What Does Cost per Square Foot Mean in Home Construction?

When planning to build a custom home, you might be tempted to ask for a cost per square foot during the initial consultation. A word of caution: It’s nearly impossible to provide you with a reliable, neat, tidy, easily digestible number until after a detailed estimate has been completed for you.

We’re pros at what we do. Based on additional information you provide to us and our historical data, we may be able to give you a ballpark range, with the caveat that things change. But to provide you with 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. But, it’s different for new construction.

When building a new home, the term considers everything – including 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 misleading without understanding what influences it.

Factors that Influence Cost per Square Foot

Let’s say you want to build a 2,800 ft2 custom home. What’s beautiful about building a custom home is that it is a reflection of your style and choices, which influence the square footage cost. Here’s a list of some of the most common average cost influencers:

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

Other Cost per Square Foot Influencers

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

Heated or livable square footage versus total square footage can also have cost implications. Often, heated square footage is more cost-effective than exterior and outdoor living square footage. So, if your home design has 2,800 ft2 heated, a 200 ft2 porch, and a single-car garage, it will likely cost less to build than the same-size home with an 800 ft2 porch and a three-car garage.

The Take-Away

Don’t get caught up on square foot cost when looking for project costs and cost estimates. From our perspective, this cost is only remotely accurate when we know everything included in building the home in a detailed cost breakdown. It’s important to understand 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 making a like-for-like cost comparison, 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 average cost, but we don’t use it to 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 your dream custom home and wonder about the construction cost, 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.