Phoenix is the city of year-round sunny weather, endless outdoor activities, and a strong economy. Known as a retirement paradise, the city has a growing population that encompasses young people, single families, and retirees. Based on 2019 data from the U.S. Census Bureau Data for 2019, Phoenix has attracted more residents than any other state in the country.
The Cost of Building a Custom Home in Phoenix
The average 2,600 square foot home in the U.S. costs roughly $400,000 (about $150 per square foot) but that can go up to $700,000 or more depending on greatly varying factors.
But exactly just how much does it cost to build a new home in Phoenix, specifically? The price for an average home in the city can cost $334,870, or about $129 per square foot, and is mostly a price that’s supported by a robust job market and good infrastructure that helps people get everywhere within 30 minutes. According to online real estate market research, the Greater Phoenix housing market is extremely strong in 2021. Now the fifth-largest city in the U.S., Phoenix has seen record-breaking growth in the past decade. Compared to coastal metro areas like San Francisco or New York, living in Phoenix is a lot cheaper but is still attracting young wealthy people from the coastal and midwestern cities because of the resort-like lifestyle it promotes.
But how much would it cost to build a 1,500 square foot home? The answer to this is heavily variable and can fluctuate due to hard costs and soft costs which include the characteristics that make up a home—location, size, cost, and even the home design and interior finishes. How expensive a residence can be is also influenced by other custom features like the framing, its foundation, roofing, flooring, and plumbing—some of the most expensive factors in building a house. Two-thirds of home building costs come down to materials and labor.
Hard costs are the costs involving materials, labor, site, landscaping, and the process of building the project. According to data gathered from online contractor marketplace BuildZoom (BZ), new home construction in Phoenix would typically cost around $172 to $213 per square foot but custom and high-end luxury homes would rise up to cost around $356 or more per square foot. Putting together all costs in general, a value-conscious home in Phoenix was reported to cost around $230,000 or about $153 per square foot. This is a home that has straightforward designs and makes use of cost-friendly fixtures and finishes. A mid-range custom home is a space that has been made with quality materials like glass, steel, and quality lumber. These homes also present better architectural designs, pulling up costs to $320,000, or about $213 per square foot. Meanwhile, luxurious, high-end homes can cost $535,000 (about $356 per square foot) or more for using premium materials that are more custom-made and highlight the distinctive architecture. It should be noted that these are just general prices. Depending on what material is used, these costs can be driven higher or lower. This year, the cost of materials has gone up 5% to 10% after reports say that the demand for homes has skyrocketed, pressuring an already overwhelmed industry. Lumber prices in Phoenix, in particular, can add $36,000 worth of costs to building a home.
Other expenses that don’t involve the physical construction of a house’s structure fall under soft costs. These include the cost of buying land to the survey work involved to get it ready for building, as well as the permits and fees charged by those involved in your project. For Phoenix, it’s important to note the desert character of the area and the special considerations that come with building in such terrain and climate.
Cost of the Land
As with building in any other location, something homeowners should consider when choosing where to build their home is proximity to roadways, shopping and business centers, and recreational spots. The county and school district a neighborhood is in may also factor into expenses to expect down the line.
AZ Big Media reports that the state of Arizona has the lowest median price of land per acre at $4,160, with many Americans moving southwest to the region in 2020. Zillow lists available lots in Phoenix with prices ranging from about $15 to $30 per square foot. However, it is important to take zoning restrictions and the availability of access to utilities into consideration when evaluating what it would take to develop a piece of land. For more remote properties, water access, for example, will need to be examined thoroughly to determine whether drilling a well or hauling water would be best for the site. The ensuing process of clearing and grading the lot can cost up to $5,000 depending on the terrain and excluding debris removal. On the whole, Arizona residents pay a little more than the U.S. average for utilities considering the climate. Installing basic plumbing and air conditioning usually costs upwards of $35,000.
Permits and Other Fees
The City of Phoenix is migrating to a new online permitting system in the Fall of 2021. The pandemic has also previously ushered in a move towards remote video inspection for most residential permits. But the Planning & Development Department’s previous fee schedule indicates that the base fee for a single-family residential site plan review is $1,300, with follow-up meetings at $600. Grading and drainage, paving, concrete, and fire line reviews cost $180 per lot, while sewer line and water line plan reviews are at $405 per sheet. The actual grading and drainage, stockpile, engineered fill, and stormwater on-site improvement fees start at $100 for the first 100 cubic yards plus $100 for each additional 100 cubic yards or fraction thereof, while haul permits from 1 to 10,000 cubic yards require no permit. Landscape permits start at $300 plus $150 per acre or fraction thereof. Right-of-way permit fees are as follows:
- Concrete – $44 per 100 linear feet or fraction thereof
- Paving – $48 per 100 square yard or fraction thereof (Plus $240 for city lab tests for permits greater than $500)
- Water – $220 per 100 linear feet or fraction thereof
- Sewer – $183 per 100 linear feet or fraction thereof
- Trenching – $33 per 100 linear feet or fraction thereof
Architecture and Design Fees
To help better navigate these costs and more, it’s often a good idea for homeowners to have an architect working alongside their contractor. They are the ones who help translate the vision for a home into a workable plan. Working closely with them can also help in staying within budget and timeline. The cost of these services can vary from architect to architect as well as project to project. Some architects may opt to charge hourly fees. HomeAdvisor estimates these fees for different kinds of architects as follows:
- Principal: $150-$250 per hour.
- Project Manager: $125 per hour.
- Intern Architect II: $90 per hour.
- Intern Architect I: $70 per hour.
Most firms, however, charge a certain percentage of the total construction cost. This can range from anywhere between 5% to 15% and is also subject to change according to materials costs along the way.
Still, some opt to negotiate a flat fee. This kind of costing depends heavily on the scope and complexity of the project, gauged against market values. Materials costs will no longer affect the fee after it is set, and it will only change if any revisions to the program and scope are made.
How do the custom home building costs in Phoenix compare to other nearby cities?
Permits found on construction marketplace BuildZoom (BZ)’s database show new construction of single-family homes in Phoenix from 2016 until right before the pandemic in the $200,000 range. Post-pandemic, permit valuation leans closer to the upper limit of that range and beyond, with some permits valued at $600,000. The trend seems to be similar in the nearby cities of Tempe, Glendale, and Sun City. However, for cities like Scottsdale and Paradise Valley, which are known for their resorts, golf courses, and luxury living, permit valuations shoot up to the $300,000 to $400,000 range even before the pandemic, and as high as $790,000 to $1,500,000 post-pandemic.
Permit fees themselves also seem to be cheaper in Phoenix, staying within the $2,000 to $5,000 range, while even for cities like Glendale, fees routinely hit five digits.
Steve Wiggins, Founder and CEO of Regency Homes, advises homeowners to budget $425 per livable square foot for high-end custom homes in Scottsdale for flat lots. “Hillside conditions can add substantially to this. This would include everything but the land itself — from plans and permits through pool and landscaping.” He observes costs to be settling down for the most part, post-pandemic, but sees long lead times to be the biggest challenge, currently, with all of the supply chain disruptions the industry is facing. “These can be mitigated though it takes some careful planning and foresight.”
Major Custom Home Building Cost Trends for Phoenix
Based on online sources like HomeAdvisor, common trends have come to a consensus that building an average home in Phoenix costs between $230,000 to $334,870, or about $88 to $128 per square foot. For example, a Spanish-style house with a living area of 1,816 feet and a 534 square foot garage, the costs can total up to an approximated $229,568 ($126 per square foot). For an average Phoenix home, these costs will vary greatly depending on the other factors that can shift the residence into a more unique piece that will end up costing more than the usual $120 per square feet as approximated by the online cost reporting site, ProMatcher. In Glendale, the basic construction of an average home can cost up to $92 to $138 per square foot while construction for an average Scottsdale home can cost up to $98 to $146 per square foot.
What Leading Custom Home Builders and Architects that Serve the Phoenix Area Say
Principal Eddie Jones, FAIA, of Jones Studio, an architectural firm that serves Phoenix, observes a general upward trend of construction costs. “If it is not a pandemic it’s a hurricane. Not a hurricane? Then it’s flooding or wildfire pulling construction workers and building material away from Arizona’s benign climate,” he says. For his own firm, however, he consistently charges a flat percentage fee of 12.5% of the construction costs, regardless of project scope, believing that each project still requires the same level of work.
In the case of two-time AIA Arizona Contractor of the Year 180 Degrees Design + Build, the percentage varies depending on the scope of work. More value-conscious designs would fall in the 10% range of the estimated construction budget, coming in the form of permit sets that would not include all the details for the construction, such as interior elevations, material selections, and door schedules. Mid-range residential projects would be in the 12% range, while high-end homes are typically in the 15% range of the total construction budget. “These design fee costs would include all of our consultant fees for architectural, structural, mechanical, plumbing and electrical. Our typical construction rates as a builder are $350-$800 per square foot. Further, design fees are influenced by the build site. A hillside lot for example, would have completely different build requirements and complexities when compared to a flat lot.”
The firm further advises homeowners to prepare contingency plans to address potential cost escalations due to the inconsistency with supply chains and the unpredictable nature of material costs. “For instance, an initial budget could be estimated for a project, however, if that project does not ‘break ground’ for another two years, material costs could be dramatically different.” It’s also best to examine prospective architects and contractors closely, and not opt for a lower bid at the cost of quality.
For high-end homes, Principal Mark Sever, AIA, of Sever Design Group, a firm that works on truly custom prototypes, has seen cost per square foot starting at $600, sometimes going as high as $1,000.
Erik Koss, founder of KOSS Design + Build, estimates the cost range for high-end custom homes to be within $300 to $800 per square foot, with an average of $450 for the design-build firm. “All of our costs have been trending upward over the last 2 years. Best advice I can give is if you truly want to build, start as soon as you can. Even when costs stop rising they rarely fall, then tend to flatline unless there is a paradigm shift in the industry or economy and those don’t come along very often. People who wait to build usually never build at all.” He adds that skilled labor and true craftsmen get harder to find every year, which adds to the difficulty of achieving the level of craftsmanship the industry strives for.
The Future of Phoenix’s Residential Construction Industry
Phoenix’s high real estate appreciation rates in 2020 are very likely to be mirrored in the coming years thanks to a strong economy and a larger number of people moving into the city.
KTAR News 92.3 FM also reports that Arizona real estate has never been more competitive, with the thousands migrating inward. This has driven up the prices in the housing market, as well as rental rates, causing many to turn toward homebuilders to escape bidding wars. The increase in work for homebuilders has subsequently caused an increase in costs due to a short supply of materials. The industry is also suffering from insufficient labor following the slowdown of business at the start of the pandemic. AZ Big Media reports this staff shortage has led to protracted project timelines, even as municipalities try to help expedite the process for applying for zoning and land use permits. Builders fear the impact all this will have on the effort to keep communities affordable.
Still, the housing boom does continue beyond the single-family residential market. Phoenix is set to hit its five-year high in apartment construction, with 15,846 new units projected by the end of the year. The high demand is likely to continue for the housing market as a whole, as the work from home transition brought about by the pandemic attracts more people to the city, in addition to the long-standing market among retirees and others seeking affordable housing and more space. The home building industry will just have to find ways to continue to adapt, as it has in the past.