{"id":10340,"date":"2023-10-27T08:20:12","date_gmt":"2023-10-27T15:20:12","guid":{"rendered":"https:\/\/real-estate-san-jose.com\/?p=10340"},"modified":"2023-10-27T08:20:12","modified_gmt":"2023-10-27T15:20:12","slug":"high-interest-rates-make-new-home-construction-less-feasible","status":"publish","type":"post","link":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/2023\/10\/27\/high-interest-rates-make-new-home-construction-less-feasible\/","title":{"rendered":"High Interest Rates Make New Home Construction Less Feasible"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">The city of San Jose just released a report titled \"<a href=\"https:\/\/sanjose.legistar.com\/View.ashx?M=F&amp;ID=12396982&amp;GUID=021ED09C-3683-471C-9DDE-9F205E72CE89\">Residential Feasibility Analysis<\/a>\" that compares expected construction costs with the value of the construction. The report says the total estimated development costs have increased by approximately 12-13% over the last 18 months. Construction mortgage rates have doubled over the last 12 months and hover above 8.0%. The report analyzed the expected total construction costs of building multi-unit housing and compared it to the expected value of the completed project for housing built to be rented and housing built to be sold. For market-rate homes, the expected residual value per unit ranged from -$322,000 to -$614,000. The residual value is the expected sales price minus the total of the hard costs, soft costs, sales costs, and profit. With these strong negative residual values, a builder would not want to build.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Looking at the <a href=\"https:\/\/julianalee.com\/san-jose\/san-jose-statistics.htm\">San Jose real estate market<\/a> shows that weak sales prices are not the cause.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/san-jose-ca-homes.com\/wp-content\/uploads\/sites\/31\/2023\/10\/q-san-jose-condo-sales.png\" alt=\"\" class=\"wp-image-10569\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/san-jose-ca-homes.com\/wp-content\/uploads\/sites\/31\/2023\/10\/q-san-jose-sales.png\" alt=\"\" class=\"wp-image-10570\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The average total development cost for a rental unit in San Jose was estimated to be $549,100 in 2019, $790,800 in 2022, and $890,600 in 2023. In \u201c<a href=\"https:\/\/sanjose.legistar.com\/View.ashx?M=F&amp;ID=12388875&amp;GUID=10CF8DCD-BAF9-44F4-9892-5B53AB28103B\">Attachment A \u2013 Cost of Development<\/a>\u201d the total cost of city permits and fees is estimated at $53,600 to $92,800 per unit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">With little likelihood of new construction increasing the supply of housing, it is hard to see a path for reduced home prices in a healthy economic environment.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The city of San Jose just released a report titled &#8220;Residential Feasibility Analysis&#8221; that compares expected construction costs with the value of the construction. The report says the total estimated development costs have increased by approximately 12-13% over the last 18 months. Construction mortgage rates have doubled over the last 12 months and hover above [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[14,15,16],"class_list":["post-10340","post","type-post","status-publish","format-standard","hentry","category-san-jose-real-estate-trends","tag-mortgage-rates","tag-new-construction","tag-new-homes"],"_links":{"self":[{"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/posts\/10340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/comments?post=10340"}],"version-history":[{"count":0,"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/posts\/10340\/revisions"}],"wp:attachment":[{"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/media?parent=10340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/categories?post=10340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/homesforsaleinsiliconvalleyca.com\/sanjose\/wp-json\/wp\/v2\/tags?post=10340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}