There are many ways of calculating the cost of a house. The easiest way is to describe what you want to a homebuilder or contractor. They have software that will give a very accurate bid on the home. Another way is to roughly estimate by considering the average cost per square foot of homes in your area. Learning the price and cost per square foot, of similar homes in your area is an even more accurate way to estimate the cost. Another way to calculate costs is to consider the elements and materials of the home, and the labor costs to build or install them.
Location is a huge factor in building a home. The average new home in California costs about $130 per square foot, while the average home in most of the Southeastern Midwestern and other western states costs between $75 and $90 per square foot. Average home costs in the North East are between $100 and $130 per square foot. Costs per square foot do not include the cost of the lot, but only the cost of materials, labor and homebuilder profit. These costs reflect the cost of living, inflation rate and labor costs of each area, as well as the influence of luxury homes on the overall average. Luxury homes are a minority of the homes built each year, but just how many are built in an area, and the degree of luxury they display, can impact the averages. It is important to note though, that even considering the fact that California has more than its share of extreme luxury mansions, the cost of building a very average looking home is still significantly more than it is in the rest of the country due to labor costs.
Despite efforts to prop up the housing industry, home builders, especially local home builders who do not have an office in every major city, are suffering the impact of the recession. They are competing with a flood of homes that have already been built. They are also competing with larger national companies who are currently getting the lion’s share of the business. The drop in real estate prices is definitely impacting them as is the increasing poverty level. In most small towns there are fewer people who can afford to build a new home, and the fear related to the economy is driving clients away.
Wage expectations are down for most construction workers, and smaller home builders are dropping prices and slashing their profits in many areas of the country, if the client needs the price dropped. If they see that the only way you will build a home is with cost reductions, the smaller home builder may just sit down with you and explain how you can build a home for less. They may suggest a smaller home or offer to let you put the finishing touches on your own home to save costs or to simply build a nice shell for you to finish. They may be willing to go the extra mile to save you money.
When it comes to home builders and contractors, one of the freedoms of a sole proprietorship or partnership is the ability to set the price in the office. They do not have to ask anyone in another area, who may not realize how tough things are in your area. You may be able to strike a bargain with a smaller home builder, especially if it is apparent that you really need a good deal, in order to build at all. They can see that it is better to do work and make some profit, than to make no profit at all. Larger companies may cut deals as well, but overall the small builder is fighting to stay open and more eager to cut a deal right now. It doesn’t hurt to ask about cost cutting.
There are many ways to approach calculating the costs of building a house including the breakdown of costs for each part of a home, a breakdown of the costs of labor and materials, and several other methods described on this site. For more information on calculating the cost of building a house, download our 98 page book, and read some of the many articles on this site.