It happens more than you think. We get an email or a phone call or a text – I am thinking of building a new home. Can you give me a ballpark price? The short answer? No, we really don’t have a ballpark price. Because sometimes we are talking about 2 very different ballparks, hell sometimes we are playing 2 completely different sports! There is such a huge variety of options and finishes and designs in building a truly custom home you have a few hurdles to clear before you are ready to build your new dream home.
First of all throw away every preconceived notion you have about new construction pricing. $80 a square foot does not happen in the Chicago market (yes, we have gotten inquiries with that number in mind!). I don’t care what Google tells you or what report you read – it does not happen. Yippee for the lady that built a whole house with YouTube tutorials, $25 and some duct tape, in the real world, that’s not happening. For the most part – $100 or $150 per square foot for a custom home does not happen in the Chicago market.
A quick Google search yielded a national average of about $125 per square foot for new construction. Like all things, location matters and those numbers are not realistic in a hot Chicago real estate market. If you ever want a hope of selling your house you have to provide finishes commiserate with your neighborhood. You cannot build a basic Chevy house and expect to sell it in 5 years for Maserati prices just because your neighbors are getting top dollar for their houses. If they put the money in, they may get the money out. If you put in less expensive finishes, you will not get top dollar. In today’s market where everyone can look at every property available for a 100 mile radius and see 75 pictures of each, a house with less expensive finishes will not stack up. It just doesn’t work that way.
The really big problem is all of the averages used to compute “price per square foot” for construction are just that — averages. And with averages come lots of situations that do not apply to our market.
For instance, those averages take into account big old housing tracts that build 1,450 identical homes on acres of land somewhere. They call them Shady Acres or Rolling Glens and you can “customize” by picking out window color or upgrading to blue siding. That is not custom. In those instances when the same house is built over and over with only a change in siding color, the price to build is much lower. That is great for someone looking for a ready-built neighborhood pretty far out of the urban core, it is a completely unrealistic, almost comical comparison to a true custom home in a sought after location.
Tract homes are not all that possible in Chicago. There are still a few areas that open up when old factories close down in a neighborhood and larger parcels of land become available, but in the really “popular” neighborhoods, we see more individual older homes going on the market (or being sold before they ever hit the open market). The majority of these old homes a tear-downs and are sold for their land value alone. With this, the custom home process in Chicago begins.
Finding an available “lot” (a.k.a. tear-down) in a hot neighborhood in Chicago is a competitive business. If it is a great neighborhood, on a great block it is going to sell and sell fast. If it an oversize lot – get ready for a bidding war! A standard lot in Chicago is 25’ wide x 125’ deep, anything wider or deeper in a great neighborhood is going to be in demand and sell for a premium. If that is something you want, have your checkbook ready and your loan pre-approved!
So the moral of the story? Your location matters. Your location will affect your price per square foot in construction AND in resale. Your home is your biggest investment; build something that reflects that investment. Don’t under build for your neighborhood (but don’t bother over-building either). Do your homework, be ready and then the process has a lot fewer surprises.
Next up, financing and architects and designers (oh my).