How much does it cost to build a house? This is a common and very important question. It’s also a loaded question full of complexity.
A Unique Industry and Buying Experience
The home building industry is different than all other industries and the buying experience is unique. Everyone has experience buying an item from a department store or making a purchase online. The product is defined, manufactured in a controlled environment, the price is set, the customer makes a value judgment based on what is seen at the price offered, and they make a decision to buy or not to buy. Even with expensive purchases like cars, trucks, and boats, the product is manufactured, the product can be seen, and the price is set allowing the customer to make a decision on the purchase. In custom building construction, the homeowner engages the idea of a purchase before the final product exists and the home is built in an uncontrolled environment in varying and sometimes harsh weather conditions.
Interested parties contact us about building a new home and often one of the first questions asked is, “How much does it cost to build a house?” The only answer that we can give at that point is “It depends.” But we’ve successfully built hundreds of homes over the 30 plus years that we’ve been in business, and where there is a will there is a way. We are here to guide you through the process.
Production versus Custom
There are two basic ways that home building companies deliver their product to home buyers, production building and custom building.
In production building, the builder buys lots or develops land into building lots and builds homes from his plans on speculation that he will have a product that a future homeowner will want to buy. This method is much like the common buying experience where the buyer can see the product, know the price, and make a decision to buy. But production building gives the buyer less choice. Plans are determined by the builder and modification of those plans may be restricted or prohibited. The finishing products that go into the structure, like flooring, cabinets, and countertops, are determined by the builder and often there is less choice available to the home buyer. Price per square foot for a production home is often less than a custom home because the builder gains efficiency by building from a limited number of plans and product selections.
In custom building we start with a blank slate. A building lot is chosen by the home buyer and a plan is chosen or developed. During the design process, changes can be made to the plans and the possibilities are almost limitless, with the only constraints being physical and geometric limitations. The home buyer has seemingly limitless choices in building products. This can be daunting but with our advice based on experience, we can narrow the selection quickly while still allowing a lot of choice. A home buyer can choose inexpensive finishing products to control cost, knowing that they will upgrade in a few years after they build some equity or receive promotion in their job. Or a home buyer can choose high-end finishes tailored to their personal taste to create the ultimate dream home. Regardless, custom building generally results in a higher cost per square foot because everything that matters to the look and feel of the home is custom.
Some production builders try to call themselves custom builders by offering predetermined plans with options packages, allowing the buyer to “customize” their home. This strategy produces a more economical price point, but if you make a request and they tell you “no, we won’t do that”, then they are not truly a custom builder.
Factors Affecting Cost
Site and Preparation Cost
The site selected affects the cost of a custom home. A flat, rectangular lot in a subdivision with a paved street will be more economical to build on than a hilly, wooded, remote mountain lot. A site requiring a long driveway and long runs of utilities will be more expensive than a standard subdivision lot.
The availability of public utilities affects cost. Regulations for on-lot sewer and water systems are becoming increasingly rigorous and the on-lot sewage system alone can add thousands of dollars to a building project. If a well is required, the drilling depth needed to find a quality water source is unknown until the work is actually done. The location of the nearest electric transformer is a factor in how much it will cost to bring electricity to the house. And whether a public sewer line is positioned above or below the house will affect the components needed for the sewer system, thereby affecting cost. If public utilities are available, the customer base and condition of the public system with respect to state regulations could affect the cost of your tap-on fee. If a public system must be upgraded soon to meet standards, the cost of the tap-on fee can be very high, especially in less densely populated areas where the utility has a smaller customer base. Permit fees and impact fees imposed by municipal government contribute to the project cost.
Preparation for a custom project also contributes to cost. Because the final product is undefined at its inception, significant work must be done to define the scope for the project. Plans must be drawn and estimates prepared, most of which cannot be reused from other projects because this project is a unique one-of-a-kind creation.
To most people building size is the most obvious contributor to cost as it is intuitive that a larger house costs more to build. However, the cost per square foot is usually lower for a large house compared to a small house of the same quality. This is because some costs are fixed, like fees, utility services, and lot cost, no matter the size of the house. Also, when a home is enlarged, it is usually enlarged in areas like the great room, family room, and bedrooms, rooms that are less costly to build because they don’t need cabinetry and plumbing fixtures. Kitchens and bathrooms are generally the most expensive spaces in the home.
A building’s length and width are not the only size quantities that affect cost. Height also affects cost. Standard wall height for a home is eight feet. Nine foot, ten foot, and higher ceilings are options. Standard eight foot ceilings require two rows of 4 foot drywall and nine foot ceilings can be done with two rows of 4-1/2 foot drywall bought from the supplier. Ceilings over nine feet in height require standard drywall to be cut in the field and require extra labor due to the height. Height adds volume to a space and that volume affects heating and cooling system requirements. So a building with high ceilings will cost more per square foot than a building with the same square footage with eight foot ceilings.
Our standard method of construction is wood platform-framed structures on concrete or block foundations. Within that building method, there are options. We may use pre-engineered roof trusses that are built in a factory and set in place with a crane or we may stick-frame the roof system on site with individual pieces of lumber. Generally stick-framing the roof provides some attic storage space while roof trusses do not, with exceptions. Floor systems can be built with dimensional lumber like 2×10’s or 2×12’s or they can be built with engineered wood products such as wood I-joists. Engineered wood products generally provide a stiffer structure so your floor won’t “bounce” enough to notice. The type of structure affects cost and with a custom home, you can add quality, value, and performance by exercising these options.
This is where it gets fun! Custom home buyers enjoy the process of shopping for products in the finishes category like brick, stone, siding, flooring, wall tile, cabinets, countertops, light fixtures. These are the products that will shape your experience living in your home every day. But there is a wide range of options and prices. Two identical homes could be built side by side from the same plan and have two very different prices depending on the finishes selected. Granite and quartz countertops, floor coverings, custom showers, and masonry wood-burning fireplaces are examples of some options that add significant cost.
So how do we navigate this maze to produce a custom home that our clients enjoy for many years to come and can afford to own? It takes experience, sound decision making, and ultimately a partnership between the custom home builder and the home buyer. There is a basic principle that if followed will keep expectations realistic and the process running smoothly. Hold up your hands, how many do you see? You have two hands to control your custom building project. There are three factors that shape your project, building size, building type, and building cost, and all three of these factors are connected with cables that cannot be broken. You have two hands that can grab any two of these factors and move them as you wish, but there is a third factor that gets pulled along which you cannot control. For example, if your budget dictates that you buy a home at a certain price and you need at least four bedrooms and large spaces for your family, then you control building cost and building size, and then your decisions on finishes must be made in light of those factors. If you desire high quality finishes and need large spaces, then you control building type and building size and building cost must follow along. The most important thing is that you hire an experienced custom builder that you can trust and relate to as this is a partnership that will last several months and longer. Custom building is not for everyone. But for those who choose to build a custom home, the process is exciting and rewarding as you will have a special home to truly call your own.
Because a custom home is a product that does not yet exist and the scope of the project is not yet defined, it is imperative that the home buyer be willing to invest in design services to define the project. Without a design, the attempt to put a reasonably accurate price on a project is impossible. Discussing price before defining the project is a disservice to both the home buyer and the builder. Stayco offers in-house design services to help clients through this process, so that discussions about price are meaningful and relevant.
Stayco Construction is a custom builder. We have built homes for first-time home buyers, move-up home buyers, and high-end luxury home buyers. Custom building is not about building just high-end luxury properties; it is about tailoring a home to fit the unique needs and desires of its owner. Custom home building is a partnership between a home buyer and a custom builder. Like any relationship, if the partnership is to be successful where the parties finish the project with joy and satisfaction, expectations must be kept realistic. Custom home building is not for everyone, but for those who choose this method of creating space to call home, it is one of the most rewarding and satisfying adventures of a lifetime.
–Michael Stayman is a Certified Professional Building Designer (CPBD) and has over 20 years experience building homes with Stayco Construction.
©2016 Stayco Construction, Inc.