As the state capital, Sacramento is the fastest-growing major city in California. It is considered a financial center on the West Coast, as well as an educational hub and major center for the state’s healthcare industry, the seat of Sutter Health, the world-renowned UC Davis Medical Center, as well as its School of Medicine. It has also been dubbed the “most hipster city in California” for its evolving contemporary culture.
The Cost of Building a Custom Home in Sacramento
According to home buying and selling platform Knock, the median new construction home price in Sacramento is $650,000 — the second-highest among the major metro areas. The U.S. median for 2021 was $390,900. With a median household income of $76,706, 80% of Sacramento households have been priced out of the new home construction market. Alternatively, the average time it takes first-time homebuyers in the city to save for down payment on a new construction home is 21 years.
On a per square foot level, the average market rate to build a house in Sacramento is around $237 per square foot, while the national average is around $207 per square foot. There are many factors that affect the difference in the cost to build a home in specific cities. They can be classified into two major categories: hard costs and soft costs. Hard costs are all the expenses related to the physical structure of the house, from the materials to the actual construction. Soft costs are the additional expenses related to land, permits and other fees, and architecture and labor fees.
Hard costs cover all expenses related to the physical structure of the home, from materials to the actual build. Based on data gathered from online contractor marketplace BuildZoom (BZ), the low-end cost to build a house in Sacramento is around $140 to $175 per square foot. The mid-range is around $200 to $300 per square foot, while the high-end cost starts at around $325 to $400 per square foot and beyond.
Sacramento-based design-build firm HouseIdea also details the following costs per square foot:
- Foundation, Slab & Piers $30
- Flatwork (Drive & Walk) $15
- Rough Hardware $7
- Finish Hardware $5
- Rough Lumber $30
- Finish Lumber $30
- Countertops $5
- R19 Ceiling Insulation $7.5
- Roofing $7.5
- Painting $4.50
- Shower & Tub Enclosure $7
- Fireplace $2
- Built-in Appliances $4
- Heating and Ducting $8
- Plumbing & Sewer Connections $10
- Doors $3
- Garage Door $3
- Windows & Sliding Doors $5
- Exterior Stucco $10
- Gypsum Wallboard $8
- Flooring $5
- Carpeting $2
- Electrical $8
- Lighting Fixtures $2
Material costs typically total around $150 per square foot, accounting for 45 to 55% of the total construction cost, although this will vary depending on material choice. More durable and energy-saving materials may cost more. The same is true for more high-end finishes, fixtures, and appliances.
Costs for additional features are detailed as follows:
- Concrete Patio $5,000-$15,000
- Driveway $15,000-25,000
- Deck $5,000-$15,000
- Screened-In Porch $2,000-$8,000
- Patio Enclosure $8,100-$18,700
- Landscaping with Pool $15,000-$200,000
The firm also differentiates the cost to build with a developer versus a custom home builder in Sacramento. Building with a developer can cost about 15% less than building with a custom home builder since developers usually build numerous houses — whole subdivisions — at once, costing less per square foot and often also completed sooner. These subdivisions often already have a variety of floor plans to choose from and include playgrounds, picnic tables, BBQ areas, and pools within the planned community. The downside is this could mean homes will continue to be surrounded by the ongoing construction of latter phases for some time and most homes would look alike. Custom home builders provide the option of building anything the homeowner wants because they focus on just a few homes, but will cost more.
Soft costs are all the other expenses beyond the physical structure of the house, such as the cost of the land, permits and other fees the city or county may charge, and the cost to hire an architect or builder.
Cost of the Land
Lot sizes have gotten smaller in Sacramento. In 2016, the average lot size was about 6,122 square feet. In 2019, it was down to 5,509 square feet — a 10% decrease. Single family homes have also gotten smaller themselves, from 2,565 square feet in 2016 to 2,370 square feet in 2019 — a 7.6% decrease.
According to HouseIdea, site work averages around $15,000. Light grading excavation typically costs $5 per square foot, but if special excavation is required due to rocks in the ground, the foundation cost could increase by around $5,000 to $20,000.
Permits and Other Fees
HouseIdea further details that the typical cost to connect to local public services such as water and sewer infrastructure, which will involve water and sewer inspection fees, is about $5,000.
The Sacramento County’s Building and Construction Fee Schedule details other permit fees that apply to the city. Building permit fees are based on the total project valuation and charged at an hourly rate as follows:
Plans for projects valued at $40 million and below will incur a plan review fee of 40% of the total building permit fee. For projects exceeding this amount, the fee schedule details a corresponding change in the plan review fee. Plans for production houses of five or more similar units in the same subdivision will be granted a 50% discount on its plan review fee.
Carports, decks, patio covers, fences, and other additions will incur the following additional fees:
(Structures requiring minimal plan review)
Private pools or spas will incur the following fees:
Plumbing, Mechanical, and Electrical permit fees start at the following rates:
The fee schedule also details the costs incurred for other specifics such as solar power installation and energy plan reviews as necessary.
According to the North State Building Industry Association, in total, impact fees average at about $95,000 per house in the Sacramento region. This is $40,000 dollars higher than in the Central Valley and Inland Empire, where they average at $55,000. These fees cover basic infrastructure such as roads, water treatment, schools, or parks.
Architecture, Design, and Labor Fees
HouseIdea shares that the cost to bring in a general contractor for new home construction ranges between $45 to $85 per square foot. It is when other expenses, such as profit, and finishing, are factored in that the average cost to build goes up to around $250 to $500.
Hiring an architect for precise drawing requirements, construction papers, and project management costs between 8 to 15% of the total building cost, which can range between $15,000 to $80,000. In some cases, architects may also charge an hourly rate ranging between $100 to $250. Bringing in a bespoke house designer will add about 10 to 17% to the overall budget, with high-end pros charging between $30,000 to $50,000. Homeowners can save up to 30% by choosing all of their designs upfront or working with a builder who has a network of local vendors with in-stock options.
In total, labor costs around 35% of the entire construction cost. For a 2,000-square-foot home, the cost can be broken down as follows:
- Site Work $15,000
- Foundation $30,000
- Framing $60,000
- Exterior Finishes $35,000
- Major Systems $34,100
- Interior Finishes $70,800
- Final Steps $17,300
Framing a house costs approximately $13 per square foot covering both labor and lumber for a single-story home, and about $22 per square foot for a two-story home. On average, a typical new roof costs about $9,211 to install, while a high-end solar roof can cost $60,000 or more. Duct Pros HVAC Service Center estimates the cost of heating, ventilation, and air conditioning (HVAC) installation in Sacramento to range from $2,832 to $14,159 and possibly more depending on the characteristics and components of the system.
How do the custom home building costs in Sacramento compare to other nearby cities?
Based on permits from the last five years gathered from online contractor marketplace BuildZoom (BZ), the cost to build a home in the nearby city of Elk Grove is just a little lower than the cost to build in the state capital today. Homes in the city, which is also part of the Sacramento–Arden-Arcade–Roseville metropolitan statistical area, typically range from 1,600 square feet to 2,149 square feet, with building cost valued from $209,694 to $262,527, averaging at about $120 per square foot.
What Leading Custom Home Builders and Architects that Serve the Sacramento Area Say
Darko Borovnica, owner of Sacramento-based custom home building firm Core Construction, shares that building costs in the city are “all over the place nowadays.” He does give some average costs for three proposed building scenarios, namely around $200 per square foot for a value build, $250 to $300 per square foot for a mid-level build, and $400 and above for a high-end build.
Moving forward, Borovnica sees the trend of adding accessory dwelling units (ADUs) on existing properties continuing in the city. “Smaller costs to build, but still getting a separate living space. We’re getting a lot of calls for ADUs or garage conversion,” he says. After the passage of California Senate Bill 9, he also sees the market moving towards multifamily builds. “Due to high construction and land costs, I see the market turning to building duplex where possible,” he explains.
“I don’t see the costs going back down, so if the client is looking to build or remodel, still very low refinance interest rates are a great source of funds to do the work now,” Borovnica says of starting new projects. “At a 3% rate, it’s free money, and if the trends continue with costs going up, this is as good a time as any to get your house built or remodeled.” He says most of their clients are seeing money well-invested at this time. “The higher cost to build is rewarded with higher equity and property value. Reality is that if you spend $300 per square foot to build, but the finished product is worth $400 per square foot, it’s still a great investment.”
Looking at the greater Sacramento region, which also includes the west part of El Dorado County, South Placer County, and parts of Yolo County, as well as the rest of Sacramento County, Christopher Grenz, president of Grenz Homes Inc., shares costs can vary a little bit. “Most of Sacramento is pretty flat, but as you get into Folsom (still in Sac County) and El Dorado Hills, grading costs can easily be $50-100k on these hillside lots which would also need retaining walls, engineering & extra permits to build.” Different municipalities within the region also have different permit pricing structures. The cost to build high-end homes can also go up to $500 per square foot for high-end subdivisions like Serrano.
Grenz also shares how the considerations for building a home have changed in recent years. “Since 2020 we have had to include Solar and front landscaping in CA. Solar can easily add $20k and landscape seems to start at $25k & can easily go 2-3X on the higher end.”
When it comes to looking at bids, Grenz advises homeowners to be discerning in matching them “apples to apples.” He says many builders may bid using allowances, such as:
- $10,000 for plumbing finishes
- $5,000 for carpet
- $3,000 for front door
- $30,000 for appliances
- $7,000 for light fixtures
“Some builders might use 6-10 different allowances, others might have all their materials on allowances. This protects against inflation. Some builders will short allowances just to make their bid look good, this is where apples to apples comes to play,” he says.
The Future of Sacramento’s Residential Construction Industry
In a market where “new construction home prices are at unseasonable highs,” the Sacramento–Arden-Arcade–Roseville metropolitan statistical area very nearly tops the list with its median new construction home price at $650,000, second only to the Miami-Fort Lauderdale-West Palm Beach, Florida area, where it is at $720,000. The national median is $390,000. For median existing home prices, the Sacramento area holds the top spot at $550,000.
U.S.-wide, the increase in pricing is outpacing the national median household income, which decreased 2.9% over the pandemic to $67,521. This is why home affordability remains a challenge despite mortgage rates dropping to near historic lows, according to mortgage and housing finance resource Fannie Mae’s Chief Economist, Doug Duncan.
As of September 2021, Fannie Mae has lowered its 2022 new construction home sale projections from 846,000 units to 789,000 in the face of supply chain issues and skyrocketing home prices. Still, the National Association of Home Builders’ (NAHB) 2021 survey on What Home Buyers Really Want shows that 60% of home buyers prefer a newly constructed home over an existing one.
High Impact Fees
However, building in Sacramento is made even more expensive by its high impact fees, which average at $95,000 per new homebuyer. Every $1,000 increase prices out about 936 families from being able to afford an average home. This creates a ripple effect among middle and low-income families seeking better homeownership prospects.
A study by the North State Building Industry Association has found that communities with similar environments and lifestyles in the Central Valley and the Inland Empire region are able to keep fees much lower for the same amenities covered by these impact fees. As such, it recommends the implementation of “policy-driven fee reductions for specific land use categories or districts to incentivize desired growth.” Assembly Bill 602 could be one such springboard to standardize local fee calculations if passed with additional provisions allowing local governments to reduce and eliminate unnecessary fees. It also recommends the reassessment of the scope of fee-funded facilities in line with the current demand characteristics of new development and conservation mandates as they apply to infrastructure such as those related to water, wastewater, and storm drainage.