The Costs of Housing - Where Are the New Builds?
On Average, in the U.S. it costs $283,500 to build a house with most homeowners spending between $115,507 and $283,500. New home construction typically falls between $100 and $200 per square foot but you can imagine spending way more than that for custom and luxury fixings.
Labor makes up 40% of the build cost with permits, design fees and materials making up the rest. Here is a helpful breakdown of house building costs:
Percent of Job Cost
Land & Site Work
3% - 8%
10% - 15%
10% - 20%
15% - 20%
Major Systems (Electric, HVAC, etc.)
10% - 15%
Interior Finishes (Drywall, Floors, etc.)
25% - 35%
Something else to think about – homebuilding material costs. Home building materials cost about 50% of the total build.
$25K - $60K
$1K - $10K
$10 / Sheet
$1 - $5 / Square Foot
$2 - $15 / Square Foot
$0.10 - $1 / Square Foot
$1K - $3K
The average purchase price of an existing home is about $285K. It generally costs up to $150K more to build a new home than to buy an existing home.
This seems relatively affordable to me. However, I do not think that this is where builders are spending their time. It is hard to imagine them building lower-tier homes given the costs and potential margins. I see builders focused on the $500K+ type homes with a major focus on $1M+. An anecdote is checking out Scottsdale or the foothills in contradistinction to Chandler, Tempe, or Gilbert in the Phoenix area. Those high-end areas are busy. Not so much in the starter home areas.
How does this end? It seems that the supply/demand stresses are very much elevated in the lowest-tiers and forecasts in that tier do not seem optimistic.