It can be very difficult to estimate the cost of building a new home since there are so many variables that go into the pricing. The cost of the land is one factor, being higher or lower depending on the region. Labor costs also vary considerably from region to region; where skilled labor is in short supply, costs might be higher.
Generally speaking, estimating the costs of a newly constructed home requires that you first isolate the costs of land, then figure out the costs of construction work based on a per-square-foot formula.
National Average Costs
Industry data from 2019 shows that the average construction cost for a 2,000 square foot home is slightly under $300,000, which computes to roughly $150 per square foot for construction alone (not including costs of land). However, the regional variations broaden the average construction cost range to $150,000 to about $440,000, which means the average per-square-foot range is $75 to $220, depending on where you live and other variables.
Variable Affecting Residential Construction Costs
Here are some of the variables that can affect the per-square-foot costs of residential home construction.
Custom home: A home that is customized by the builder to meet your specifications typically costs between $100 and $400 per square foot. A home built according to stock specifications by a mass builder can cost considerably less.
Design professionals: If your home requires work from a professional architect, the additional fees can add 5 percent to 15 percent to the overall construction costs. Customized plans provided by a builder can add $1.50 to $2.50 per square foot. This can change the average cost of a 2,000 square foot home from $300,000 to about $330,000.
Modular or prefabricated home: Prefabricated homes are manufactured offsite and assembled on location after components are delivered to the building site. Such prebuilt homes can cost 10 to 20 percent less than custom-built homes.
Housing development: Homes constructed in larger housing tracts by mass developers can be as much as 15 percent cheaper than a comparable home built in an isolated site.
Excavation costs: On a building site where substantial excavation and earth-moving is required, large equipment can cost $70 to $90 per hour. It is not uncommon for complicated building sites to add as much as $10,000 to $15,000 in extra construction costs in earth-moving and excavation time.
Choice of roofing and siding materials: National averages are based on common materials for roofing and siding—such as wood or vinyl lap siding, and asphalt composite shingles. Premium materials such as stucco or stone veneer siding and slate roofing will increase your building costs.
Quality of appliances and fixtures: Appliance costs can vary enormously, and it is fairly easy to increase costs by $30,000 or more if you choose premium appliances and fixtures in your home.
Quality of surfaces: Average construction costs are based on middle-of-the-road choices for cabinetry, countertops, and flooring. Choosing premium materials, such as granite or synthetic stone countertops, and natural stone or porcelain flooring will push your per-square-foot construction costs toward the upper end of the range.
Outdoor design features: Major landscape elements, such as swimming pools, large decks or patios, and outdoor kitchens, will add substantially to construction costs. An elaborate landscape can add as much as $50,000 or more to the cost of a home, though it is considerably cheaper to include these features at the time of original construction rather than adding them later.
Geographic location: It is an unfortunate reality that new home construction is more expensive in some regions. For example, Texas has some of the most expensive new-home construction costs, with average new home construction costs ranging from $233,000 to $658,000, while Georgia offers some of the least expensive costs, with averages of $102,000 to $393,000. Check out average costs in your region in order to evaluate the costs quoted by your builder.
Average Ala Carte Costs
Although costs for individual construction stages varies considerably, national averages in 2019 reveal the following costs:
- Foundation work: $4,000 to $12,000
- Framing work: $1,500 to $6,500
- Exterior finishing: $40,000 to $60,000
- Mechanical systems: $30,000 to $50,000
- Interior finishing: up to $85,000
It is quite clear that controlling costs is mostly about the choices you make for interior and exterior finishes and mechanical systems. The foundation and framework of the home comprise a relatively small portion of a home's construction costs.
Tips for Managing Construction Costs
Ken Katuin, a tech-savvy professional with many years of experience working in the home design industry, offers these tips for estimating and controlling construction costs:
Meet with several builders. Look for those who construct houses that are similar in size, quality, and features to the home you want, and ask for their per-square-footage costs. Make sure you understand exactly what is included in the price. Most builders will provide you a list showing the materials they will use.
Inspect newly constructed homes. Find houses that are similar in size, style, quality, and features to the home you want. Take the price of the home, deduct the price of the land, and divide that amount by the square footage of the home to determine per-square-foot costs. This will give you a local average cost that you can use to evaluate the costs quoted by local builders.
Pay attention to bathrooms, kitchen, and windows. The most expensive areas in a home are usually the bathrooms and the kitchen. The number of windows and the size and quality of windows can also affect the cost.
Consider the architecture. Vaulted ceilings and high roof pitches can increase the cost of a home. When using other homes to calculate an estimate, be sure the home has a similar style and features of the home you plan to build.
Watch for cost overruns. The finished cost of a home often is more than the original bid price due to clients overspending the allowances, making changes, and builders encountering unforeseen problems. Proper planning can greatly reduce cost overruns. In general, it is a good idea to allow an additional 10 percent to cover unexpected costs.
Consider "footprint" size. When building a home, it's best to work with even numbers. Have your home size rounded up or down to increments of two feet. This reduces wasted materials. Also, it's most economical to build a home that is no deeper than 32 feet. If the depth exceeds 32 feet, then your roof trusses may need to be specially designed and will be more expensive.
It usually costs less to build a two-story home when compared to a one-story home that has the same square footage. This is because a two-story home will have a smaller roof and foundation, and plumbing and ventilation are more compact in two-story homes. When building a larger home, the cost of expensive items (such as a furnace or kitchen) is spread over more square footage. Consequently, a larger home may have a lower square footage cost than a smaller home.
Take inflation into account. Usually the cost of building a home increases around 3 to 6 percent per year. If it will be several years before you begin construction, remember to include inflation into the cost estimate for your home. When using other homes to compare prices, try to use homes that have been built within the last six months.
Expect market fluctuation. The time of year, the region's climate, local building code regulations, and the local and national economy all affect labor costs. This is why home cost estimates are binding for only a certain number of days—labor costs can change quickly. Here's a big warning: If a contractor's estimate stays the same year after year, check the materials list. Construction costs can be absorbed by lowering the quality of materials, which means you can end up with a home that disappoints you.