How much per square foot does it cost to build a new home? We get this question all of the time as I’m sure most builders do. The short answer is “it depends.” As a buyer, I am sure you are thinking “that is not an answer.” Unfortunately for builders and the buyers “it depends” is the truth. There are so many factors when building a house, it is difficult to give a price per square foot unless you are duplicating a home that was recently built with the same features, materials and similar homesite. Let’s breakdown some of the reasons for the “it depends” answer.

Homesite and Utilities

The homesite can play a factor in the pricing. Whether you want to build on a site you own or want to purchase, site conditions impact the price.

  •        Does the property have a lot of trees that need to be removed?
  •        What are the soil conditions?
  •        How much dirt needs to be removed or does a lot of dirt need to be brought to the site?
  •        How far will the home sit from the road?
  •        What utilities are available – water and sewer or well & septic, natural gas or propane?

All of these questions will need to be answered to determine their price impact on building a new home.

Size of the Home

The larger the home the lower the cost per square foot. The reason for this is the main components of the home are amortized over the entire space of the home.

For example: If the home has a basement, the cost of the basement is divided by the square foot of the home. Let’s say the basement is exactly the same size for these two scenarios:

House #1
2000 sq. ft ranch
Basement cost is $40,000
40,000 / 2000 = $20 per sq. ft.

House #2
4000 sq. ft. 2-story
Basement cost is $40,000
40,000 / 4000 = $10 per sq. ft.

It is less expensive to build up than it is to build out. This is why 2-story homes are less expensive per square foot than ranch designs. If you have an unfinished basement, this is the least expensive space to finish per square foot. The reason is the main components are already there: the concrete walls, the concrete floors, the ceiling joints holding up the main floor, etc. These prices were factored into the finished floor space above it when your home was being built. Whether you decide to finish the basement when building or wait and finish it several years after you moved in, this is easy and inexpensive space to finish in the grand scheme of the entire home price and value. In Michigan if you have a finished basement, it definitely adds value to your home on top of the additional square footage you added for less money per square foot.

Architectural Style of the Home

There are a wide variety of home styes. Sometimes the style is strictly personal preference and taste while other times the style may be determined by the location you want to build due to restrictions. A few examples of home styles include: Cape Cod, Craftsman, Colonial, Contemporary, Farmhouse, Modern, Tudor and Victorian.

Simple boxes are the least expensive to build such as the Colonial. Once you start getting into numerous corners, steep roof pitches, arches, angles and multi-exterior finishes it adds to the cost of the home. This is due to the complexity of the design and the materials used.

Features and Materials of the Home

This is where it gets interesting. A home has many parts and components used in its construction. The materials used do matter when it comes to cost. Think about how many types of cabinets, countertops, floor coverings, plumbing fixtures, light fixtures, shingles, appliances, doors, windows and so much more are offered by all of the different manufacturers. With most manufactures, they offer different product lines and each line is a different price. The price difference may have to do with a particular style, color or components used, or time it takes to make the product.

Here is an analogy that may help you understand. You want to purchase a new full-size SUV and you have narrowed it down to one made by General Motors. The versions offered are the Chevy Tahoe, the GMC Yukon and the Cadillac Escalade. All of these vehicles are the same size, body type, structure and manufacturer. So, with the large price difference what is the difference between the three vehicles? The features and materials used are the difference. The Chevy Tahoe is a base model with standard materials & features. The GMC Yukon has more features and upgraded/mid-grade materials used compared to the Chevy Tahoe. The Cadillac Escalade has the premiere features and high-end materials used to make the vehicle compared to the Tahoe and Yukon. This is why the Yukon is more expensive than the Tahoe and the Escalade is the most expensive of the three.

Home building is similar to vehicles. However, instead of having three distinct levels like the vehicles, homes can have so many more levels and mixes of products. You could select low, mid or high level when it comes to materials depending on your price range or you can mix and match to get what is most important to you. If money was no object, most people would select the best of the best. Unfortunately, most buyers do have a budget when building a home. If budget allows, it is usually best to go with higher quality materials on the difficult to change items such as cabinets, hard surface flooring and windows. The other items that are easier to change, such as plumbing and light fixtures, select lower priced materials and then change them later when you have additional savings.

There are so many factors involved when building a home. The size, style, features, materials used and homesite all play a factor in determining the price of a new home. Hopefully, you now have a better understanding of why “it depends” is the answer to “how much per square foot does it cost to build a new home?”