Construction Costs Should Predict Housing Prices Across Cities. They Don’t. Here’s Proof.

Research analyzing 75 years of data shows that construction costs—materials, labor, and builder margins—have little impact on U.S. housing prices. Since the late 1970s, housing prices have outpaced building costs, and cities with similar construction costs can have vastly different home prices. Regional housing affordability is driven mainly by factors other than construction expenses, which explain almost none of the variation in housing prices after 2000.