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Randall Garrett Gazette

Vol. III

Price: Priceless Home Builder News

April 2008

NEW HOME PAGE Of interest….

Why do Houses Cost a “Lot”?

HAVE you ever wondered what drives housing prices? Hmmm? Have you? Well, it’s the land. You know the thing that God isn’t making any more of (except in Dubai). Yes, land. Land is the largest cost-driving factor for a residential developer, and the largest single line item on a home builder’s budget. How can that be? Some of you think the fluctuation of gasoline, lumber, concrete, sheetrock, doors, blah, blah, blah, are what drives the price. Wrong! It is the dirt beneath our feet.

The cost for putting in streets, utilities, setting the drainage, etc., is virtually the same no matter where you put them. Obviously, the more lots in a sub-division, the more “improvements” costs there are. Certainly, if the developer puts a theme park of

(imagine Cinderella’s

water falls and Frank Lloyd Wright sculptures, as an entrance to the “Look-at-me-I -live-in-a-McMansion” neighborhoods, then that tends to add a smidge to the

Castle as a subdivision

development cost. It is the price paid to the


Consequently, the

landowner that factors into what lot price the developer can put on the ground. pricier the lots, the more

amenities and stuff required

to attract the

consumer class of upper-crusted families with their 1.9 children. Marketing say in the $200,000 range (sound outrageous -

American lots,

get ready! - in the next few years that will be starter home lot prices), you have to have “green

space”, walking trails, iron see-thru fences, waterfalls, and ponds complete with man-eating swans (those birds are mean) , of course. In the $25,000-lot neighborhoods, all you get for an entrance is a couple of 3 inch trees in front of a short brick wall, with a concrete sign calling the sub-division “Something Oaks”. They name it Something Oaks because “Siding Ville” doesn’t have that same lovely ring to it. Curiously, there is not a tree within miles in Something Oaks.

Ok, so we have established how a lot price is determined. How is that factored in to a home price? Generally speaking, the lot cost should be about 20% of the sales price of the home. Of course, there are exceptions to the rule, for example, in Highland Park

Randall Garrett Homes, Inc.

Randall W. Garrett Construction Company, Inc.

P.O. Box 1708 Colleyville, Texas 76034 Office: 817.475.4644


104 Grapevine Hwy., Suite 100 Hurst, Texas 76054 Fax: 817.472.7156

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