Eye On Housing
Looking at single-family homes started in 2015, the median prices, excluding improved lot values, range from $168 per square foot for contractor-built homes in the Pacific division to $78 per square foot for speculatively built homes in the East South Central division.
At $168 per square foot, new contractor-built single-family homes in Pacific are the most expensive to build exceeding the national average of $105 per square foot by 60%. Per square foot costs exclude the cost of developed lot, so highly variant land values cannot explain the regional differences in per square foot costs. However, higher and rising regulatory costs undoubtedly contribute to higher per square foot costs.
New England with the median contract price of $149 per square foot is second on the list of most expensive contract prices per square foot. In 2015, New England also became home to the most expensive spec houses with the median sale price of $144 per square foot, excluding improved lot values.
The most economical homes are spec homes started in the South region, where median sale prices per square foot (excluding improved lot values) range from $78 in the East South Central division to $87 in the West South Central division, consistently below the national median sale price of $92 per square foot. Looking at the contractor-built starts in the South, prices per square foot are slightly higher ranging from $98 in the West South Central division to $100 in the East South Central and South Atlantic divisions but still below the national median contract price of $105 per square foot.
Typically, contractor-built custom homes are more expensive per square foot than spec homes after excluding improved lot values, 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 clear exception is the Middle Atlantic and Mountain divisions. In the Middle Atlantic, half of spec homes have costs per square foot in excess of $132 while the median for contractor-built homes is $122. In the Mountain division, the median sale price also exceeds the median contract price, $109 versus $98 per square foot.
Nationally, square footage prices (excluding improved lot values) for both custom and spec homes increased, 8 and 4% respectively, compared to 2014. However, some regions registered much bigger fluctuations. In the West North Central division, the median contract price per square foot jumped 23% while the median sale price showed no significant change. In the East South Central division, contract prices per square foot increased 18% and lost their status of the most economical in the nation. Meanwhile, after registering a small decline since 2014, sale prices per square foot in the East South Central division became most affordable in the nation.
Annual changes in median square footage prices may reflect changes in home building costs (including material, labor, regulatory costs, etc.) but may also signal a shift in a production mix. For example, a shift towards high-end homes will be reflected in rising median square footage prices, all other things being equal. And vice versa, a shift in a home building mix towards starter, first-time home buyer’s homes will manifest itself in lower median prices per square foot.
The NAHB estimates are based on the Survey of Construction (SOC) data. The survey information comes from interviews of builders and owners of the selected new houses. 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 reported prices are medians, meaning that half of all builders reported higher per square foot prices and the other half reported prices lower than the median.
For the square footage statistics, the SOC uses all completely finished floor space, including space in basements and attics with finished walls, floors, and ceilings. This does not include a garage, carport, porch, unfinished attic or utility room, or any unfinished area of the basement.
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