Where Can I Find The Best Value in New Construction?
There is a correlation in real estate that seems obvious: the more square footage a home has, the more expensive it will be. While a useful rule of thumb, there is much more to the story.
Price Per Square Foot is a Benchmark and Nothing More
Let’s take a look at the new construction market in Maple Grove and how they value square feet. In the chart above, you can quickly identify a few trends.
- Prices are up across the board. No price point has been immune to cost increases of material and labor.
- The smallest homes cost the most per square foot. Not entirely surprising, given there are flat overhead costs not directly proportional to the size of the home (permits, inspections, and land cost come to mind).
- Homes between 3000 square feet and 3500 square feet offer the largest value by a significant margin.
This is an example of finding value in a tight market. Even as we head towards a correction, it is important to be mindful the sellers are still favored when they present a well-kept, fairly-priced home to market. Still, this data is inconclusive by itself. Let’s take a look at the broader Twin Cities Market and see if the trend continues.
Expanding the Scope
As you can see, the market in the greater Twin Cities region does not support the same value. While entry-level, smaller homes certainly carry a significantly higher cost per foot, the value in the 3000-3500ft. range has disappeared entirely. So, what happened?
First, note that Maple Grove is quickly becoming a “luxury” market for would-be buyers of new construction. Prices in general are up compared to the Twin Cities, thanks to the amenities and education offered in the area.
Next, we need to understand the larger picture. Who is building these houses? Not all builders are created equal, and some offer significantly finer finishes than others. Architecturally significant detail, stone countertops, taller ceilings, solid wood doors, even something as simple as lights on a dimmer switch add cost without increasing the square feet of a home, thereupon raising the price per square foot.
A “production” builder will generally offer the largest home they can for the lowest cost per square foot, where a “custom” builder designs their homes with a specific lifestyle in mind. These will vary wildly in cost per square foot, and it isn’t for me to say which is better than the other — it largely depends on the needs of the buyer. You can learn more about the types of builders here on our website.
Finding Value in New Construction Requires Networking
There is one more thing to be done to determine the best value in the market, and it has nothing to do with data. The issue with looking at numbers in the past is just that; they’re in the past. To get ahead of the curve and see what others are missing, connect with your local builder reps. Ask them about their current homes for sale — what do they have under construction to move into within a month? Two months? Six? The closer to completion, the more likely a builder is to come to the negotiating table. Homes cost money the longer they sit unsold, and builders are always looking to offload inventory.
Builders do not always have their inventory listed online in advance, so be sure to touch base regularly and keep a log of what is on the way. With critical knowledge of upcoming inventory and understanding where value currently exists in the market, you can find the best deals.
Want more like this? Come back next week for another edition of Market Monday, where we dive deep into the details to find diamonds where others only see dirt.
