Square Foot Prices Up In 2020
Median square foot prices in new custom single-family detached (SFD) homes started in 2020 increased 8%, according to NAHB’s analysis of the latest Survey of Construction data. Increases in square foot prices in new for-sale SFD homes (excluding skyrocketing improved lot values) averaged 4%. Median sale and contract prices per square foot went up across all US regions, except for the West region where square foot prices in custom SFD starts were lower compared to a year ago.
The highest median square foot sale and custom prices are registered in New England – $173 and $186 per square foot, respectively. The most economical custom and for-sale SFD homes are started in the South region, where the median contract and sale prices per square foot are consistently below the national medians.
Contract prices of custom, or contractor-built, homes do not include value of improved lot as these homes are built on owner’s land (with either the owner or a contractor acting as a general contractor). Consequently, contract prices are typically lower than sale prices of spec homes. To make comparison more meaningful, the cost of lot development is excluded from sale prices in this analysis.
In the for-sale market, the Pacific and New England divisions register the highest median square foot prices, $172 and $173, paid on top of the most expensive lot values in the nation.
The East South Central division is home to the least expensive for-sale homes. Half of all for-sale SFD homes started here in 2020 registered square foot prices of $99 or lower, paid on top of the most economical lot values in the country. The other two divisions in the South – West South Central and South Atlantic – also registered median square foot sale prices below the national median of $112. Their corresponding prices are $104 and $108 per square foot, excluding improved lot values. Among other factors, lower square foot prices in the South partially reflect less frequent regional occurrence of such costly new home features as basements.
In the custom home market, new contractor-built SFD homes in the New England are most expensive to build. Half of custom SFD homes started in New England in 2020 registered prices in excess of $186 per square foot. The median custom square foot prices in the neighboring Mid Atlantic division were $140 per square foot – second highest in the nation.
The two midwestern divisions (East North Central and West North Central) have similarly high custom square foot prices. Half of custom SFD starts in the East North Central have prices of $139 per square foot or higher. The corresponding median price in the West North Central is $138.
he South Atlantic division is where most economical custom homes were started in 2020 with half of new custom homes registering prices at or below $106 per square foot. The remaining two divisions in the South – East South Central and West South Central – recorded similarly low median square foot contract prices of $114 and $115 – all below the national median of $125.
Since square foot prices in this analysis exclude the cost of developed lot, highly variant land values cannot explain the regional differences in square foot prices. However, overly restrictive zoning practices, more stringent construction codes and higher other regulatory costs undoubtedly contribute to higher per square foot prices.
Typically, contractor-built custom homes are more expensive per square foot than for-sale homes after excluding improved lot values, suggesting that new custom home buyers are not only willing to wait longerto move into a new home but also pay extra for pricier features and materials. These custom prices mark ups are highest in the Midwest.
In 2020, however, the West divisions registered declining custom square foot prices. As a result, these divisions – Mountain and Pacific – stand out for registering sale square foot prices exceeding contract square foot prices.
The NAHB estimates are based on the Survey of Construction (SOC) data. The survey information comes from interviews of builders and owners of the selected new houses. The reported prices are medians, meaning that half of all builders reported higher per square foot prices and the other half reported prices lower than the median. While the reported median prices cannot reflect the price variability within a division, and even less so within a metro area, they, nevertheless, highlight the regional differences in square foot prices.
For the square footage statistics, the SOC uses all completely finished floor space, including space in basements and attics with finished walls, floors, and ceilings. This does not include a garage, carport, porch, unfinished attic or utility room, or any unfinished area of the basement.