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6 Tips for Staying Under Budget when Estimating Home Construction Costs
With the market in turmoil, construction costs for new homes are somewhat unpredictable unless you understand the factors that go into estimating those costs. Changing land prices, material price fluctuations, contractor labor costs—all of these factors play a part in the overall cost of a new home. In this article, we’ll discuss some of the current trends in new home construction costs, what’s happening in the industry to impact these costs, and a few tips to help you keep your new home construction cost estimates on track during the process. Let’s get started!
2022 Construction Costs to Build a New Home
What does it cost to build a home in today’s market? Though there will be a range of regional differences, most builders see an average of $250 per square foot for single-family home construction, according to data from Cumming. When your customers are considering a custom-designed home, that cost will probably increase, mainly because the builder is unable to maximize their own savings through bulk purchases and cookie-cutter building processes found in planned development construction.
The range between high- and low-end homes also varies, with the metropolitan gap showing up in Denver, where homes range between $115-$383 per square foot. Cities like Orlando range from $184 to $221 per square foot, and New York is $330-$396 per square foot.
In most situations, building out instead of up, adding bedrooms, adding a basement, or bumping up to luxury finishes will raise the overall cost of the home significantly.
Engineering and Construction Costs Continue to Rise
Entering the third year of the COVID-19 pandemic, contractors have seen a series of shakeups in terms of engineering and construction costs. Delays in project starts are now causing backlogs, and when combined with skilled labor shortages, project schedules are becoming more and more unpredictable. Rising costs and high demand for materials like lumber, glass, aluminum, and copper are also causing complications for contractors both large and small. Raising consumer prices to cover the high material rates has not caused a slowdown in demand, and contractors are looking for time and cost efficiencies to make up the gaps.
The National Multifamily Housing Council reported a 14% increase in exterior finishes and roofing, a 12% increase in insulation, and 45% increase in the first quarter of 2022.
What are Tips for Estimating New Home Construction Costs?
When you’re working with eager new customers, there are a number of directions you can use to help ensure that they’re getting what they want in a home, all while staying within budget.
- Pin down a specific floor plan. Your customers may come in saying they just want something general, but having them commit to a specific floor plan helps protect everyone’s interests in the process.
- Provide your customers with an estimated cost per square foot. This allows them to understand how much it will cost to get the home done in general terms. They can then begin to decide where to economize and where to splurge in terms of interior and exterior finishes. Check out our Painting Estimate Guide to help you understand how to provide an accurate and detailed interior and exterior paint estimate under budget.
- Educate your customers on what style, quality, and features mean. If they have a better idea of what they actually want to focus on, it can help you determine how to prioritize their budget to make them happy with the finished product.
- Make sure your customers are leaving room in the budget for unexpected costs. This can include site prep work that is above and beyond what is expected, fees for permits, and additional costs for construction during particular points of the year, such as heating blankets for concrete in winter.
- Try to keep your customers and your company proactive to avoid cost overruns. Use a detailed contract with your customers, purchase materials before costs increase, stay on top of potential late fees for construction delays, and similar approaches to keep costs as low as possible.
- Use quality construction estimating software and/or services to help ensure you’re catching all of the expenses and saving time in the process. Estimating services help drastically speed up your estimating process, in some cases by up to 15 times faster. This allows you to bid more jobs while spending more time in the field doing what you do best—building homes. It also increases your profit margin because you’re spending more time in the field and less time estimating each job.
By having a solid understanding of current construction costs, trends in the market, and how to estimate new home construction costs effectively, you’ll be able to come up with a solid estimate of construction costs for your project without a lot of extra work or worry. However, the easiest way to ensure that your bids are accurate is by using comprehensive estimating software (watch a full demo here) that helps you avoid missing any area of the plans and keep up with any changes in material costs.
1build is a construction estimating software that is revolutionizing construction estimating by combining the experience of human estimators with the intelligence of powerful data, enabling faster, more accurate estimates. You can start a 14-day trial for free to see just how cost-effective our software and services are for your construction business.