We're making more and more luxury cars, why is the price not coming down?
From looking around Omaha, I see they are primarily increasing the supply of high-end homes. It follows that for a given lot size, it's the way to get the biggest profit.
Because more people are buying them. If you make more and more of something and you can still sell all of them without lowering the price, it means there is still more demand for that thing.
We’ve under-built housing for almost 2 decades. The long term demographic trend is that people are moving out of rural areas and into urban areas like Omaha, so the fact that there would be more demand for than supply for housing in Omaha is entirely expected.
> From looking around Omaha, I see they are primarily increasing the supply of high-end homes. It follows that for a given lot size, it's the way to get the biggest profit.
What you say is true, but also not a problem.
When I was college I lived in an apartment in Chicago with 3 roommates. Our apartment had a servant's quarters. The dining room (which we also used as a bedroom) had a metal tube with a bell that connected to the servant's quarters. Obviously, at one time this was a luxury apartment, but my share of the rent was only around $500. It became affordable housing. Today's affordable housing is yesterday's luxury apartment.
Not sure the details of Omaha, but where I live in Los Angeles, insane building codes make it incredibly difficult to profitably develop affordable housing. The very nice apartments I lived in when I lived in Tokyo would all have been illegal in Los Angeles.
That's not what affordable housing is. You probably didn't live in affordable housing in Tokyo (edit: of course I could be wrong, but it's not my first guess). Yes, your housing was affordable. But affordable housing in US cities is subsidized and price capped, with income restrictions.
Last, and this is really hard to convince some people: the amount of rebuilding due to natural disasters has skyrocketed. Due to the way insurance & federal relief works, that work is far preferable to labor than spec work. This has put a huge distortion in the new build market.
High wind resistant, fire resistant. Landscaping too.
They absolutely do. Look up all the building code changes post Hurricane Andrew in the 90s. Those changes spread through the whole southeast and have made wind almost a non-factor. The problem is and always will be flooding. My house is built above the '100 year flood' line to fit code which helps. The problem is either older houses or houses built in areas that didn't historically flood enough for people to consider it a risk.
This is great, but ugh, I live along the Gulf Coast and for the life of me I don't understand why more people don't build with concrete (block or poured) walls, instead of stick-framed! Sure, you can build wood to withstand wind up to code, but you can't make it termite-proof, of which this region has an abundance.
Say I have two opportunities, one pays $200/hour and one pays $100/hour. But I can only do the higher-paying one for 10 hours a week. If I have more capacity and I want to have more than $100k in annual income, I will work the less profitable job, even if it doesn't provide the maximum profit.
Similarly, in the market in general, if there's demand for housing at a lower profit margin, and there's spare capacity to build it, it should happen. People don't just take the highest profit margin opportunities and toss the rest in the rubbish. So I think there has to be a deeper issue, for example there are costs that make the profit margin so low (or even negative) that the opportunity doesn't attract sufficient labor to build the supply.
I don’t think this is true, especially per capita:
https://www.statista.com/statistics/204208/north-america-veh...
Also, “luxury” car is relative. An entry level car today will have many features from a luxury car from 20 years ago. Also, “luxury” brands will intentionally not make too many cars to maintain the brand’s exclusivity. Otherwise, they would not be able to profit from price discrimination:
https://en.wikipedia.org/wiki/Price_discrimination
So price per car feature and per mile has certainly come down, a lot. But simultaneously, people’s expectations have gone up.
we actually saw this when new cars became unavailable during the COVID supply chain crunch and then used car prices skyrocketed. the real estate equivalent would be literal tenements in New York renting at $4-5k a bedroom.
Because supply and demand are carefully watched. Manufactures are not just making more and more luxury cars, they carefully study the market and adjust supply so that their price makes sense. Remember all the materials, labor, engineering, management and other overhead sets a floor to price of a car, they carefully watch the numbers to make them work. They might be making more cars, but they are not making infinitely more.