Eye On Housing
Looking at single-family homes started in 2016, the median prices per square foot, excluding improved lot values, range from $164 for contractor-built homes in the Pacific division to $81 for speculatively built homes in the East South Central division.
At $164 per square foot, new contractor-built single-family homes in Pacific are the most expensive to build exceeding the national average of $101 per square foot by more than 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 $147 per square foot is second on the list of most expensive contract prices per square foot. In 2016, New England also became home to the most expensive spec houses with the median sale price of $150 per square foot, excluding improved lot values.
The most economical custom homes are started in the South region, where the median contract prices per square foot range from $88 in the West South Central division to $90 in the South Atlantic and $91 in the East South Central, consistently below the national median contract price of $101 per square foot.
Custom, or contractor-built, homes are built on owner’s land (with either the owner or a contractor acting as a general contractor). Consequently, contract prices of new contractor-built homes do not include value of improved lot and, typically, are lower than sale prices of spec, or built for sale, homes. To make comparison more meaningful, the cost of lot development is excluded from sale prices of speculatively built homes.
Looking at the spec starts and excluding improved lot values, nevertheless, reveals a similar geographic pattern. The highest per square foot median sale prices are registered in New England ($150) and Pacific Divisions ($138). The lowest median prices are in the southern divisions, ranging from $81 in the East South Central division to $89 in the West South Central division and $91 in the South Atlantic. Once again, these divisions stand out for registering prices below the national median – $95 per square foot for spec homes. 
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 division where half of spec homes have per square foot costs in excess of $131 while the median for contractor-built homes is $120. In New England, the median sale price also exceeds the median contract price, $150 versus $147 per square foot, but the differences are relatively small.
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. 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.
Any chance for a similar study, but with more specificity? Looking for median cost of homes per square foot within the United States and territories, excluding the value of the improved lot, broken down by zip code. That might be asking for a bit much, so how about the 382 Metropolitan Statistical Areas of the United States of America?
Unfortunately, the Survey of Construction does not provide any data for more detailed geographies, so we can only estimate the square foot prices at the division level.
What is the difference in the Lot Cost in this article vs. NAHB: Cost of Construction, Finished Lot Cost for 2017 of $91,996 and equating to 21.5% of the finished homes value? Is the difference the Raw Lot Cost vs the Finished Lot Cost? If not, what is the difference?
Also in the past NAHB broke down the Finished Lot Cost into various categories (see Construction Costs for Single Family Unit 2004 published September 15 2005.) Does NAHB have current figures for these categories?
Thank you for your assistance!
The concept of lot value used in this article and NAHB’s Cost of Construction surveys is essentially the same: the price of a lot with all improvements for a home built for sale.
There are some technical differences in the statistics reported. This post calculates a median price after subtracting the lot value, and the NAHB Cost of Construction survey shows averages. This post is based on the 2016 SOC and the NAHB survey is from 2017.
Unfortunately, we’ve been unable to break down the finished lost cost in our more recent surveys, as so many of the builders simply buy the finished lot and don’t know the underlying details.
When computing the value of construction for GDP statistics, the Census Bureau assumes 10.6 percent of the price of a home built for sale is attributable to raw land.
Any information available on average vs. luxury/higher end build outs?
Unfortunately, the Survey of Construction does not differentiate between lower/average/higher end costs, so we do not have this information.