The real reasons why remodeling and new construction is so expensive

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[00:00:24] Eric Goranson: They've been back to expensive again. What I've seen in the last few years, O S B price. Prices where they're $9 a sheet retail, or 22 or $28 a sheet Retail. When builders have 50 or 60 extra thousand dollars in lumber prices in a house, yeah. That is going to, that is going to change how housing prices go.

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[00:01:11] Eric Goranson: Thanks for joining us today. Well, in this episode, I wanted to talk about why housing and remodeling right now is so expensive and in most places of the country it has gone up significantly, and there's a lot of different facets to why. And I wanted to talk about those today so you understand it as well as is maybe we can sit here collectively and see if we can do something differently to help change that.

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[00:02:05] Eric Goranson: The first one that I have seen, and this is depending on where you're located, but um, it's, it's a big issue. Building permit fees in some areas are adding so much to a house. Like for instance, here where I'm located in the city of Portland, Their impact fees that they do can be 50, 60, $70,000 to put a house on a lot, and that's just for the fees.

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[00:03:06] Eric Goranson: So even though it really didn't change the impact to the neighborhood, They're gonna get you anyway, depending on the value of the house and what that is. And I think that is one of the biggest hurdles that we run into on projects when you know you have a permit fee that is not reasonable. Now, anytime that you're charging that much money just in fees, that goes right to the bottom line of that house.

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[00:04:05] Eric Goranson: That's a big one right there. Now here's one that's really, um, a bigger dive here that I want to talk about, but it's a big deal. Like out here on the West Coast, for instance, on my side of the country where I'm located, we have a problem with urban growth boundaries. Now, what an urban growth boundary is, is where cities and states, and most of the time it's states have gone in and said, okay, we are gonna control how much sprawl.

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[00:04:57] Eric Goranson: What used to be a [00:05:00] $25,000 lot is now a $200,000 lot because we have made it very hard to find buildable lots. The problem is, is that gives us an opportunity then to inflate the price of the lots out there. So instead of it being a more affordable 'cause, there's a ton of lots to build. What we're seeing is, is that it is pushing up.

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[00:05:53] Eric Goranson: Why are we artificially pushing that up now as a homeowner? Do I want to see them put out, um, [00:06:00] investment wise? Would it be smart for them to go out and say, Hey, we're gonna open up this whole huge big swath of land and it's gotta tank our values? Well, no, of course not because that hurts things. But I think we need to be smart about how we're doing it and create a little bit more space for people to build so we can have affordable housing.

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[00:06:38] Eric Goranson: So that means it's a federal forest, it's a state forest. These are un buildable places because guess what? We don't own them and nor can we own, own them. And more importantly, We can't get tax money from 'em. So there's no property taxes getting paid by the federal government to the state government really.

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[00:07:20] Eric Goranson: And that makes it really hard because one, the schools have to fight a little bit more. 'cause that's not, um, people paying on the property taxes and that's not going into our schools. And then second of all, what happens is, is that's our artificially, you know, Creating it where most of the land is never going to be buildable 'cause it's federal land.

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[00:07:58] Eric Goranson: I think we need to open up more [00:08:00] land. I think we need to have more places. To build. But yes, that will come, um, you know, at the, at the detriment to mother Nature in some areas. But I think if by, if we do this correctly, by creating the right amount of green spaces, we can have less impact. But I think those are two big pieces of the puzzle here of why things are getting more and more expensive is that we have to one, really be able to watch those fees.

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[00:08:49] Eric Goranson: Yes. What are you doing in your school district to help build the trades? Is there a wood shop program in every middle school and high school? Did they eliminate those? Are those [00:09:00] gone because they made 'em into computer science rooms? Is there ways for people to learn welding? What skills are they teaching in high school for people that want to go into trades?

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[00:09:31] Eric Goranson: We're gonna talk more about that and what we need to do to get that changed around because things are gonna keep getting more expensive. Which means that's harder for people to get into homes. We'll talk more about that just as soon as a round the house returns.

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[00:10:22] Eric Goranson: Welcome back to The Around The House Show where we help you get the most outta your home through information and education. Thanks for joining me today. We've been talking about why remodeling and new homes are so expensive right now and what's going into that. And so far we've talked about building permit fees being absolutely insane in some areas we've been talking about, um, you know, really the cost of land and urban growth boundaries that have been really artificially raising prices out there for property that's buildable.

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[00:11:14] Eric Goranson: They have all the things that they should have in a vocational skills program. And then there's other schools that have completely decimated those programs. They are focused only into getting kids into college, and they are not focused into getting kids into skilled trades. And those are the ones that are failing our children these days because we need to.

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[00:12:00] Eric Goranson: And the problem is, is what we're doing, and this is me getting on my soapbox a little bit here, guys, but what we're doing is we're making it so these kids are going out and having to spend a hundred grand on an education and then turn around and go, wow, I can't use that. Now I gotta go back and I'm gonna learn a skilled trade.

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[00:12:41] Eric Goranson: And it's crazy that there are plenty of school districts out there that are doing really good at it, but right now there's way more that are not. And the cool thing is, is that you're in complete control of that. So what do you do about it? I want to see you get down and get involved with your, your schools.

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[00:13:26] Eric Goranson: That's what's gonna help us get this turned around for the trades. Now it's still gonna be for decades, a great education for somebody to go out and get into an apprenticeship program and do it. But we're getting to the point now where there's construction projects that can't happen because there's not enough people to do the work, and that is going to artificially raise prices even more and make it so housing's gonna be much harder for people.

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[00:14:10] Eric Goranson: Two, we've got the trades hitting the retirement age where there's a lot of people out there with 30, 40 years of experience that are saying, Hey, cool, I'm heading to the beach. I'm done. And then we've gotta really be able to get the kids that don't go to college, that don't want to go to college. Why are we taking their hard-earned money and get 'em getting loans and having to pay it back when they're not gonna use those skills anyway, so that's a big one.

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[00:15:05] Eric Goranson: And you know, something, they, they, they are running a business as well. But the thing that we have to look for is for small business when they have to pay 25 or 30% to get operating loans. Maybe they're gonna develop land or they're gonna buy land and they're gonna build and they need to carry that loan.

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[00:15:49] Eric Goranson: So that is adding to our cost of housing. And so until we get, you know, this isn't a politics show 'cause we don't wanna do it, but obviously inflation. I took Econ 1 [00:16:00] 0 1, 2 0 1. We know that inflation is caused by government overspending. That's what it is. And guess what? We have devalued the dollar enough to do that.

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[00:16:29] Eric Goranson: What loans people have to get is very, very expensive. And that of course reflects in our housing prices. Now, another one that's been interesting, and this is something that's been complex and we're not gonna get into the weeds on this 'cause quite frankly it's boring radio and podcasting. Lumber prices have been all over the board.

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[00:17:19] Eric Goranson: So if you think about it right now, if I took a a, a, a medium-sized house and we added $40,000 because our lumber package went up, we added $40,000 for let's say, um, you know, your development fees to your city. Then you had, let's say, another $40,000 of inflated land cost due to urban growth boundaries, and that we just added 120,000 bucks to the price of a home, not even talking the labor.

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[00:18:21] Eric Goranson: And some of this stuff we have complete control over, we just have to change our mindset. Of how to do that. Now, when we come back, I'm gonna talk onto a hot subject that I think is a little controversial, but for some people, but I think it's a smart, easy answer to affordable housing. We'll do that just as soon as a.

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[00:19:25] Eric Goranson: Now, when we went to break, we were talking about lumber prices being high, and some of that has to do with between what's going on in the Canada market and the US market and uh, trade restrictions between those two and what that's doing for lumber prices. And anytime that we're having any kind of a battle like that, that gets to be pretty crazy expensive when we start adding tariffs and things onto that.

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[00:20:06] Eric Goranson: But really, lumber prices. One thing that we can really be careful with, and it is a commodity, so every day during the week that price is changing. And so it's a speculative market. At any time that we have hiccups in that speculation, prices go up, whether it's um, a trade deficit, whether it's a tariff, whether it's any of those things, it all affects the price of lumber.

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[00:21:01] Eric Goranson: So they're gonna, basically, they're saying, and what Canada's saying is the, that it's unfair, unjust, and illegal extension of US import duties on Canadian softwood lumber products. So basically the, to make this into a, I'm gonna simplify this a little bit, maybe oversimplify it. So I do apologize if I am, but there's been a decade long dispute.

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[00:21:55] Eric Goranson: And of course it makes things more expensive here. [00:22:00] So I understand why the US Trade, uh, representative's office is saying it's trying to ensure a level playing field, but um, this is where these battles occur and that affects. Our lumber prices and right now lumber prices are down, but that's because there's not a lot of home building either.

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[00:22:43] Eric Goranson: If people are buying lumber in September, October, whenever that lumber futures price is, that takes a while for that to occur. And then, you know, we're kind of looking a few months out of what's happening in the lumber market for what's happening for builders and [00:23:00] remodelers. So these are things to really take into account and anytime that we get into these trade disputes, those are things that end up costing money.

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[00:23:30] Eric Goranson: So that's really where that is. It doesn't really change what's going on with cabinetry and some of the other finished goods. So just something to think about there. Now, here's another one that has been controversial and I think it's something that's good, but it's also something that adds to the cost.

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[00:24:14] Eric Goranson: And with this, it adds money to it. So for instance, if, um, you know, if you're looking at an induction range right now versus an electric because you're trying to push that or a gas range, I love the induction ranges. They're good, but you're gonna spend a lot more money for an induction range than you will over on a, um, you know, on a gas range, for instance.

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[00:24:55] Eric Goranson: It's going to be more expensive on those appliances to get something the other [00:25:00] way. Now, the other thing we get into is energy standards because, and again, these are things that I think are needed, but they just add to the price of a home, and maybe instead of doing so many rebates that we end up helping out a little bit better for people that are trying to build affordable housing to get that in there.

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[00:25:42] Eric Goranson: It costs more money 'cause you're putting more parts inside the house. So that is kind of an unavoidable part, but it is a part of really creating something that's gonna be healthier that does come at a cost and that is unfortunate, but there's not really a lot we can do to avoid [00:26:00] that, except make some good choices on what we're doing.

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[00:26:26] Eric Goranson: And there are people out there like Skyline homes that do this every day that can create a more affordable factory built home. You can build developments. Where the homes are prefabricated, they come out where all they have to do is build the garage that's detached to the front of it. And you'd never know this was a manufactured home community, but you can do it faster, cleaner, healthier in, in a factory environment with risk, less risk, and less material waste than you see.

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[00:27:23] Eric Goranson: Door-to-door, you know, suburbia community. But we can do it with a factory built home for less money, period. It's gonna look like a regular neighborhood. 'cause you're gonna have front garages on the front or the side of the house, depending on the design, and you can get those in there and get a turnkey place much faster and much easier with that.

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[00:28:11] Eric Goranson: A new construction build, you've got probably a couple dumpster trips of materials, and you sure don't have that when they have sized pieces correctly, where the lumber's, precut. At the right length, and that means you're not throwing away, which is materials you're paying for that are going in the landfill, so you're paying for it twice.

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[00:29:00] Eric Goranson: Welcome back to The Round the House Show where we can help you get the most outta your home through information and education. We've been talking today here about really trying to figure out how do we get more affordable housing for people out there. And we were talking a little bit earlier about, uh, the manufactured home community about how they're really building nice homes these days.

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[00:29:37] Eric Goranson: You've got a attached garage to it. So in all intents and purposes, when you walk into it, it looks like a regular home. It doesn't look like something coming out of a seventies trailer court, which is the the old way of doing it, and I think that that we've got some really good ideas out there, especially with this pre-manufactured housing out there that can save some time and money.

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[00:30:33] Eric Goranson: But I walked through them building these homes. It is surprising how much I. They're building those homes and many, you know, site-built, stick-built homes. There is so much more steel involved. There's so much more straps. And the things that I like too is that they have larger drywall sheets because there's less seams, [00:31:00] which means there's less ability to crack.

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[00:31:19] Eric Goranson: There's prefabs, there's a lot of different things. I'm not talking like the container homes and, and that kind of stuff, that's a little kitschy, but I'm talking about, you know, people building homes in factories and setting 'em out to be put together or assembled. And I think that is going to be one of the many things.

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[00:31:58] Eric Goranson: Let's be honest, it's [00:32:00] just how it goes. I have seen some, some affordable homes that were built, um, That were, if they were built by a private company, they'd be, uh, they'd be in luxury homes for the cost that they're doing. There's just no, no comparison when you have a, a private company build it. So I think we need to lean on that versus government housing, because government housing is something that ends up being very wasteful and there's just a lot of hoops and stuff to go through.

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[00:32:58] Eric Goranson: So I think that is [00:33:00] something that, um, is obtainable. I think that is the, the, the future of that. Now, the other problem we have too is, and this is something that is, that is happening on the rental side that I wanted to talk about for all you renters out there, is that we've got some issues out there that are starting to happen in certain states where we've, we're really fighting some battles, like here in Oregon.

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[00:33:43] Eric Goranson: So these are things that that can be done. But when it's nearly impossible to evict somebody for damaging the house or not paying rent or any of that, you start putting too much power. [00:34:00] Into the hands of the tenant. You're not gonna have people out there renting homes anymore. So what happens is, is when you come in and do a hard line on landlords, and I know people that are renters go, oh, those darn landlords, I get it.

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[00:34:39] Eric Goranson: I'm selling all my rentals. I'm getting out, I'm moving outta state. And all of a sudden you have single family homes that are rentals that are great for families. These are for people with a dog or whatever that wanna have the next step out of apartment living to get into that before they maybe go buy a home.

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[00:35:19] Eric Goranson: Anytime that you get people involved in trying to regulate that, it seems to make it harder for people to get in there. Not easier. So I think we really need to start having some hard discussions about what can we do to get people into homes and get 'em in there responsibly. Now, you know, we hear about the, the, the, the housing crisis as far as, you know, the homeless out there.

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[00:36:14] Eric Goranson: Because we really have to start taking care of people to fix that. And all the free housing in the world doesn't fix it. If they have to follow rules where they're not doing drugs, where they're not hurting people, where they're not in a mental health crisis. We need to get these people helped and a, a compassionate way of doing it.

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[00:36:59] Eric Goranson: And, uh, Jordan [00:37:00] Schnitzer came in and purchased it at the auction and then turned it into a really reliable and safe. Transitional housing for people that are wanting to get off drugs, get off the streets and get into a safe place. They have now turned this into a great place for that. 'cause it had everything there.

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[00:37:41] Eric Goranson: Now, if you've got ideas on how to deal with this, feel free to send me a message over to around the house online.com, and that's the way to get ahold of me there. And we're gonna be talking about with some great interviews coming forward here as well. We're coming into fall, so you know what it is with Fall and it's a Happy Labor Day weekend to everybody out there.

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[00:38:15] Eric Goranson: Uh, make sure if you're, uh, listening to us on the radio that you follow the podcast and we have, uh, the podcast on any podcast player as well as our premium content, which we are going to have some, uh, some episodes here in September that we are gonna have, uh, at least one or two exclusive episodes for you to catch over there.

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[00:38:54] Eric Goranson: On these holidays, weekends. I appreciate y'all. Thanks for tuning in around the house. We'll see you next Saturday [00:39:00] or Wednesday on the podcast. Thanks for tuning in