As climbing prices and increased interest rates continue to push home ownership out of reach for many families, the numbers are out on how much new home construction costs in each state.
The cost to build a home in California is exceeded by only two other states — Alaska and Hawaii. The study comes from Forbes Advisor, which pegs the average cost to build a 2,000 square-foot home in California at $405,440. It takes on average $421,080 to build a home in Alaska and $412,840 in Hawaii.
After California comes New Jersey, where it takes $376,900 to erect a home. Costs do not include the price of land.
It lines up with what homebuilders are paying on average in Fresno County, according to Mike Prandini, president of the Building Industry Association of Fresno/Madera Counties.
Prandini said in Fresno County — one of the least expensive places to build in California — the average cost to build a home runs around $300,000. Add in $150,000 for the lot and what it takes to finish it, a 2,000 square-foot home could cost upwards of $450,000. And that’s without any sort of profit for the builder.
“It’s not a cheap enterprise to build a home anymore,” Prandini said.
Materials are the biggest contributing factor, he said.
Forbes listed framing as the most expensive portion of the home, averaging $33,000 for quality lumber. Metal stud framing can be $20,000.
Year-to-date, 1,837 permits have been pulled for single-family homes in Fresno, Tulare, Kings and Madera counties, valued at $519.04 million, according to the Construction Monitor.
Year-to-date for the same week in 2021, there were 2,154 permits pulled.
Benchmark Home Construction based in Danville lead the way with 221 permits. Lennar Homes followed closely behind with 208 permits.
What’s remained consistent, Prandini said is the timeline of building a house. So long as the materials arrive on time, getting a house built should not take more than four months — assuming a regular flow of labor and materials, Prandini said.
Homebuilders are finally starting to see some relief in terms of costs and construction timelines, said Ryan De Young, president of De Young Properties, but labor continues to be an issue.
“They’re not where I’d like to be nor where we were before Covid, but we’re trending in the right direction,” De Young said.
Supply chain issues have loosened, and hold-ups are limited to random items such as baseboards or streetlight parts.
What has also helped is the ability of homebuilders to make internal adjustments. For instance, De Young Properties added a second company to help with certain trade labor.
Highly skilled, manpower-intensive trades have been the most impacted, said De Young.
Year-over-year, costs have gone up substantially, but builders are seeing relief in some categories — lumber especially, said De Young.
Fortune reported May 27 lumber futures had dropped 50% to $651 per thousand board feet. In January, lumber was trading at $1,329 per thousand board feet.
Those cost decreases have not yet been realized across the board, said De Young, but it is something to be hopeful for.
Even with the quick rise in interest rates, no spike in cancelations materialized, De Young said. But it did mean having to “double check” on qualifications. The mortgage arm of De Young — De Young Mortgage — had locked in rates for some customers.
“We did have to really roll up our sleeves on a handful and look at certain situations to make sure the customer and loan were in good shape,” De Young said.
In the end, only two customers had financing issues, but issues weren’t limited to interest rates.
The Fed’s moves just haven’t deterred home buyers, said De Young. The pipeline of sold and under-construction homes remains strong.
Millennial buyers have entered prime buying age and have become a major cohort in line with Baby Boomers. And rising rents have incentivized home buying, said De Young.
“Many people are choosing to purchase because of the certainty and peace of mind,” De Young said.