Square Foot Prices More Than Double Inflation in 2022
Median square foot prices (excluding improved lot values*) for new for-sale single-family detached (SFD) homes started in 2022 increased 18% to $155, 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% to a national median of $156 per square foot. Both increases were more than double the U.S. inflation rate of 8% that same year.
The rise in median contract prices per square foot undoubtedly reflect fast rising construction and labor costs that pummeled home building in the post-pandemic environment.
Because square foot prices in this analysis exclude the cost of developed lot, highly variant land values cannot explain the regional differences in square foot prices. However, overly restrictive zoning practices, more stringent construction codes and higher other regulatory costs undoubtedly contribute to higher per square foot prices. Regional differences in the types of homes, prevalent features and materials used in construction also contribute to price differences.
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. Half of all for-sale SFD homes started in the East South Central division in 2022 registered square foot prices of $132 or lower, while the other two divisions in the South — West South Central and South Atlantic — also registered median prices below the national median at $152 and $150 per square foot, respectively. Lower square foot prices partially reflect less frequent regional occurrences of such costly new home features as basements.
The Pacific and New England divisions registered the highest median prices. Half of new SFD 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.
In the custom home market, new contractor-built SFD homes in the New England are by far most expensive to build. 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.
The Pacific division had similarly high custom square foot prices. Half of custom SFD started in the Pacific in 2022 had prices of $160 per square foot or higher. The corresponding median price in the West North Central was $155.
The South Atlantic division is where most economical custom homes were started in 2022, with half of new custom homes registering prices at or below $131 per square foot of floor space. The remaining two divisions in the South — East South Central and West South Central — recorded slightly higher median square foot contract prices of $156 and $141.
Natalia Siniavskaia, Ph.D., NAHB assistant vice president for housing policy research, provides more details behind the SOC data analysis and historic trends between spec and custom homes in this Eye on Housing post.
*The cost of lot development was excluded from sale prices in this analysis because contract prices of custom, or contractor-built, homes do not include value of improved lot as these homes are built on owner’s land. Consequently, contract prices are typically lower than sale prices of spec homes.