New Construction Costs - CRAZY!

[24601NoMore]

Hey, everyone. Wife and I are looking at building our retirement home but have been really taken back by the cost of new construction, which for anything halfway decent is running roughly $250/sq ft here in SE MI.

We have a lot of family in the area, so moving out of state is not really an option for us.

Looking to build a 2,700 or so sq ft house, that's $675,000 (!!) "just" for the house - no landscape, sprinklers, deck, window treatments, etc. Add in land (we have a signed purchase agreement on a 3.5 acre parcel), and that's low $800K (!!!!) just for house + land. Then, at least another $100K to finish (deck, patio, landscaping, irrigation, interior finish, ...), and it's north of $900K - all for a 2,700 sq ft retirement house which while large is certainly not palatial for the area.

Seems new construction costs have gone totally bananas in the past couple of years. Tax assessor told me that there were some Pulte houses she was assessing that just 2 years ago would have been $300K. Those same houses are now $500K+. Plus, the taxes on the house we'd build are > $10K a year - for 2,700 sq ft..(Michigan has the 11th highest property tax in the country).

What are you all seeing in your areas for new construction cost per sq ft? And are any of you thinking of or building in ER?

PS: In case anyone's wondering..we've been looking at used houses for ~10 years now. Have found a grand total of TWO (out of hundreds we've looked at) that we'd consider buying. There are just too many things that we are looking for to have any confidence that we are going to find anything used that meets even 3/4 of what we want. So, it's either give up a bunch of things - or build. And building cost now is insane, at least here. I'm sure a lot of that has to do with the super low mortgage rates driving demand, but we're very surprised that there's still high demand with COVID putting everything including the security of most people's jobs totally up in the air..

Thanks..

 

[aja8888]

Well, we didn't build here in Texas. We bought a 15 year old, 2,000 sq. ft. BRICK home with Hardiplank trim in a 55+ community. The houses sell for about $250K and we are in a Very Desirable community (The Woodlands, TX).

From what I hear, building from scratch (your lot) is about $200/sq. ft. around here now. And that's for a pretty nice home. Resales seem to be selling in the $150/sq.ft. range. Maybe that's one reason why a large number of Michigander's have been, and are currently, moving to Texas? My Ex wife was from Saginaw and we were married in Dearborn.

One thing about this area is that we have a LOT of builders that employ trades people that are Hispanic/Other and I believe the labor rates are not as inflated as in other parts of the country.

 

[Fermion]

We are building our own home (building it ourselves, not "building" it but really having someone else do it) and I now think homes are too cheap! Just the concrete for the foundation for our very small 2 story, 1400 sq foot house was about $6,000. Hookups to water/sewer/electricity will be near $9,000. Heck, even OSB has gone up from $12 a sheet to $16 to $22 a sheet depending on vendor...this is in the last week!

We are still having fun and are doing it for the hell of it, but if you want to save money, buy a used home lol.

 

[travelover]

Ironic. I moved out of SE Michigan 3 years ago (Northville) and my house value didn't even keep with inflation over the 27 years I owned it. Maybe I moved too soon..

 

[Lewis Clark]

Have you considered buying an existing home for less money, and putting the extra money into remodeling to make it what you want?

 

[Ronstar]

I feel your pain. To a much smaller extent. I recently made 3 cabinet doors 76”x18” each. Maple with Baltic birch panels. $500 for wood and hinges. Building materials are out of control.

 

[wmc1000]

We were looking to buy a few acres and have a similarly sized house built in central indiana. All in for a semi-custom home with lots of upgraded features including land costs, ( about 8-10k per acre), is about $130 psf. This is for rural area of state.


Turns out we found an existing 5 year old home with 2661 sq. ft. on 2.5 acres in the same rural neighborhood for less than $97 psf and we will end up around $115 psf when we are done with changes we are making.

 

[skipro33]

I live in the Sierras half way between Sacramento and Lake Tahoe. A lot of bay area folks are realizing working from home is a viable alternative due to the shelter in place edict. They are selling their million dollar cracker boxes and moving here to work remotely and a lot are actually pulling the plug to retire here. Home values are north of $270 a square foot, up 8% from a year ago.

 

[Bamaman]

We're seeing some small 3 bedroom all brick homes with double car garages on small lots starting at $170K. That means $200K after options.

Jump up to better roof lines and nicer trim, and they're running $240, which means $270K after options. This is the most popular price range and the 8,000 new employees coming to town for the FBI and Mazda-Toyota will most likely be in these homes.

We bought a 12 year old all brick home last Fall that had been reconditioned to like new condition. It has 3905 square feet with 19' ceilings in the entry & great room. Triple car garage and almost 1 acre. Price was $355K and then we added an in ground swimming pool and landscaping is in process. Alabama property tax--$1,100 a year.

 

[Aerides]

Custom home builds have always been more expensive than buying new construction or existing homes.

But now? Covid has created demand: People are realizing their home needs to be their everything. People are upgrading, adding on, moving to bigger ones.

Add to that the supply chain issues, delays with sub-contractor and permits, all builds will take longer which means more overhead - and the cost of raw materials is going up.

Best bet is to find a resale that meets the neighborhood and footprint requirements, the bones, the things that can't change. Then budget upgrades and changes.

 

[24601NoMore]

Have you considered buying an existing home for less money, and putting the extra money into remodeling to make it what you want?

Yep - sure did. Have looked at a couple possibilities..but since this will be the last house we buy and our 'forever' house are looking to not have to make 'too' many compromises and haven't found that yet.

 

[24601NoMore]

Ironic. I moved out of SE Michigan 3 years ago (Northville) and my house value didn't even keep with inflation over the 27 years I owned it. Maybe I moved too soon..

Nah - existing home values haven't kept up with inflation here at all. Our own house is worth probably 25% less than we have in to it, and it's DEFINITELY not appreciated. We'll take a real hit if and when we ever sell.

New construction, on the other hand, is absolutely insane. I call it the HGTV effect. Everyone wants the shiny new house with all the latest upgrades. Heck, we partly even fall into that same trap..

 

[Offgrid Organic Farmer]

After I retired, We bought bare land and started construction in 2005.

When it was all finished [including solar power], our 2400 sq ft house cost us around $31 per square foot.

 

[24601NoMore]

Custom home builds have always been more expensive than buying new construction or existing homes.

But now? Covid has created demand: People are realizing their home needs to be their everything. People are upgrading, adding on, moving to bigger ones.

Add to that the supply chain issues, delays with sub-contractor and permits, all builds will take longer which means more overhead - and the cost of raw materials is going up.

Best bet is to find a resale that meets the neighborhood and footprint requirements, the bones, the things that can't change. Then budget upgrades and changes.

Yeah - we've always seen new home construction being higher than existing homes. But not anywhere near this kind of delta or $/sq ft cost before. $675K JUST for a 2,700 sq ft house - no land, finishing, landscaping, deck, patio, irrigation, window treatments, etc..that's crazy!

What I can't figure out is why COVID is apparently INCREASING demand. I'd think many people would be concerned about their job security given what's going on, and not want to be making any major purchases or financial commitments like a new house at this point - especially one this expensive. Heck, we're both ER'd and don't have to worry about job security - and we're beyond hesitant to make that large of a financial commitment..

Supply chain issues make sense..but it's the demand part during COVID that I can't figure out..

 

[aja8888]

Yeah - we've always seen new home construction being higher than existing homes. But not anywhere near this kind of delta or $/sq ft cost before. $675K JUST for a 2,700 sq ft house - no land, finishing, landscaping, deck, patio, irrigation, window treatments, etc..that's crazy!

What I can't figure out is why COVID is apparently INCREASING demand. I'd think many people would be concerned about their job security given what's going on, and not want to be making any major purchases or financial commitments like a new house at this point - especially one this expensive. Heck, we're both ER'd and don't have to worry about job security - and we're beyond hesitant to make that large of a financial commitment..

Supply chain issues make sense..but it's the demand part during COVID that I can't figure out..

People moving out of cities, apartments, and very low interest rates. That's part of it.

 

[Aerides]

What I can't figure out is why COVID is apparently INCREASING demand. I'd think many people would be concerned about their job security given what's going on, and not want to be making any major purchases or financial commitments like a new house at this point - especially one this expensive.

Some, but not enough to outweigh the ones who are realizing they want/need a bigger/better home now they have to spend more time in it and have nowhere to go. Two-Executive parents making $300k per year with kids underfoot who are looking at WFH for the next year? Now they need a 6 bedroom when the 4 was fine before. Lots of that going on. Or people moving out of cities into suburbia. Plenty of reasons covid is creating demand.

Me for example - finally used covid to justify adding a pool. And I couldn't even get some builders to give me a quote they are so backed up.

 

[MRG]

OP I agree. I'm seeing $250 a foot for new construction here in SWCO. Some of these places are loaded with solar options but they are on tiny lots with not much else. We are watching a place next door where they're spreading gravel around the "yard". We walked through the place while it was under construction. Tiny rooms that made you feel like you were in a cheap hotel.

I'm not sure if I believe the online real estate estimates but this house we paid 375k 4 years ago is now worth 550k? How does that work? I mean it's exactly $250 a foot for year old construction but..... we're not going anywhere.

 

[RobbieB]

If you have to have exactly what you want you're gonna have to pay for it. There's no negotiating, no haggle, just order it up and open your wallet.

Or not. Your choice.

 

[Peter]

If you have to have exactly what you want you're gonna have to pay for it. There's no negotiating, no haggle, just order it up and open your wallet.

Or not. Your choice.

I know a few people who did this, and when it was all done, realized that what they thought the wanted isn't quite right after all ...

 

[RobbieB]

I did it. I ordered up a new car to my spec and got a whole grand off the list price.

But I got what I wanted eh?

 

[davebarnes]

If we built a custom house $350+/sqft would probably be our price.
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[Singletrack]

For a new custom home with premium finishes here on the Colorado front range, you can easily spend $350 to $450 per square foot, excluding land. There is a complete dislocation between the resale market and new construction costs at present. Unfortunately, I’m not sure that new construction costs are going to moderate any time soon, particularly in desirable markets.

 

[old medic]

We have been living in a camper and rebuilding an abandoned house as we can...
with buying the place and material bought so far.... were at about $7 a square foot...
Hoping to stay under $50 by the time were done

 

[DrRoy]

We are also in SE Michigan. DW and I also once considered building our retirement home new, although in Ohio. Even bought some land. We canned that about 8 years ago and sold the land as the cost would have been ~$750,000. Instead, we have spent around $150,000 on several projects to make the house we have more perfect for us.

 

[foxfirev5]

Many areas in Michigan are going nuts. DS is having a house built outside Grand Rapids and new starts are already about 10% higher$ in just the last few months. Lake house are fetching crazy prices for teardown cottages and replacement 4000 sq ft houses on 50' lots. I'm glad I'm neither a buyer or a seller. Simply happy with what I have.