How much is the cost per square foot for a new house? Great question.
Tough to answer. In years past, we've built homes for less than $80 per square foot, and for more than $250 per square foot. This article will shed some light on the question of how much it costs to build a new house, and give you some insight into how a builder figures cost per square foot. I also hope to give you some tools to help compare price per square foot between different builders.
When I get asked this question, it tells me the person asking it is trying to compare builders, or houses, and because houses aren't like cars (you can't go to 3 different builders and look at the exact same make and model), it's really difficult to do any kind of meaningful comparison. Comparing 2 different houses, with different features, sizes, and locations is difficult because the 2 houses might not have anything in common.
Is it an easy equation?
One thing they do have, that all houses have, is a price and a size. By dividing the price by the size, you get price per square foot, and boom! there's your yardstick. Now all you have to do is compare price per square foot and you can tell which house is the better value, right?
Oh, how I wish it were that simple. As my dad says, "let me throw the Hope Diamond in the bathtub and then let's figure the price per square foot". I just checked Wikipedia, and the Hope Diamond is valued at anywhere from $200-250 million dollars.
(The Hope Diamond)
Let's be conservative and say it's only worth $200 million. If you put it in the bathtub of a 2,000 square foot house, the value of that house would increase by $100,000 per square foot. That's a pretty high price per square foot - for that price, do you think that house should also come with a garage door opener?
That's a ridiculous example, of course, but it demonstrates the problem with comparing houses using cost per square foot.
Items that affect price per square foot
Here are the big items that affect price per square foot. Compare these items (along with their current costs) in a house you're considering building or buying to help you compare one house to another (or one builder to another). Keep in mind we’re using “made up” numbers. Costs can vary widely, and have gone up significantly since 2019. Actual numbers in 2023 will be as much as 50-100% higher, but the principles and comparisons still apply:
- Land: if you're looking at a house / land package, and the land cost is hidden in the total, try to find out what the land actually cost. In the example above, I used a 2,000 square foot house because it makes the math easy (and I'm an easy math kind of guy). Let's say you're comparing 2 houses, both 2,000 square feet, and house number 1 is sitting on a lot that cost $20,000. That's $10 per square foot just for the land. Let's say house number 2 is on a lot that cost $30,000, which is $15 per square foot just for the land. There's a $5 per square foot difference in the two houses already, and we haven't even looked at the houses yet.
- Garage size: When you divide the price of the house by the size, the size you're using is the living area, or the area of the house that is covered by heating and air conditioning. That area doesn't include the garage, but the garage still costs money to build, right? For a typical garage stall (one car), to make the math easy, let’s pretend a cost of around $10,000, which means a 2-car garage would cost around $20,000 and a 3-car would cost around $30,000. That cost gets spread out over the square footage, so the 2-car contributes $10 per square foot, and the 3-car contributes $15 per square foot. Just as in the land example (notice how I used simple math again - keeps me from messing up), there's a $5 per square foot difference just in the garage size.
- -Covered porches and patios: Similar to the example of garages above, the covered porches and patios add to the cost, but not to the square footage. To give you an idea, let’s pretend it costs about $38 per square foot for porches and patios, so a 12x12 patio will cost about $5,500, adding about $2.75 per square foot to a 2,000 square foot home or $2.20 per square foot to a 2,500 square foot home.
- -Cabinets: Most of the homes we build have a kitchen (duh), 2 or 3 bathrooms, and a laundry room. Let's take the typical 2,000 square foot house again, and let's say it has 2 bathrooms (and a kitchen, of course). Now, doesn't it seem realistic that I could build a 3,000 square foot house and it still has 2 bathrooms and a kitchen of sizes similar to the rooms in the 2,000 square foot house? Sure, I do it all the time. So, the cabinets in each house cost the same - let’s pretend a realistic number for each house is $5,500. In the 2,000 square foot house, the cabinets contribute $2.75 per square foot, whereas in the 3,000 square foot house, the cabinets contribute only $1.83 per square foot (OK, I had to get out my calculator for that one). That's a difference of $0.92 per square foot, and you'll notice an interesting thing... the bigger house had a lower cost per square foot for the cabinets. More about this phenomenon later.
- -Heat and air: This one is related to the size of the house, since a bigger house needs a bigger air conditioner, but air conditioners don't come in an infinite array of sizes. In other words, you can get a 3-ton air conditioner (a "ton" is the measurement of an air conditioner's capacity to remove heat from the air - for nerds like me, that's 12,000 Btu's for each ton), but you can't get a 3.1-ton air conditioner. That means a 2,000 square foot house and an 1,800 square foot house might have the same size air conditioner, because a size bigger would be too big for the 2,000 square foot house and a size smaller would be too small for the 1,800 square foot house. Let's say we use a 4-ton AC for each house, at a cost of roughly $6,800 installed. Again with the calculator, that's $3.40 per square foot for the 2,000 square foot house and $3.78 for the 1,800 square foot house. Again, note that the cost per square foot is higher for the smaller house.
OK, I think you get the idea. There are quite a few items that could be the same cost in houses of very different sizes, which means cost per square foot can vary widely in two houses that have identical features. You can imagine how different light fixtures, faucets, appliances, and flooring could have a huge influence over price per square foot.
The bottom line is that the items you select to go into your new house will determine the cost, and the cost per square foot, much more than the choice of builder will.
The only way to get the exact number, rather than comparing builders by some arbitrary price per square foot, is to find the builder you like and trust, and work through the process of designing or picking a house plan, specifying the features, and adding it all up.
Here is an article I wrote some time back that you might find helpful on the topic of finding and selecting the right home builder.
For more information on the overall process of building a home on your land, download this free guide, From Raw Land to Forever Home.