Real Estate Marketing & Beyond
A new report from the National Association of Home Builders shows the costs of constructing a single-family home were much higher when compared to 2011, reaching $246,553 last year compared with just $184,125 in 2011.
Much of this cost was due to an increase in the price of lumber, as framing and trusses account for a considerable percentage of the construction costs. Between April 2011 and April 2013 the cost of purchasing softwood lumber increased by 40%. The survey which was conducted in August and September last year shows that even though constructing costs are rising, as are house sizes, the lot sizes are shrinking.
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The survey showed the average single-family home had 2607 ft.² of finished area and was built on a 14,359 ft.² lot, and sold for $399,532. This is an increase of 25% compared to 2011 when the average price for a single-family home was $310,619 but is still well below peak prices reached in 2007 when the average single family home sold for $454,906. The average lot size last year was about a third of an acre, but it has declined from approximately 21,879 ft.² in 2009, and 20,614 ft.² in 2011. Over the past few years lots have been harder for builders to purchase. In August last year 59% of builders regarded the availability of lots in their local markets as being low or very low. This figure has increased from 43% recorded in September 2012. It is likely that the low supply is driving up the costs of purchasing lots. In 2009 lot costs were $3.5 per square foot, declining to $3.3 per square foot in 2011, but increasing to $5.2 per square foot in 2013.
The average construction costs accounted for 59% of the homes sales price in 2009 and 2011. This percentage had increased to 62% last year. The second largest share of the sales price is taken up by finished lot costs. These costs dropped last year to 19% compared to 22% in 2011. On average, the builder’s profits accounted for 9.3% of the sales price.
The construction costs for new single-family homes can be broken down into eight major sections. The costs of interior finishes account for 29.3% of costs, framing accounts for 19.1%, site work for 6.8%, foundations for 9.5%, exterior finishes for 14.4%, final steps for 6.6% and other costs for 0.9%. In addition to rising construction costs many builders have to deal with labor shortages.
Apparently framing crews are the least available, as 48% reported a shortage of framing crews directly employed by their firm, while 51% reported a shortage of subcontract framing crews.
