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What Does Cost per Square Foot Mean in Home Construction?

You might be tempted to ask us to give you a cost per square foot during our initial consultation when you’re planning to build a custom home. A word of caution. It’s nearly impossible to give you a reliable, neat and tidy, easily digestible number until after we’ve completed a detailed estimate for you.

We’re pros at what we do. We may be able give you a ballpark range based on additional information you provide to us and historical data, with a caveat that things change. But to give you a number you can count on, we need to know the exact cost of everything.

Cost per Square Foot Explained

If you’ve been in the market for a house, then you’re likely familiar with cost per square foot based on buying or selling a home. In that sense, the cost per square foot is usually the sales price divided by the heated square footage of the home. Yet it’s different for new construction.

When building a new home, the term takes into account everything – everything like house plans, building materials, labor costs, site preparation, interior finishes, and more – that will be used or required to build your home. Once those costs are assembled, the total is divided by the number of square feet. And Voila! Your cost per square foot. However, that number can be a bit misleading without understanding what else influences the cost per square foot.

Influencing Cost per Square Foot

Let’s say you want to build a 2,800 square foot custom home. What’s beautiful about building a custom home is that it is a reflection of your style and choices, which influence the cost. Here’s a list of some of the most common cost influencers.

  • Topography of the lot
  • Building materials choices
  • Interior finishes
  • Home design
  • Change orders
  • Labor

Other Cost per Square Foot Influencers

The pandemic really did a number on the supply chain, and as a result, material costs have been particularly volatile over the past few years. When coupled with labor shortages, changing material costs can create price swings that can quickly influence the cost per square foot.

Heated or livable square footage versus total square footage can also influence cost per square foot. Oftentimes heated square footage is more cost effective to build than exterior and outdoor living square footage. So, if your home design has 2,800 heated square feet, a 200 square-foot porch, and a single car garage, then it will likely cost less per square foot to build than the same size home that has an 800 square-foot porch and a three-car garage.

The Take-Away

Don’t get caught up on cost per square foot. From our perspective, cost per square foot is only remotely accurate when we know everything included in the cost to build the home. And it’s important to know how the builder calculates cost per square foot so that you’re comparing apples to apples if you’re comparing builders. If you’re not comparing apples to apples, then you risk making decisions that could end up being costly mistakes.

In fact, we don’t really find cost per square foot to be particularly effective or useful. We track it like statistical data so that we have a historical view of cost, but we don’t use it price a construction project. If we’re honest, it’s a number generated for your benefit, such as using it to loosely gauge cost.

If you’re thinking about building a new home and wonder about the cost, then it may help you to think about what you are looking for in the home. Read this blog post for a deeper understanding.

When you’re ready to talk cost and want to know what it’s like working with us, contact us to schedule a free consultation.