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  • Jonathan Poyer

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:

Work

Percent of Job Cost

Land & Site Work

3% - 8%

Foundation

10% - 15%

Framing

10% - 20%

Exterior Work

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.

Material

Cost

Lumber

$25K - $60K

Concrete

$1K - $10K

Drywall

$10 / Sheet

Flooring

$1 - $5 / Square Foot

Siding

$2 - $15 / Square Foot

Insulation

$0.10 - $1 / Square Foot

Roofing

$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.

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