Direct Construction Costs

Do Single Story Homes Cost More To Construct?

Whenever I have run a cash flow or pro forma in past years, one of the key assumptions is the cost of building the home.  And usually a good pro forma will break out the house cost to mean the vertical costs from foundation up – and it doesn’t include site work or other related soft costs.  The terms of direct construction or directs are often used to specify just these vertical costs.

In gathering assumptions, I have often found that single-story homes cost more to build, at least when talking about a per-square-foot cost.  It seems that most of the extra costs for single stories results from a larger foundation and more roof area.  As a simplistic example, consider that a 3,000 sf two-story home would have 1,500 square feet of foundation and 1,500 square feet of roof, with two floors getting you to 3,000 square feet.  For a single-story home, you would have 3,000 square feet of both foundation and roof area.  There are other factors in this calculation such as garage, staircase, and volume ceiling areas, but this example explains where probably most of the added costs lie.

One other factor may also be that the single-story home within a tract might be the smaller square footage of the floorplans, which is a factor in the per-sf cost.  Let’s say that a two-story 3,000 home fits nicely on a 6,000 sf lot, with ample yards and setbacks for the market.  With a single story, and again trying to ensure that the yards and setbacks are right for the market, maybe the home size can only be 2,400 square feet.  Because this smaller square footage still has the same expensive rooms (kitchens, baths) and core utilities (furnace, AC, electrical panel), it does not have the cheaper additional square footage of the larger home.  Thus, this single-story home may show a higher cost per sf based on its size.

So why build single story homes?  Generally, there is a market for that floorplan and sometimes carries a price premium that will help to offset the additional costs.

Please share with us below your comments and questions.

John Kaye has over 30 years experience within the land development and homebuilding industries, having held senior management positions with The Irvine Company, Koll Real Estate Group, and Brookfield Homes. As a developer, John has overseen the land acquisition, entitlements, and development of master planned communities, residential tracts, urban infill sites, and land assemblages. His experience and skill sets include land acquisition, land brokerage, project management, market analysis, finance, and strategic planning.

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