Since housing inventory is so low as of late, I’ve had several buyers consider finding a lot and building their own home. Is this a good solution to our low inventory problem? Here are some quick talking points to consider on this topic.
Basic Entry Level Construction Costs: 💲Current new construction with basic finishes have a cost per sq.ft. at right about $350, not including the cost of a lot. So, that works out to be approximately $700,000 to build a 2,000 sq.ft basic home, plus the cost of a lot, which starts around $250,000 in Bend for entry level locations.
Mid-Range to Higher End Construction Costs: 💲💲 Mid-range to higher end construction is currently in the range of $500 to $600 per sq.ft., again not including the price of the lot. This would work out to be approximately $1,200,000 to build a 2,000 sq.ft. home at $600 per sq.ft., and would cost approximately $350,000 for a mid-range lot.
New construction residential real estate sales in 2021 constituted only 13% of total sales. New construction residential real estate sales from 2004 to 2008 were about 27% of total sales.
Building permits are way down. 📉 The number of building permits acquired in January of 2018 was 78. The number of permits acquired in January of 2022 was 37.
How Long Does it Take to Build? 🗓🗓🗓 Average build times for custom homes are between 14 and 24 months and have taken longer in some cases.
Cost of Materials and Labor: 📈 Costs of construction materials have over doubled in the last 12 to 18 months, and contractors and subcontractors are charging a premium right now for their services.
What about buying a new home from a local developer? 💡 There are lots of challenges with buying a lot and having a custom home built, so what about buying a new construction home from a good local developer? Buying a new construction home from a local developer definitely costs a lot less. For example: An upper mid-range quality 2,010 sq.ft. home built by Pahlisch Homes in Skyline West is currently listed for sale at $860,000 or $427/sq.ft., and this INCLUDES the price of the land. Pahlisch Homes also has an upper mid-range 2,837 sq.ft. home for sale in the NE neighborhood of Petrosa, currently listed at $820,000 or $289/sq.ft. Again, this includes the price of the lot.
Conclusion. Buying new construction from a local developer is a much more economical option vs. a custom new home, but with new construction only making up 13% of total sales, inventory there is also limited and it will take time for the right home to come up. If you don’t mind spending the extra money for a custom home, waiting up to 2 years for it to be completed, and buying a lot separately, a custom build might be the right choice for you.
- Rob Eggers, Principal Broker rob@bendhomeguide.com
