The low end for building a new home starts at $150-200 per square foot, the midrange from about $200-300 and custom homes from $300-500 or even higher. So to build the average-sized US home in 2024 of about 2,300 square feet would cost anywhere from $345,000 to well past a million, excluding land costs.

But is square footage the best way to estimate home building costs?

According to Bob DeVries, who started in his father’s construction business more than a half century ago, the answer is no. 

“Square footage, I never really trusted it,” said DeVries, now 72 and winding down his career as a builder. “I’d get the quote on the materials and then figure out how many days it would take us to do the work.”

He said it was different for builders who were putting up suburban tract homes in places like Levittown, because they knew exactly what their models would cost per square foot. And for contractors in the masonry trades, or the paving business, square footage is a more reliable measurement of how much they need to charge.

But when it comes to home building, the architecture of the home and the finishes can make a huge difference in cost.

“I spent a lot of time making estimates and I did not want to make a mistake,” DeVries said. “I never really relied on square footage.”

There’s a builder from Minnesota who posts on Reddit as hello_world45 who agrees with him:

I am a builder in MN. This is exactly why I hate price per square foot questions. It's basically meaningless. You never know if you are talking about the same. square feet. Then the finish level makes a huge difference. So do the floor plan and site details. I can build 2 houses the same size one is a simple rectangle with a 4:12 gable roof. The other has a bunch of jog in and out and a super complicated 12:12 roof. The cost per a square foot is vastly different.

As for why so many builders use square footage when it comes to making estimates, DeVries said it simplified things.

“Because it’s easier,” he said. “There’s a lot of guys out there that will throw a crazy number out there and if one person bites out of ten they’ll make out.”

Since he worked in a family business with his brother, and many of their clients were people they knew from growing up in northern New Jersey, he said he would not be able to sleep at night if he thought he was overcharging. 

The productivity problem that plagues the wider construction industry, which proptext wrote about in February, is not the same for smaller crews who can take advantage of new technology and better tools to work more quickly

He said when he and his brother Charles worked for their father in the late 1960s and early 1970s, it would take six to eight weeks to frame out an addition, a job that they can now complete with a helper in about a week.

“A lot of that has to do with air tools,” he said. “Everything is a system now.”

Building materials are also more readily available and there is not as much customization in the industry.

“It’s not like back in the day that you had to get the mill work from the mill shop,” DeVries said. “Now everything is standardized.”

And for those who want to cut corners, the Home Depots and Lowes of the world are their friends.

“I did bathrooms and kitchens for some houses in some upscale areas for a guy and he would buy all the cheapest stuff and he would live in it, and then sell it in four years,” he added. “It looked pretty good.”

Though he said he would not vouch that the cabinet doors would not fall off in the next 10 years.

The US is some four million homes short of demand, and the shortage is even more acute for affordable homes. There has been some progress in the last five years, with RentCafe reporting that nearly 310,000 affordable apartments were built, with 91,000 units in 2024 alone.

Still, the shortage persists, and as proptext wrote recently, affordable housing is usually no bargain and isi often more expensive than market rate housing.

John Burns, the founder of John Burns Real Estate Consulting, raised this question recently on LinkedIn.

But according to DeVries, older homes are not the solution.

“It’s almost always more costly and labor intensive on an existing property,” he said. “With an older home what do you get out of it, maybe a foundation?”

For a builder, framing a house from the ground up is usually a more cost effective way to go.

“You spend a lot of time straightening things out before you get moving,” DeVries added. “Renovations are almost always more expensive.”

And just because a home is older does not mean that the construction is better, though he has seen plenty of well-built older homes.

“The old saying ‘they don’t build them like they used to’ — that’s a lot of crap as well,” DeVries said. “You open up the wall and the joists are too small and the plumber has cut into them to make room for the pipes.”

When renovating an older property, cheaper finishes and vinyl flooring are often the best choice for a long-term rental. But, for a short-term property, the design elements are often what mean the difference between a property that pops on Airbnb or VRBO and one that potential renters click past

When it comes to higher construction costs, “It’s all in the finishes. There is such a disparity in prices,” DeVries said. “Does the kitchen have soft-close doors?”

In the end, it’s a question of the goals of the investor, and at what point the higher numbers start to interfere with a deal’s profitability.

“People are not that knowledgeable about hardware and locksets,” he added. “You could spend $6 or $80 and the average person would not know the difference.”

Homeowners association (HOA) fees are creeping up, throwing another variable into the financial calculation of what is affordable for investors and home buyers. A survey by Lending Tree of the 100 largest metros found that 17.5 million homeowners, or nearly 32%, paid fees in 2024 and 2.6 million or those folks (15%) were shelling out at least $500 a month, or $6,000 a year. Almost 60% of homeowners in Las Vegas pay HOA fees, the highest rate; next on that list was Orlando at 56% and Houston at 55%. New York, Honolulu and Miami have the highest share of homeowners paying more than $500 a month. These fees are used to cover maintenance and repair costs, utilities, insurance and build up reserve funds. Proptext did a deep dive on the perils HOAs pose to investors that is worth checking out.

Earning $200,000 a year is a great salary in most of the US, and is enough to buy a pretty nice house. In the Bay Area, not so much. The AI boom has hit San Francisco full force, and real estate has gone haywire. Those who are making a mere $200,000 — enough to afford a home in the $650,000 to 925,000 price range — can pay $4,000-$5,000 a month for a mortgage, and a lot depends on the down payment. These folks will have to compromise on home type, whether it be a condo, townhome, or single-family home; distance from job centers; age and condition of the property. Real estate agents who spoke to the San Francisco Chronicle that the best places to look were Concord, Richmond, Martinez or Benicia in the East Bay, or starter homes Contra Costa, Napa, Sonoma and Solano counties.

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