How does the size of my home impact $/sqft?
Prospective home buyers for decades have analyzed the value of a home based on the dollars per square foot ($/sqft). As a home builder, it’s a tricky question to answer when asked what our $/sqft is. We don’t want to paint a rosy picture and set unreasonable expectations, but at the same time, we don’t want to turn people away because we sound more expensive than our competitors.
I’ve found it best to set the baseline with an average size home. For example, a 3000 sqft custom home in 2023 should run you around $350/sqft. The final budget could be $300/sqft, $320/sqft, or $450/sqft. It will depend on the design, the customer’s selections, and other special considerations (difficult lot, walls of windows, etc.). But in general, without having a design to work off of, a budget of $350/sqft should put you in the ballpark of what’s reasonable.
Ok, so if I want to build a 1,500 sqft home, I should assume a budget of $525,000? NOPE!
There are many aspects of building a home that don’t care if you are building a small home or a larger home. A few examples are the utilities for the home, the kitchen, and the driveway. If someone wants to build a home on a rural lot with no street utilities, the cost of water (potable rainwater system or well) & and a septic system alone could equal over $60K. This cost is gonna be about the same for a 2000 sqft or 3000 sqft home. And let’s not forget about the builder’s overhead, a 2000 home is going to take roughly the same amount of time as a 3000sqft home. I don’t want to suggest these examples will be exactly equal between a small home and a large home, but they certainly do not scale 1:1 as the size is increased or decreased.
There are also economies of scale working against a smaller home and working in favor of a larger home. Trades typically charge a larger rate on smaller projects because their costs do not scale linearly. This logic works in favor of homeowners building much larger homes.
Below is a graph representing the relationship of home size to $/sqft. The data for this graph was generated by running multiple scenarios of similarly designed homes through our bidding software, adjusting as needed for non-linear construction costs.
