The custom home premium, the difference between what typical buyers pay per square foot for a contractor-built home and a spec home, reached 12.6%, its highest level since 2011, according to NAHB’s analysis of the latest Survey of Construction (SOC) data. For custom single-family detached (SFD) homes started in 2025, the median price climbed to $171 per square foot. For spec starts, after excluding improved lot values, the median was $152 per square foot, essentially unchanged compared to $153 a year earlier.
Custom home contract prices do not include the value of an improved lot, as these homes are built on the owner’s land (with either the owner or a contractor acting as the general contractor). Consequently, contract prices are typically reported as lower than the sale prices of spec homes. To make the comparison more meaningful, this analysis excludes lot development costs from sale prices.
A Widening Gap Between Custom and Spec
Historically, contractor-built custom homes command a higher price per square foot than for-sale SFD homes after excluding improved lot values. The premium presumably reflects differences in the types of homes being built. Custom homes are often designed to meet individual buyers’ specifications, potentially involving one-of-a-kind floor plans, unique finishes, materials, and construction processes compared with standardized spec homes. Over the past two decades, the custom home premium averaged roughly 9%.
That premium all but disappeared in the post-pandemic period, when supply-chain disruptions, soaring building material costs, and rapidly rising home prices affected both segments. For homes started in 2021 and 2022, spec-home prices per square foot essentially caught up with and briefly exceeded custom contract prices. The premium returned to its historical range in 2023 and 2024. In 2025, however, it widened substantially.
The mechanics behind the widening gap are straightforward. Median spec-home prices per square foot have effectively plateaued for four consecutive years, while median custom contract prices increased from $156 per square foot in 2021 to $171 in 2025, a cumulative gain of nearly 10%. With construction costs continuing to rise over this period, the divergence suggests that builders of for-sale homes have had greater ability to contain per-square-foot price increases, particularly in a more price-sensitive housing market.
The latest July 2026 NAHB/Wells Fargo Housing Market Index (HMI) survey provides some additional context. Small builders (most custom builders are in this group) reported higher hikes in building material costs than large-volume businesses. Large production home builders may have advantages in purchasing and procurement, including the ability to stockpile materials ahead of anticipated price increases, negotiate longer-term contracts, or obtain more favorable terms from suppliers. These advantages could help explain why material-cost increases have translated differently into prices for custom and spec homes.
Custom home building also appears less sensitive to interest rates, as it remains a relatively bright spot for the residential construction industry in this high-rate, high-cost cycle. As spec home building contracted during the first seven months of 2026, the custom market remained stable, potentially supported by rising stock prices and financial wealth.
The Spec Premium is Not Universal
The national custom home premium, however, obscures striking geographic differences. The Central and Southern divisions drive the national median. The East South Central division recorded the highest custom premium at 29%, followed by the North Central at 27%. The West North Central and South Atlantic divisions posted more modest premiums of 9% and 7%, respectively. At the same time, custom and spec square foot prices (after excluding lot values) were nearly identical in the West South Central.
At the same time, the median spec price per square foot exceeded the median custom contract price in four Census divisions (New England, Middle Atlantic, Mountain, and Pacific). The gap was widest in the Pacific division, where the custom median of $171 was roughly a quarter below the spec median of $227.
Notably, the four Census divisions with reversed custom home premiums have the highest spec square-foot prices. In New England, after excluding lot values, half of the spec SFD homes started in 2025 had prices exceeding $262 per square foot. The Pacific and Mountain Divisions in the West were second and third, with corresponding medians of $227 and $204 per square foot. The Middle Atlantic, the next most expensive spec home market, registered square foot prices of $193. At the other end of the spectrum, in the East South Central Division, the median was $138, the most affordable in the nation.
The four Census divisions where median spec price per square foot exceeded the median custom contract price are also among the nation’s most expensive markets for buildable lots. This pattern suggests that the custom-home premium is not simply a reflection of the higher cost of individualized construction. In high-land-value, high-cost markets, custom construction may offer home buyers a more economical path to building a home. This buyer already owns the lot and can commission a house tailored to the site and budget.
Because the square-foot prices in this analysis exclude the cost of developed lots, highly variable land values may only indirectly affect square-foot prices (by influencing home design) but cannot explain wide regional differences in square-foot prices. However, overly restrictive zoning, stricter building codes, and higher regulatory costs directly increase square-foot prices. Regional differences in home types, common features, and construction materials also contribute to price variations. In the South, for example, lower square-foot prices partially reflect a less frequent regional occurrence of costly new home features like basements.
These differences are important when interpreting the national custom home premium. Rather than representing a universal markup for custom construction, the 12.6% figure reflects the net result of very different regional housing markets and the characteristics of the homes being built in each market. The widening national premium therefore points to an increasing divergence between custom and spec construction overall, while the regional data show that the economics of custom construction can look very different from one market to another.1
- The NAHB estimates in this post are based on the Survey of Construction (SOC) data. The survey information comes from interviews with 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. While the reported median prices cannot reflect the price variability within a division, and even less within a metro area, they nevertheless highlight the regional differences in square foot prices.