{"id":303,"date":"2021-01-06T06:49:04","date_gmt":"2021-01-06T06:49:04","guid":{"rendered":"https:\/\/cohesivehomes.com\/?p=303"},"modified":"2023-06-27T17:33:21","modified_gmt":"2023-06-27T17:33:21","slug":"new-construction-homes-so-expensive","status":"publish","type":"post","link":"https:\/\/cohesivehomes.com\/new-construction-homes-so-expensive","title":{"rendered":"Why Are New Construction Homes So Expensive?"},"content":{"rendered":"\n

Over the past few decades, the cost of real estate has risen considerably. This rise doesn\u2019t just reflect the rising costs of property, but also a rise in costs of new construction homes. A house that cost $70.45 per square foot in 2000 cost $134.91 in 2020; almost doubling in the last 20 years.<\/p>\n\n\n\n

It has become increasingly difficult for millennials to purchase old homes, let alone purchasing or constructing new homes. So, a question arises; why are new construction homes so expensive?<\/p>\n\n\n\n

The rise in new construction home prices can be attributed mainly to land shortages; particularly in metropolitan areas. You can go to the country side, but that means you\u2019ll get farther from amenities as well. Furthermore, houses are now built with elaborate custom designs, thus increasing the cost of construction.<\/strong><\/p>\n\n\n\n

But that\u2019s not all. In this article we will look at the different factors causing this increase in price, and more. <\/p>\n\n\n\n

What Is a New Construction Home? <\/strong><\/h2>\n\n\n
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Any home in which the buyer is the first person to live in after construction is called a new construction home. It might seem very simple, right? You buy land, you construct a home on it and live in it; there\u2019s your new construction home.<\/p>\n\n\n\n

However, in today\u2019s market, if an investor buys a plot of land, constructs a new house on their own accord (by getting in touch with contractors), gets a real estate agent and sells it to you, it will still be considered a new construction home for you.<\/p>\n\n\n\n

So today, home buying also falls in the spectrum of a new construction home; the only prerequisite is that no one should be living in the house before you.  <\/p>\n\n\n\n

What Makes New Construction Homes So Expensive?<\/strong><\/strong><\/h2>\n\n\n\n

Before we get into the meat and potatoes of why new construction homes are so expensive, let us consider a study published in 2020 comparing the average costs of a new construction home in the US (in 2019).<\/p>\n\n\n

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Source: Statista<\/u><\/a><\/p>\n\n\n\n

As evident from the graph above, one of the biggest costs involved in a new construction home was that of interior finishing, going as high as $75,259 in a normal, not-so-fancy house<\/strong>. In 2021, the same ratios are maintained, but the overall cost of interior d\u00e9cor of the same range will cost much more, depending on how you design your home.<\/p>\n\n\n\n

The following is a detailed breakdown of a new construction home project, apart from the cost of land, in 2021.<\/p>\n\n\n\n

Work<\/strong><\/strong><\/td>Cost (Min)<\/strong><\/strong><\/td>Cost (Max)<\/strong><\/strong><\/td><\/tr>
Average Custom House Cost<\/strong><\/strong><\/td>$158,300<\/strong><\/strong><\/td>$483,900<\/strong><\/strong><\/td><\/tr>
Site Prep<\/strong><\/strong><\/td>$5,000<\/td>$38,000<\/td><\/tr>
Foundation<\/strong><\/strong><\/td>$16,600<\/td>$72,000<\/td><\/tr>
House Frame<\/strong><\/strong><\/td>$16,600 <\/td>$95,000<\/td><\/tr>
Exterior <\/strong><\/strong><\/td>$20,000<\/td>$95,000<\/td><\/tr>
Appliances (HVAC, Electric, Utility) <\/strong><\/strong><\/td>$17,000 <\/td>$72,000<\/td><\/tr>
Interior<\/strong><\/strong><\/td>$42,000 <\/td>$167,000<\/td><\/tr>
Labor (Per Sq. Foot)<\/strong><\/strong><\/td>$100<\/td>$200<\/td><\/tr><\/tbody><\/table>
Costs of different aspects of a new construction home<\/figcaption><\/figure>\n\n\n\n

If you\u2019re looking for the average cost of a new construction home with respect to the number of bedrooms, here are some estimates. Keep in mind, these estimates are likely to go up or down depending on your choice of material (redwood vs. pine wood, for example).<\/p>\n\n\n\n

No. Of Bedrooms<\/strong><\/strong><\/td>Cost (min)<\/strong><\/strong><\/td>Cost (min)<\/strong><\/strong><\/td><\/tr>
1<\/strong><\/strong><\/td>$90,000<\/td>$300,000<\/td><\/tr>
2<\/strong><\/strong><\/td>$140,000 <\/td>$350,000<\/td><\/tr>
3<\/strong><\/strong><\/td>$180,000<\/td> $400,000<\/td><\/tr>
4<\/strong><\/strong><\/td>$200,000<\/td>$500,000<\/td><\/tr>
5<\/strong><\/strong><\/td>$250,000<\/td>$600,000<\/td><\/tr><\/tbody><\/table>
Typical new home cost for different numbers of bedrooms<\/figcaption><\/figure>\n\n\n\n

The table above should help you materialize not only how much a new construction home will cost you, but also why these homes are so expensive. Home interior is one of the biggest contributors to the increase in price, i.e., material costs<\/strong>. The more you customize your home, the more it will cost.<\/p>\n\n\n\n

Furthermore, if you hire an architect to help you with the exterior and interior design, you\u2019ll have to add that expense as well. For a typical 2,500 to 2,700 sq. feet house, expect to pay a fee of 5% of the total construction costs. A 4-bed house costing $400,000 will be designed by architects for $20,000.<\/p>\n\n\n

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After home interior costs, the second biggest expense you\u2019re going to have to incur is that of labor. For the same, 2,500 sq. feet house, labor costs can rack up to $250,000<\/a>. These costs are negotiable, though, so leave no stone unturned when trying to get a good deal!<\/p>\n\n\n\n

If you haven\u2019t worked a construction site before, we recommend you don\u2019t go full-on DIY for a new construction home. Could the Brooklyn Bridge be built by one person? Or just one group? Perhaps, but it would take forever!<\/p>\n\n\n\n

Apart from the raising labor and material costs<\/strong>, there are other costs to consider as well when trying to understand why new construction homes are so expensive.<\/p>\n\n\n\n