Frequently Asked Questions
This page contains answers to those questions asked most frequently by our customers.
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- What Is Your Cost Per Square Foot?
The average price per square foot of the homes we build continues to increase and we hesitate to quote a price per square foot. At the beginning of 2005, the average price per square foot was just under $112 excluding the lot. At the beginning of 2006, the average price per square foot was $165 and rising. Since 2001, the price per square foot of the homes we have built has ranged from a low of $85 to a high of $175 excluding the lot. A number of factors are driving these cost increases.
Overall, the cost of building materials spiked more than 15 percent from 2003 to the beginning of 2006. Steel prices have increased nearly 50 percent since 2003, according to the U.S. Bureau of Labor Statistics and the National Association of Home Builders. Concrete costs have risen 18 percent during the same period. PVC pipe, which carries clean water into homes and wastewater out, has gone up at least 35 percent in the just the last eight months. The price of copper has doulbed since the January 2006. And higher crude oil prices have made it expensive to deliver many other materials.
PVC pipe, which carries clean water into homes and wastewater out, is made with a byproduct of natural gas and has gone up at least 35 percent in the just the last eight months. PVC supplies tightened after Hurricane Katrina disrupted natural gas lines and PVC plant operations in the Gulf Coast regions. The price of copper wiring has increased 300% spurred by copper mine strikes in Arizona and Zambia, and high demand in China. And higher crude oil prices have made it expensive to deliver many other materials. Costs of vinyl windows and carpet materials which are manufactured with natural gas are also escalating. Asphalt and roofing materials can also be added to the list, because petroleum or natural gas is a key ingredient.
There are so many variables in the construction market that it’s extremely difficult to predict future costs based on any one factor, but most experts believe prices will remain high, even if local real estate markets cool. The building boom in China and India, and resulting demand for supplies, is putting upward pressure on costs for steel and concrete worldwide, according to Bernard Markstein, director of forecasting for the National Association of Home Builders. The rate of increase is higher now than it has been since the early 1990s, he said. Analysts predict cement, the primary ingredient in concrete, will especially be in short supply. Consumption in the United States in 2005 grew to a record 114.6 million metric tons, an increase of 6.8 percent over 2003, according to the PCA. Consumption is projected to grow another 5 percent this year. Rebuilding New Orleans will require at least 4 million tons of cement during the next five years, according to the Skokie, Ill.-based Portland Cement Association. Products like PVC piping, insulation and roofing, which are manufactured with natural gas or crude oil, will likely remain 20% to 50% higher than in pre-Katrina days, according to Ken Simonson, chief economist for the Associated General Contractors of America. (AGC) The AGC looks for increases of 5% to 10% in 2006 for brick, glass, gypsum and wood. Simonson expects overall fuel prices to rise from 5% to 10% in 2006. That would be on top of diesel fuel prices that have shot up almost 60% in 2005. These increases raise costs across the board because they directly raises the cost of operating equipment.
In addition to the escalation in material prices, there are a number of factors that affect the cost per square foot and make it difficult to quote a price per square foot. So be cautious when using cost per square foot estimate the cost of the home you would like to build or to compare builders. There are a number of things to consider.
Cost per square foot is typically calculated by dividing the total cost by the square feet of living area. Costs such as impact fees, water meter fees, sewer hookups, septic systems, wells, temporary utilities, plumbing, garage doors, cabinets, appliances, site concrete work such as driveways and sidewalks, and landscaping are included in the total cost and affect the cost per square foot calculation. But they are unrelated to the square feet of living area in the home. Consequently, smaller homes generally cost more per square foot than larger homes because there is less finished square footage to divide these costs into. The average size of the homes we have built since 2001 is 2,715 square feet.
Some homes might contain unfinished or partially finished areas – like basements and attic “bonus rooms.” These unfinished or partially finished areas obviously add to the total cost of the home, although the cost per square foot of these unfinished or partially finished areas is less than the cost per square foot of finished space. If the square footage of this unfinished or partially finished areas is included in the cost per square foot calculation, the cost per square foot would appear low. On the other hand, if this square footage is excluded, the cost per square foot would appear high. Over 30% of the homes we have built over the past two years have contained unfinished or partially finished areas. However, we only used the finished areas when calculating our average price per square foot
The sales price quoted by most builders includes “Allowances.” Allowances are budget amounts for items the Buyer is allowed to select but which may not have been selected prior to entering into the contract to build the home. If the cost of the items selected by the Buyer exceeds the Allowance, the sales price is increased by the difference. Common allowance items include cabinets, countertops, light fixtures, appliances, tile, flooring, and landscaping. Low Allowances could make the cost per square foot appear low. The average cost of Allowance items in the homes we have built since 2001 are:
- Cabinets – $11,987
- Countertops – $3,080
- Light Fixtures – $2,206
- Appliances – $3,863
- Tile – $5,296
- Hardwood Flooring – $5,364
- Vinyl Flooring – $1,144
- Carpet – $4,696
- Landscaping – $10,099
But these amounts are increasing due to the escalation in material costs.
- Where Do You Build and Remodel?
We build and remodel throughout the Treasure Valley and southwestern Idaho and will soon be licensed in Oregon. Our offices are located in Hidden Springs where we have designed and built a number of homes since 2001, but we have built and remodeled homes and commercial projects thought Ada and Canyon Counties.
- Do You Only Build Your Standard Plans?
No. In fact, if you compare our Homes Under Construction and our Completed Homes to our Standard Plans, you will see that most of the homes we build are custom designed for our clients.
- Do You Build Anything Other Than Energy-Efficient Homes?
No. We joined the U.S. Department of Energy’s Building America Builders Challenge and committed to constructing homes that rate 70 or lower on the EnergySmart Home Scale (E-Scale) and meet the Builders Challenge Quality Criteria. The Building America Builders Challenge is based on lessons learned from the Building America Research Program of which we were a member for over 10 years. We use the Systems Engineering Approach to home building in every home we build. The Systems Engineering Approach developed under the Department of Energy’s Building America program produces homes that are even more energy efficient than those built to the ENERGY STAR performance guidelines. And it allows us to accomplish that with little or no increase in cost over standard building practice. We have also made a commitment to the ENERGY STAR Program to build 100% of our homes to ENERGY STAR performance guidelines.
- How Long Does It Take To Build A Home?
It typically takes about five (5) months from the time that we apply for the building permit until the house is completed and ready for occupancy. Basements add about two (2) weeks to the schedule.
- Would you be interested in bidding on my project?
Probably not. Although it may appear advantageous to you, we don’t believe that requesting multiple bids on your new home or remodeling project is in your best interest. While it seems to make sense at first, we believe that there are some compelling reasons why you shouldn’t do so.
Do You Really Want A Cheap Home or Remodel? Looking for the lowest bid may assure you of the “cheapest” home or remodel, but are you really looking for a “cheap” home or remodel? Shouldn’t you be convinced that the quality and value are more impor¬tant than a lower price?
There’s No Price Tag On Trust. Bidding the home or remodeling project out to “keep the Builder or Remodeler honest” is the wrong way to approach the process. If you don’t trust us, why are you working with us in the first place? When we work with a client, we do so based on a relationship of trust and confidence. It is our mission to design the best possible home or remodel within budget and make a fair return for our efforts.
Bidding Mistakes Don’t Help You. It is risky and unrealistic for you to hope that the Builder or Remodeler will make a large bidding mistake in your favor and then expect him or her to eat it after construction has begun. You must understand that a Builder or Remodeler who realizes that a bidding error is going to reduce his margin will be difficult to deal with regardless of the contract.
Only One Builder or Remodeler Wins. A custom home or a significant remodel takes an incredible amount of time and expertise to bid correctly. The “bidders” are people with whom you will have to spend a great deal of time, and they will likely become friends. Once you have selected a Builder or Remodeler, you will have to tell two or more Builders or Remodelers the bad news that you selected someone else to do the work.
Comparing Apples To Oranges. Add to this the difference in how jobs could be bid. If plans and specifications are poorly drawn and executed and/or if the bid instructions are vague and incomplete, the bids will be so far apart that it will be impossible to reconcile them and determine which among them is really the lowest. If plans and specifications are properly drawn and executed and if the bid instructions are complete, three competent and reputable Builders or Remodelers will appear with pricing that is almost identical. If this is so, why submit to the stress of bidding out your home or remodeling project? You should choose a Builder or Remodeler the same way as you would choose any professional — reputation and warranty.
Customer Service And one final consideration,
Low Bid = Low Profit = Low Customer Service.
Reprinted from Design/Build Business – August 1997