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Question:What is the construction cost for a single family home in California? Lennar, a big builder, offers a 4000 sqft home for $1.3M (reduced from $1.5M) Why is it so expensive?
Answer:Of course I don't know what Lennar pays for the construction but I can throw out some numbers. Just 3 days ago I got an appraisal for an investment property and it included the cost approach, meaning, they tried to calculate what it would cost to build this SFR from scratch.
This was a ~1900 sqft house, 4BR/ 2BA and it would cost $101k to build and $80k for the land = $181k total. (I buy for $176k)
This was in Utah. $50 / sqft is very low. You can do that in Texas and New Mexico but not in California. A few weeks ago I chatted with my neighbor because I felt we were insuring our homes too high. He is in the construction business. He said in California the cost of construction is around $180 / sqft.
Maybe the truth is in between. Keep in mind, the Utah home was as basic as possible. No tile, cheap carpet, cheap kitchen, no high ceilings, small windows etc etc
I believe that to to build a 4000 sqft home, the price won't be $180 but maybe $130 / sq. (Bigger sqft, it should get a bit cheaper per sqft)
--> 4000 * $130 = $520k.
Now the cost of land. Here is where the smart builders indeed make HUGE profits. What they do is, they buy OPTIONS on the land many years ahead. It is possible to look up the assessed value of a parcel with Zillow.
$366k for a 3900 sqf parcel. (2006 sale)
The builder probably paid less for it, no idea, but there was also cost involved in developing raw land.
$520k + $366k = $886k total price. Yes a big profit if they sell for $1.3M. It also gives you an idea how much they can reduce further until it starts hurting.
These numbers are wild estimates anyways, the real cost for the builder could be anywhere between $600k and $1M, but certainly not around $215k what ozajh posted.
I looked at Lennar's web site. The house looks beautiful. Of course as always, they do not show that that there are direct neighbors. Those drawings never show the adjacent properties. They state everything on their web site except the lot size. For a reason, I assume.