Using project data from CoConstruct’s home building software, we analyzed over 8,000 home building projects from 2019 to 2021 to identify trends in the average cost per square foot to build a custom house. We found that in this past year the average cost per square foot of a home has increased dramatically while the square footage of new homes has stayed consistent. See below for our full findings on new home square footage and cost per square foot.
Average square footage of a house is down but the average cost per square foot to build it is up
The average square footage of newly built custom homes has declined slightly over the last three years. From 2019 to 2020 the average square footage of a new custom home decreased 1.4% from 3,158.5 sq. ft in 2019 to 3,115 sq. ft in 2020. Over the following year, the average square footage of homes stayed relatively flat, decreasing only 4 sq. ft from 2020 to 2021. While pandemic-influenced residential real estate trends led to home buyers seeking more space for their families and home offices, this did not result in larger built homes than before. Instead, home buyers likely looked to increase their space relative to their current situation instead of acquiring palatial estates.
While the size of new custom homes has dropped slightly, the average cost per square foot has taken off the last two years. After averaging $229.29 per sq. ft in 2019, the average increased 2.6% in 2020 and then 36.5% in 2021 to $321.15 per sq. ft, a $85.80 per sq. ft increase. This sharp increase in cost per square foot for new custom homes in 2021 is likely a result of increased material prices, labor shortages, and other industry issues plaguing home builders over the last 18 months.
A unique combination of square footage staying flat, the average cost per square foot rising, and home builder’s profit margins staying flat meant home builders took home more money per project. While home builders didn’t markup projects more than before they made more money on 2021 projects from the higher costs per square foot being passed onto clients.
The average square footage and cost per square foot for a house varies by region
The average square footage of a house varies by region across the US with new homes in the West averaging 3,191.3 sq. ft and homes in the Midwest averaging 2,885.8 sq. ft, a difference of 275 sq. ft. This is heavily influenced by geography and land availability in each census region. Beyond regional variation, there were also noticeable three-year square footage trends for each region. The average square footage of homes in the Northeast and South for instance have decreased 5.7% and 2.5% respectively from 2019 to 2021. To help put that into perspective, for homes in the Northeast that equated to 177 less square feet, or a little less than the size of an average bedroom. The West, notably, is the only region with a higher average square footage for a house in 2021 than 2019.
The average cost per square foot for homes also varied by region across the country. For example, the cost per square foot for homes in the South cost $347.45 per sq. ft while homes in the Midwest cost $236.91 per sq. ft. The average cost per square foot for homes in the Midwest, South, and West all increased from 2020 to 2021. This year over year increase was largest for homes in the South which saw a 38% increase, more than double the cost per square foot increase that homes in the Midwest and West saw. The dramatic increase in price for the South compared to other regions likely shows that the industry factors are having a larger impact on builders in the South than other regions. The average cost per square foot for homes in the Northeast, in contrast, decreased 7.6% from 2020 to 2021.
Where we got our numbers from
CoConstruct helps over 100,000 building professionals manage clients and trade partners, schedule work, track financials, and more. Aggregating and analyzing the data builders input into the system, CoConstruct can identify construction industry trends and highlight emerging issues. By using and sharing this information CoConstruct is doing its part to eliminate the chaos of project management and help create rewarding experiences for both home builders and clients.