than buying then the houses for sale are too high.

      •  They told on a financial show today (2+ / 0-)
        Recommended by:
        Shocko from Seattle, pdx kirk

        that businesses are using machines that replace people when they can.  I guess that would be manufacturing.

        •  This is new? (2+ / 0-)
          Recommended by:
          relentless, pdx kirk

          That's called increasing worker productivity.  It dates back to the beginning of the industrial age.  Fewer workers are required to create the same number of products, so segments of the labor force become redundant.  In order to maintain the same level of employment, you need to expand production to absorb these, as well as the expansion due to population growth.  I don't believe 'the jobs are coming back', because I can't see the necessary increase in consumption, given the levels of debt in the country.

          it is capitalistic accumulation itself that constantly produces, and produces in the direct ratio of its own energy and extent, a relativity redundant population of labourers, i.e., a population of greater extent than suffices for the average needs of the self-expansion of capital, and therefore a surplus population.

          - Capital, Volume I, ch. 25

          Working overtime is scabbing on the unemployed. -- IWW

          by Expat In Cebu on Mon Aug 09, 2010 at 08:26:50 PM PDT

          [ Parent ]

        •  Been hearing this since the early 80's! (1+ / 0-)
          Recommended by:
          relentless

          Its true too. Make you wonder how few people will it take to run a production line eventually. It is a downward spiral.

          "There are no bad architectural styles, well except the boring ones." F.LL.W.

          by pdx kirk on Mon Aug 09, 2010 at 09:02:08 PM PDT

          [ Parent ]

  •  Several Good Possible Answers to These (5+ / 0-)

    Cost of new vs old. There's an enormous surplus of existing houses, so it's fairly easy and not unusual for the cost of one to be less than a replacement construction cost.

    Material costs? Falling dollar, China gobbling up materials right off the start. China could explain costs for metal, wire and definitely concrete. Concrete has had supply shortages because of China and maybe some of the Middle Eastern states.

    Price is coming down on solar but it's still far too expensive up front for most of the middle class.

    Plus unlike say computers, radios or cars when they were first introduced, solar panels don't let you do anything new that you weren't already doing before. You've already got electricity --to go solar, you have to give away the value of an automobile to keep having the electricity that you could have without doing that, so that you could start making a profit 15 years later.

    That's far too much sacrifice for ordinary people to make.

    And right now there's no major party interested in the investment of making masses of common people energy producers.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon Aug 09, 2010 at 05:15:28 PM PDT

  •  The demand is about the finance ... (2+ / 0-)
    Recommended by:
    Gooserock, pdx kirk

    ... there are a variety of different incentives to reward someone who can afford the up-front cost, but no Connie Mae institution to finance against the savings in utility costs. Put a Connie Mae in place, and the demand would quickly ramp up to the point of rewarding the up-front cost to manufacturers of developing and introducing standardized modules.

    Houses costing more to build than their market value is quite common. Its the foundation of what makes a slum. In the 1950's, it happened in central city locations, the old brownstone townhouses of the middle class and upper middle class city residents be reworked into apartments to get enough rent per tenant to cover the purchase price of the building.

    But when it costs more to build than its worth on the market, it costs more to maintain than the market value of maintaining it, so the landlords that owned those buildings did not put enough money into them to keep them in good repair and they started to fall into decline.

    The collapse of the housing bubble was the first time was saw a large number of outer suburban areas where the purchase price started to dip toward or below the cost to build.

    Start 2010 with Lesbian Creative Works, 100% Yuri from ALC Publishing

    by BruceMcF on Mon Aug 09, 2010 at 05:19:58 PM PDT

    •  I Think the Fact That It's Investment That (1+ / 0-)
      Recommended by:
      BruceMcF

      brings you no new service or capability is a HUGE turnoff. You just throw away your ability to finance anything big for a decade to come, and you get nothing at all till then.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Mon Aug 09, 2010 at 05:27:31 PM PDT

      [ Parent ]

      •  I would think that the hot water solar (1+ / 0-)
        Recommended by:
        BruceMcF

        would be worth the expense.  Heating water used to be considered at least a third of your electric. It would depend on how high your electric costs are.

        There are websites that show how to build your own solar water heater equipment.

        It is odd, I keep cutting back and doing things to save electricity costs and I have for years. We have a very expensive electric company. It seems to work for a month then it zooms back up. Our house is all electric so I focus on that.  We have a water well and the pump is electric.

        I can't do the solar water heating thingy and can't get my husband interested in doing it.  

        For most of us, adding insulation where we can and using a solar water heater would help a lot and it should pay back fairly fast.  Using the new energy saving bulbs should help, too.

        I don't know if the high efficiency water heaters pay back as fast. They would be easier to deal with although we had to pay to have our electric water heater installed and it was about $250 to do that. It has a timer on it so it doesn't come on often but our bill didn't go down when we started using it.

        Our last electric bill was $248 and I have bills 10 years old when it was about the same for the same month.  I had some bills in other months that were $400, though, back then for winter bills where we had to heat with electric.  We use a pellet stove now which lowers it about a hundred dollars.  But pellets have went up...

      •  Yes, that's how Connie Mae helps ... (2+ / 0-)
        Recommended by:
        relentless, pdx kirk

        ... with the finance capped at utility savings, and paid back in utility bills, the portion funded by Connie Mae does not show up as a debt in a person's credit rating.

        Start 2010 with Lesbian Creative Works, 100% Yuri from ALC Publishing

        by BruceMcF on Mon Aug 09, 2010 at 06:56:50 PM PDT

        [ Parent ]

  •  On the subject of rising material costs: (2+ / 0-)

    There was a time when lumber companies would go in and cut first growth douglas fir and redwood, mill it, and take it to market. There used to be a lot of trees, (just like there used to be a lot of oil).
    Harvestable timber is not what it once was and more lumber companies are relying upon "engineered" materials which utilize short lengths, chips, sawdust, and the like. Engineered materials are pretty damned good, but you must remember that being manufactured, they consume lots of energy, capital costs for specialized fabrication machinery, and chemicals (glues). I would expect them to cost plenty. That being said, a "number 2 or better", 2 x 12 in Doug fir will be way more expensive than its engineered lumber analog.

    Good luck with your project!

  •  In our area (1+ / 0-)
    Recommended by:
    pdx kirk

    builders get discounts.  You have to sign up as a builder at places like Lowes in order to get them.  You even go out a different check out. I don't know what you have to do to qualify as a builder.  Lowes, Home Depot and places like that have websites.

    Selling overseas may keep building materials high, too.  I heard they were selling sheets of plywood in Iraq for $70 a sheet or higher when the war started. It has been a long time, it may have been even more than that.

    My daughter has been looking at houses. The realtor told my husband that $65 a foot is the going rate in this area.  It has been over $100. He said people refuse to sell for $65 and set their houses at least for what they pay for them, but they don't sell.

    My other daughter bought a house about 3 years ago and the bank told her that the builder made about $100 on it. It was a nice home but no one was buying.  She sold it for what she had it in and was very lucky to do that.  

    Builders didn't insulate walls until sometimes in the 70s era or when gas and oil went up.  Our gas bill was low in the house we lived in without wall insulation.

    Insulation companies can cut circles in your siding and in your sheetrock to insulate a lot of the outside walls.   My sister had it done and they glued the circles in then mudded them, sanded them and painted the walls. When the wind blows the wall insulation especially on the north in the winter and the southeast in the summer does help.  

    Good luck with your projects.

    •  My experience is the old "contractor discount (2+ / 0-)
      Recommended by:
      alizard, relentless

      has faded away over the years. It used to be real and significant. Now its more about some extra customer service for the full timers vs the DIY'ers.

      I tell my clients that its, "time, price or quality, you can have any two you want."

      So if price needs to be low and you do not want to sacrifice quality, then prepare to make time your friend. The best way I have found is to get a cheap barn or garage and shop materials from the gray market. craigslist, barter networks, recylce building centers. then stock pile the goods. Start with a design that is solid but still loose. Adjust it to fit the material you find. This takes 6 months if your on it. up to two years if not.

      "There are no bad architectural styles, well except the boring ones." F.LL.W.

      by pdx kirk on Mon Aug 09, 2010 at 09:18:02 PM PDT

      [ Parent ]

  •  (2) I think is easy to answer (0+ / 0-)

    There are a lot of empty houses already built.  And, anyway, the land is the asset and the house on it is just a cost center.  (Land is very volatile...)

  •  Where I am, all of the new assessments came (0+ / 0-)

    through with the land going way up and the houses on them way down. As I am in a burb, what I thought was that their guess on likely outcomes is that the houses all get torn down and lots combined for the next round of building, as the last one here was in the Fifties and Sixties, so the value is in the land especially when the lot minimum is 15K square feet save for affordable housing areas where the apartments and condos are.  A related problem is that since most of the houses are occupied by much older people, because the young people haven't got the credit to buy at all, there may well be a dropoff in total residence before this thing is over, literally more houses than people, where the value would really be in the land.

    Where I am, people do have insulation, to keep out not cold, we don't usually get what the East gets, but both damp and noise, and have been for some time because we are abundantly supplied at all ends of town with airports. We've always had periodic shortages here of building this and building that, but the response has been a lot of broader based salvage and Second Use places for more than the usual number of things, and alternative ways to avoid that sheetrock shortage - given where we are, everything has to be shipped the expensive slow choo choo train way so there is never a bargain on lots of things.

  •  In a way (1+ / 0-)
    Recommended by:
    Shocko from Seattle

    the example of your high costs of building and the lowered value of homes already built is a pattern in many areas in this country.

    Businesses want and do charge ever higher prices, but the value of the work done by the middle class is going down.

    Maybe it is what they can sell building material for overseas that keeps the prices propped up.  But even things that can't be outsourced like health care and cable seem to be ever increasing prices while the income of those who work is going down or they are being layed off.

  •  Prices for everything no longer make sense. (0+ / 0-)

    We've noticed weird gyrations of food prices in our area. It seems as though the more people cut back, the higher the prices of staples (and in this case materials) go. It's counter-intuitive and the exact opposite of what makes sense. We should be in a deflationary cycle, what with everyone being broke and/or out of work, but prices keep creeping up.

    I have watched the prices of canned goods and pasta jump up 25-50% in the last year because, I thought, that's mostly what people can afford, so supply and demand... But the price of steak, say, doesn't go down. Or expensive cheeses. Which makes no sense. It should, since people can't afford it.

    It's all got to come crashing down at some point.

    "'club America salutes you' says the girl on the door/we accept all major lies, we love any kind of war"--The Cure, "Club America"

    by Wheever on Tue Aug 10, 2010 at 08:32:44 PM PDT

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