New-Home Construction Costs Explained

New home under constructionWhen you purchase a newly built home, what are you actually paying for? Construction costs account for 61.8 percent of the total price, according to a survey conducted this summer by the National Association of Home Builders.

The average new home, built on a half-acre of land with 2,802 square feet of finished space, sold for $468,318, the NAHB said in its latest Cost of Construction Survey. Of that amount, $289,415 went for construction costs, including material and labor.

The second-largest expense was for the finished lot — $85,139, or 18.2 percent — followed by the builder’s profit $42,292, or 9 percent. The remaining 11 percent of the cost went for overhead and general expenses, sales commissions, financing, and marketing.

Construction costs were further broken down into eight categories:

  • Interior finishes: 29.6 percent.
  • Framing: 18 percent.
  • Exterior finishes: 15 percent.
  • Major systems rough-ins: 13.1 percent.
  • Foundations: 11.6 percent.
  • Final steps: 6.8 percent.
  • Site work: 5.6 percent.
  • Other costs: 0.5 percent.

Among the expenses for interior finishes were $16,056 (5.5 percent) for cabinets and countertops; $13,367 (4.6 percent) for flooring; $12,409 (4.3 percent) for interior trims, doors, and mirrors; $11,744 (4.1 percent) for drywall; and $2,760 (1 percent) for a fireplace.

The average size of new homes has been steadily rising since 2009, when it stood at 2,402 square feet, according to U.S. Census Bureau data.

The average price of new homes in 2015 was the highest average since the NAHB survey was started in 1995. The average sales price has been rising over the past few years, from $310,619 in 2011 and $399,532 in 2013.

(Image: Flickr/Great Valley Center)