With the end of 2014 approaching, NAHB’s Eye on Housing is reviewing the posts that attracted the most readers over the last year. In October, we used Census data to compare new home prices across regions in the U.S.
The NAHB analysis is based on the Survey of Construction (SOC) data. The survey information comes from interviews of builders and owners of the selected new houses. The SOC differentiates between houses built for sale, houses built by contractors, owners and for rent. Built for sale are houses built on builder’s land with the intention of selling the house and land in one transaction. These are often called speculatively-built or spec houses. Contractor-built or owner-built houses are built for owner occupancy on owner’s land with either the owner or a builder acting as the general contractor and are often referred to as custom homes.
Contract prices of new contractor-built homes do not include value of improved lot and, typically, are lower than sale prices of spec homes. To make comparison more meaningful the cost of lot development is excluded from sale prices and prices are compared on a per foot basis. The most expensive homes are contractor-built homes in the Pacific and New England divisions with median contract price of $145 and $143 per square foot, respectively.
The most economical homes are started in the South region, where median sale prices per square foot (excluding lot value) range from $73 in the West South Central division to $84 in the South Atlantic division, consistently below the national median sale price of $86 per square foot. Looking at the contractor-built starts in the South, prices per square foot are slightly higher ranging from $84 in the East South Central division to $88 in the South Atlantic division but still well below the national median contract price of $93 per square foot.
Typically, contractor-built custom homes are more expensive per square foot than spec homes, suggesting that new custom home buyers are not only willing to wait longer to move into a new home but also pay extra for more expensive features and materials. The exception is the Middle Atlantic division where spec homes cost more per square foot than contractor-built homes, $131 versus $103. This makes the Middle Atlantic division home to the most expensive (in terms of price per square foot) new single-family spec houses.