How Much Does it Cost to Build Good House?

Newly built homes are often priced higher than resale, but,
with a new home, everything inside and out is brand new.
Photo: Kitchen and dining area of the Hayden Plan by
Maracay Homes at Artesian Ranch in Chandler, Ariz.
Conventional thinking is that a new home will cost more
than an existing home.
The rule of thumb seems to be that buying a new home
from a builder might run you 15 percent to 30 percent more
than buying a comparable older home in an existing
neighborhood.
In fact, in September 2014, the National Association of
Home Builders (NAHB) reported that the median price of a
new home was $259,000, while the median price of an
existing home was $210,300.
The key to comparing new versus older home prices,
however, is to make sure you are comparing apples to
apples, cautions Ed Hudson, director of Marketing Research
for the Home Innovation Research Labs, a subsidiary of
NAHB. “Comparing median prices is fine, but are the
homes the same size? Do they have the same features?
Newer homes typically are more spacious and have more
modern features.”
Moreover, because of the only slowly recovering new-
home market, many new home builders are still offering
deals on options or closing costs. Costs can be further
reduced if the builder allows you to provide some “sweat
equity” — i.e. do a little of the finish construction work
yourself.
Selecting premium upgrades — such as top-of-the-line
appliances or cabinets, granite countertops, high-density
carpeting, hardwood floors or a highest-efficiency HVAC
system — can, of course, add to your new home’s bottom
line. In addition, new homes come with a few additional
costs, such as new sod maintenance, new utility and cable
connections and possible homeowner assessments or
community association fees. You might also feel the need
for new furniture, a new washer/dryer, window coverings,
landscaping, fencing or a new deck.
Building a custom home costs even more. Construction of
a true custom home generally involves the expense of an
architect, as well as the cost of a construction loan,
permits, impact fees, site preparation, utility connections,
sidewalks, driveways and possible well or septic field. All
things being equal, it commonly costs 20 percent to 30
percent more for a custom home than for a new production
home, according to Hudson. Construction of a custom
home typically runs from $200 to $400 per square foot.
In addition, building a new home can take months or, in the
case of a true custom home, up to a year and requires
extensive participation by the buyer in selecting design
and product options, site visits and home walk-throughs.
When buying an existing home, you can often close and
move-in in less than two or three months.
What Do You Get For This Premium?
The key to comparing new versus older home prices,
however, is to make sure you are comparing apples to
apples. — Ed Hudson, director of Marketing Research for
the Home Innovation Research Labs Regardless of the
price difference and commitment required, a large
percentage of people prefer, and buy, a new home. Here’s
why:
You Get What You Want
A key reason a majority of buyers would prefer a new
home over an existing home is that a new home can allow
them to better obtain exactly, or more exactly, what they
want or need in a home. New home developments offer
numerous plans and options to personalize your home.
Semi-custom homes offer more flexibility and often allow
limited customization before construction is complete.
And, true custom-built homes allow you to set exact
specifications for your dream home.
Everything is New
Buying an older home is a gamble. You never really know
what you’re going to get or how long the home’s roofing,
appliances, fixtures, pumps, furnace or air conditioner will
last. Immediate repairs or renovations may be needed.
“Products in a new home,” Hudson explains, “have less
wear on them. An air conditioner typically needs to be
replaced every 15 years, a roof every 20 or 30 years. With
a new home, you’re buying more time before replacement
of mechanicals and other big ticket items.”
With a newly built home, everything is new. Virtually every
new home provides a brand new range and dishwasher and
many include a new washer, dryer and refrigerator. Unlike
with a used home, little maintenance — at least initially —
is required and there are no repairs that demand attention.
The roofing, windows, flooring, cabinets, countertops,
fixtures, sump pump and hot water tank all are new with
extensive service life before any needed replacement. The
home will have both an overall builder’s warranty and a
host of individual product and appliance warranties.
In new home developments, even the neighborhood is new
and often features lawn service and state-of-the-art
recreational amenities. It can also be easier to “fit in” and
make friends since all the neighbors are also new. Finally,
don’t overlook the fact that there is an exhilarating level of
pride and excitement in being the owner of a brand new
home.
The Home is State-of-the-Art
New homes tend to offer contemporary design aesthetics,
such as open spaces, flex spaces, great room design,
volume ceilings, wider hallways, first-floor master suite,
larger closets and dramatic architectural articulation that
old homes can’t match. “New homes are more modern,”
Hudson notes, “with open layouts that suit current
lifestyles. Older homes, for example, tend to have eight-
foot ceilings. With a new home, the first-floor ceiling
usually is nine feet.”
Built with current technology and modern construction
standards, today’s new homes meet the latest health and
energy standards and feature higher-performance windows,
insulation, air infiltration and HVAC systems and
techniques that greatly increase energy efficiency and
reduce home operating costs as compared to older homes.
New homes also generally sport low-flow plumbing
fixtures, high-efficiency lighting products and Energy Star-
rated appliances.
“Building standards have ratcheted up significantly in the
last decade,” adds Hudson. “Today’s homes must meet
much higher energy-efficiency codes. They have better
windows, are more airtight and have more advanced
heating and cooling systems. They’re more comfortable.”
In addition, new homes are often wired for the latest high-
speed Internet, communication systems, security and fire
protection, flat-screen TV connections and entertainment
technologies.
The bottom line, Hudson summarizes, is that “new homes
can be a superior value.”
Roy Diez is a freelance writer and marketing professional
specializing in the architectural, building and construction
industry. He is a former editor-in-chief of Professional
Builder magazine.