At RES Contracting, we get regular inquiries into the costs per square foot to build a custom home in Prescott. Many would-be homeowners look to find the right time to invest their money into the custom home of their dreams. So, we’ve put together some data for you all to help in making that decision. Check back here, as we’ll publish an update at least quarterly, if not more.
There are many components to the cost of a home, including building (or input) materials, labor, land, and the overall economy. Let’s take a look at the latest numbers.
Residential Construction Materials Prices
In January, we continued to see residential construction materials increase in pricing, affecting the overall cost per square foot to build. Overall, building materials increased by over 20% year-over-year. Below are some of the materials and recent changes (last month or previous quarter).
- Lumber: Lumber is pushing the construction costs with two consecutive months of over 20% increase in prices.
- Steel: Steel has seen a steady upward trend in pricing as well, as demand also grew in 2021. (source)
- Paint: Both exterior and interior paint has seen record prices, increasing by over 30% and 20% respectively. (source: BLS PPI Report)
- Concrete: While concrete has also experienced price increases, the price of ready-mix concrete (RMC) is not as severe as other materials (source). RMC pricing went up 1.4% in January.
- Glass: Year-over-year price change in flat glass, according to the to the BLS PPI, is 9.0%.
- Gypsum: This material that goes into drywall has seen eleven straight months of pricing increases and has increased over 30% since August 2020 and 23% year-over-year.
- Plastics: Plastics experienced a 24% Producer Price Index increase year-over-year (January 2022 over 2021). (source)
With building materials increasing, it’s no surprise that the cost to build per square foot has also risen. The average price per square foot to build rose to $321 in 2021 from $235 in 2020 (and $219 in 2019). In Prescott, Arizona, the cost per square foot to build a custom home ranges from $300-450.
Another large component of the cost to build is land. Land can vary in price depending on location and ease of build. That said, Prescott still has some great plots available at great prices.
Residential Construction Labor Costs
With unemployment down to 4% in the US, the construction industry is experiencing the same shortage in skilled labor as other industries. The result is a higher cost to residential construction labor, as well as longer build times due to the labor shortage. With demand continuing to increase, the construction labor market had 345,000 unfilled positions. While that is a lower number than the record 445,000 in November, there is still a significant strain on labor which impacts the costs to build. (source)
Right now the biggest impact on the cost of your new custom home is inflation. Inflation rose to new recent highs of over 7%. As you read above, that is impacting all of the major categories of residential construction materials, as well as the cost of land and the final product.
Interest rates are still historically low. However, rates are expected to increase in 2022, providing some resistance to the home building boom of 2021.
In the construction industry, we’re still seeing increases in residential construction starts and permits, per the Census Bureau. This puts continued demand pressure on pricing.
We know that homeowners look for the right time to build, to maximize their dollars. Keeping an eye on these numbers as well as having regular conversations with your custom home builder can help you with that decision.
Call our office today (928-776-0301) to discuss your project and check back here to get the latest numbers.