Median square foot prices (excluding record-high improved lot values) for new for-sale single-family detached (SFD) homes started in 2022 increased 18%, according to NAHB’s analysis of the latest Survey of Construction data. Increases for square foot prices in new custom SFD homes were similarly high, averaging 19%, more than double the US inflation of 8% registered by the CPI the same year.
In the for-sale market, the Pacific and New England divisions registered the highest median prices. Half of new for-sale single-family detached homes started in these divisions in 2022 were sold at prices exceeding $214 and $219 per square foot of floor area, respectively, paid on top of the most expensive lot values in the nation. The most economical SFD spec homes were started in the South region, where the median sale prices per square foot were at or below the national median.
The East South Central division is home to the least expensive for-sale homes. Half of all for-sale SFD homes started here in 2022 registered square foot prices of $132 or lower, paid on top of the most economical lot values in the country. The other two divisions in the South – West South Central and South Atlantic – also registered median prices below the national median of $155 per square foot of floor area. Their corresponding prices are $152 and $150 per square foot, excluding improved lot values.
Half of custom SFD homes started in New England in 2022 registered prices in excess of $213 per square foot of floor area. The Mountain division came in second with the median of $200 per square foot of floor space. After showing strong appreciation of 23%, median prices in the East North Central division reached $185 per square foot– third highest in the nation. The median custom square foot prices in the neighboring Mid Atlantic division were $160 per square foot.
Typically, contractor-built custom homes have been more expensive per square foot than for-sale homes after excluding improved lot values. Over the last two decades, this custom home premium averaged slightly above 9%, suggesting that new custom home buyers were not only willing to wait longer to move into a new home but also pay extra for pricier features and materials. However, these custom home premiums largely disappeared since 2021 when median square foot prices for new for-sale homes caught up and, in five divisions, exceeded divisional custom homes square foot prices.
As of 2022, the custom home premium per square foot returned into a positive territory but remains well below the historic norms, suggesting that custom home buyers now less likely to pay for pricier features and materials than before the pandemic.
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