Wednesday, April 28, 2010

How much does it cost to build a new house in _______ ?

A new house will probably cost between $80 and $200 per square foot...

In one form or another, this question is one of the most frequent requests we receive from our visitors. Unfortunately, it is also one of the few questions that we simply cannot answer very specifically. Can you tell me how much it costs to take a vacation or send my kids to college? How much should I expect to spend on a new car? What is the "average cost" of a dinner for two or a gallon of gas?

All of the above questions contain so many variables that it is impossible for anyone to answer them accurately without first asking several additional questions and gathering much more information. The same is true when calculating the cost to build a new home.

Let's begin by considering what square foot homebuilding costs really are — nothing more than the total cost of a given project divided by the total number of square feet in that project. So, a 2,000 square foot home with total construction costs of $250,000 would cost $125 per square foot to build. Spend another $50,000 on a gourmet kitchen, an elegant master bath, marble tiles in the foyer, a fancy curved stair, 10 foot ceilings, or any other combination of "above average" features or finishes and that same 2,000 square foot house would now cost $150 per square foot to build; an increase of 20 percent.

Now consider the structure itself. If the house in question is a rancher, with all of the finished area on one floor, the roof would have to be large enough to cover the entire 2,000 feet of living space. Turn that single level rancher into a two-story colonial and the roof size is instantly reduced by 50 percent because the second floor system became the "roof" for half of the area on the first floor. Increase the roof pitch from 3/12 to 12/12 and the roof area (including framing members, sheathing, shingles) quickly increases by 35 percent. Of course, these examples are oversimplified because they don't consider any other differences like the need to add the cost of stairs and take away the space they occupy, or in the case of a slab-on-grade foundation, the difference between the cost of a concrete slab verses a wooden floor system, but hopefully the point has been made. Costs of similarly sized homes can also vary considerably due to the shape of the building, the number of corners or offsets in the design, the type of foundation and required local footing depth, the pitch of the roof, and many other design characteristics that are not directly related to the size of the house.

Next we have all of the regional, governmental, political, seasonal, and unpredictable human factors. Development impact fees, which more and more state and/or local jurisdictions are charging owners or land developers, can range from a few thousand dollars to more than $50,000 (at last check) per single family home. Labor and material costs can vary substantially based upon the time of the year, complexity or uniqueness of the project, good or bad economic times, jobsite conditions, regional markets, the unemployment rate, local building codes, construction moratoriums, zoning laws, covenants and restrictions, availability of supplies and workers, weather conditions, natural disasters, public or private water and sewer, and several hundred other factors. And, to make matters worse, there really isn't any uniform method of measuring square footage or defining what is included in those numbers. Is your builder or realtor using exterior dimensions or interior dimensions? How do they define heated or unheated space? Have they included the garage or basement or unfinished loft areas in their calculations? What about decks or covered porches? Is the land included in the square foot costs? What about building permits, liability insurance, utility connections, wells, septic systems, driveways, sidewalks, landscaping...

Unfortunately, the only way to be sure that your homebuilding budget is reasonable is to identify and price every item that will be used to build your individual home and bid all of the associated subcontracts and labor costs. Of course, in order to do that, you will need to have plans and specifications and you will need to develop a complete and thorough estimate for your individual project. The obvious problem here is that not many people want to buy a dozen different house plans and then spend weeks or months pricing them in order to determine which one(s) they can afford to build. So, a more realistic approach to determining how much your new home will cost might be to simply work backwards. Start by determining how much you can afford to spend, then be realistic about the size of the house you need, and finally, decide what and where you can afford to build.

There are plenty of financial resources on the Internet that will help you learn more about mortgages and calculate monthly payments for a given loan. After you have a good idea of your financial situation you can look in the real estate section of your local newspaper for homes that are in your price-range. Often, the advertisements will provide you with prices and square foot descriptions from which you can develop a square foot price. Then, visit several model home communities and tour model homes in order to see room sizes, the type of finishes, and the quality of workmanship that you should expect in that price-range. Be sure to take - and use - pencil, paper and a camera to record what you like, as well as, what you don't like about the homes you will be touring. Also remember that many of the things seen in model homes often are not included in the price of the "standard model". If you visit on a weekend, you might even be able to walk around the community and talk to homeowners that are working outside. Introduce yourself, tell them what you are doing, be polite and respectful, and you might be pleasantly surprised by how much information they will happily give you.

You may also want to check with local mortgage bankers, real estate agents, or friends who have recently built a new home or addition to see what type of "ballpark" numbers they can provide. Local contractors and homebuilders associations might be able to quote "average" homebuilding costs and figures. However, before you put too much faith in "average" numbers, keep in mind that the only house that you really care about is the one that you are about to build. Home prices of $55, $79, $84, $87, $92, $110, $122, and $315 per square foot combine to produce an average of $118 per square foot, which is probably a reasonable figure for many areas of the country, yet the difference between the lowest figure and the highest is very substantial. While professional builders may be able to average their profits and loses over several projects, the typical homeowner or owner-builder probably cannot. So, regardless of how you finally come up with the numbers, be sure to take the time to review your finances, prepare a reasonable budget, and produce an accurate construction estimate for the specific home that you are about to build.

Good luck with your project, thank you for visiting B4UBUILD.COM, and have fun building!

Greg Susman

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