Armchair Builder

Cost to Build a Home

Estimating Cost to Build a home

Is there an easy way to determine the cost to build a home?  The National Association of Home Builders periodically surveys professional builders to find out what it costs them to build a home.  This survey gives average house costs for new single family homes constructed across different states in the U.S.  The numbers are important as it gives the owner-builder a behind the scenes look at the cost to build a home for professional builders.  As an owner-builder, you can use these numbers as a guide to decide where to focus your efforts when estimating, bidding and negotiating for your new home.  Let’s talk a little more about how these numbers can be used along with some of the limitations associated with them.

Limitations of the Survey

We need to keep in mind when looking at national averages for the cost to build a home…that they are just that…averages.  The numbers are compiled from builders across the country and as we all know, pricing for labor and materials vary greatly from one location to the next.  For example, the labor cost to build a home in the city of Chicago is about 25-30% higher than out in the far suburbs due to the heavy union influence in the city.  This can be seen in many other parts of the county as well.  Keep this in mind as you are comparing these house costs with the location of your project.  If you are in a high cost area such as San Francisco or Hawaii you will want to add additional money into your rough estimate when figuring the cost to build a home.

Guidance in Product Selections

It’s easy to get caught up in the excitement of your new home project and lose focus on your house costs.  The survey results help keep you in-line as you decide what products you want for your home.  Let’s take windows as an example.  You can spend anywhere from $4k to $30k on the windows for your new home.  If you look at the survey results, the average new home sales price was $310k.  And for this sales price, the average amount builders spent on windows was $6k.  Therefore, you probably don’t want to spend $20k on your windows if your house value is projected to be $300k when finished.  If you do, you will need to make up the cost by cutting elsewhere.

Focus on Larger Costs

When it comes to the cost to build a home, I like to focus the majority of my time on the low hanging fruit.  Meaning, you should put a larger percentage of your efforts into estimating, bidding and negotiating the higher dollar components that make up a home.  If we take a look at the survey, we see the largest components are as follows:  1) Framing and Trusses, 2) Excavation, Backfill and Foundation, 3) Plumbing, 4) Cabinets and Countertops, 5)  HVAC, 6) Siding, 7) Flooring, 8) Electrical, 9) Drywall.  These top categories make up almost 60% of the cost to build a home.

Cost to Build a Home

By reviewing the survey results from the NAHB, we can get a quick and easy look at the average cost to build a home in the U.S.  For a more detailed analysis which includes more specific line items and percentages of cost to build a home, check out the Armchair Builder e-Store and the New Home Budget resource.  You may also want to checkout our video, Getting Started: How Much Will it Cost?

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