To bring this into the light of scrutiny without over-dramatizing it, we need to first understand the general business model. We sell an item or a service and anything above our expenses is called “profit”.
The profit or loss margin on a tangible item is much easier to calculate than on a service performed. We all know that if we go to a store and a bottle of soda costs us three dollars, we’re getting ripped off. However, if we get a bid from a contractor to replace a floor, for example, most of us have no idea what a fair price is.
Contractors rely on this ignorance and they constantly overcharge homeowners on labor performed. As a matter of fact, they are setting new standards for labor costs just by being dishonest. As consumers, we pay a certain amount for things, but if a product rises sharply in price, we notice and complain about it. If that product stays at a high price long enough, the consumers gradually accept it and stop complaining about it.
This is true not only in the housing industry, but in all industries as well. Think about how much we pay for insurance. An insurance agent has a profit margin that depends entirely on overcharging customers. As in all businesses, this is a very undefined area, so business people just charge according to how much people will pay. Many business owners believe that if a customer will willingly pay the price, then it’s a fair price.
In our modern world of easy finance, consumers are so quick to buy homes, that they aren’t paying any attention to rising labor costs that are ridiculous. They only see a monthly payment amount that they can or cannot comfortably pay.
So, in response to the question, “are …