The San Francisco Bay Area recently took the crown from New York as the most expensive place in the world to build, according to a report by UK-based consultant Turner & Townsend. While the firm based the data on construction costs for commercial, multifamily, medical, education, and warehouse structures, the same trend is expected to extend to custom home construction in the residential sector.
The leading question that many developers and private property owners ask is, how much does it cost to build a house in the San Francisco Bay Area, given the current status of the market?
The cost of building a custom home in the San Francisco Bay Area
The question about the cost of building a custom home in the San Francisco Bay Area has been asked so many times and most of these arrive at one answer: it depends. There are different factors that come into play. In order to come up with a definitive answer, you have to identify these factors beforehand.
Building custom homes, being “custom” in nature, presents a wide spectrum of potential cost depending upon the location, size, cost and characteristics of the land, access to utilities, home style, interior finishes, architecture and design fees, construction costs and builder fees, permits, and additional custom features. These factors are divided into two categories: hard costs and soft costs.
Hard Costs include anything related to the physical building of the structure and labor costs. In constructing a new custom home, general contractors and home builders estimate that good quality but value-conscious entry-level homes in the San Francisco Bay Area can cost as much as $600-$700 per square foot. Aside from cost-friendly fixtures and finishes, these homes come in simple, straightforward designs. Mid-range custom homes, on the other hand, include custom details and unique architectural features, as well as higher quality materials, including glass and structural steel. Their construction ranges from $700-$800 per square foot. High-end custom homes above $800 per square foot allow project owners to build structurally complex, high-performing, and fully custom residences on large, expansive lands. These homes also put an emphasis on personalization in the choice of materials and fixtures.
Additional costs not directly related to construction costs are also called Soft Costs. This covers the cost of the land and architectural and design fees. Soft costs also include fees for processing permits and relevant paperwork, insurance, compliance documents, utilities, green certifications, among others.
Cost of the Land
Zillow’s market prices confirm what many cost guides have established: the cost of the land depends on its location. In San Francisco, lots located in high-end neighborhoods and close proximity to urban centers are currently valued at approximately $600-$1,100 per square foot. In some mid-range residential areas, the value of land ranges from $180-$300 per square foot. Lots farther from the urban centers cost lower. For instance, 2,800-square-foot land is currently sold for around $300,000.
Architecture and Design Fees
In the city of San Francisco, architecture and design rates can range from a minimum of $2,500 for custom remodels to hundreds of thousands of dollars for luxury home designs, according to HomeAdvisor’s data. The amount will depend on the value and complexity of the project. The same resource also points out that the average custom home architecture rate is approximately $30,000. The figures are higher than the national rate, which ranges from the average of $5,700 for remodels to more than $40,000 for new custom homes.
It is important to note that architects may use different costing methods: based on project percentage cost, per hour rate, or per square foot costing. These amounts cover services that include drafting plans and full architectural plans for custom homes. The amount can also include the necessary construction documents and other relevant paperwork. The most important factor is the experience of the architect or designer. Naturally, seasoned and renowned architects will charge more than those who are new to the practice.
Permits and Other Fees
Permit fees vary widely, but according to general contractors that serve the region, overall permit fees can range between 6%-19% of the total project budget. If you’re building a custom home with a budget of $1.5 million, for instance, the permits can range from $72,000 to $228,000. The amount will vary depending on the complexity of the build, geologic hazards and environmental constraints, and local regulations and building codes, among others.
How do custom home building costs in San Francisco compare to other cities in the Bay Area?
In San Jose, the average construction cost ranges from $400 to $600 square feet. For average properties, that means custom home building is estimated to cost $500,000-$750,000 including labor, materials, and impact fees. The range excludes the cost of the land. Many agree that aspiring homeowners should note that the cost of the land, especially in San Jose, can be 200%-300% more than the actual home construction.
In Oakland, experts agree that building a custom home in the city requires one to spend over $300 per square foot for an above-average home in terms of quality and customization. Manta’s 2021 report suggests that the average custom home building cost spent by project owners in the city is around $350,000. Lands in the area can cost a minimum of $150,000 or higher. Just like other Bay Area’s permit processes, Oakland custom home building can be bureaucratic. Permits are estimated to cost up to around $50,000 for a 1,500-square-foot home that costs $225,000.
Data from BuildZoom (BZ), an online marketplace for the construction industry, shows that contractors from San Mateo County reported building costs in Burlingame that range from $680,000 for a 2,010-square-foot custom residence to $1.2 million for a 4,650-square-foot luxury home. In Brisbane, the lowest construction cost recorded by the marketplace in recent years was $500,000 for a value-conscious 3,500-square-foot home while the highest was mid-range $700,000 for a home that covers 2,327 square feet. In Colma, data shows an average of $500,000 for a 2,500-square-foot residence.
BZ data also reveals that the 2018-2020 construction costs in Menlo Park for two-story homes with attached garage start from a mid-range value of $800,000 for an approximately 4,800-square-feet home. For a 3,200-square-foot luxury home, construction costs can reach up to $1 million. On the other hand, one-story homes with attached garages range from value-conscious $340,000 for a 2,260 square-foot residence to a high-value $700,000 home of 2,090 square feet.
Major Custom Home Building Cost Trends for SF Bay Area
Gathering cost data from digital marketplace platforms like HomeAdvisor and Manta, as well as online discussion forums, such as Quora and Reddit, produced ballpark figures. These figures came from a variety of sources, including project owners who built their homes from scratch, estimates from active general contractors in the area, as well as realtors and brokers who know the market well.
Based on these sources, the answers and the common trends show that the average cost for building a home in the Bay Area can cost up to $400 per square foot or more, especially in housing markets like San Francisco City’s. This means that a typical home building cost can range anywhere between $200,000 to $600,000+ respectively for a 500-square-foot to 10,000-square-foot home, based on the factors mentioned earlier. In San Jose, construction costs can go up to $800-$1,000 per square foot, depending on two factors: how “custom” the home is. This range excludes the cost of the land and other soft costs, such as architectural fees and permits. Together, costs can quickly get into the millions.
What Leading Custom Home Builders and Architects that Serve the Bay Area Say
Aside from the data we mentioned above, we also reached out to the leading custom home builders and residential architects that serve the Bay Area.
According to the data we gathered, the minimum home building cost can go as low as $250 per square foot. On the other side of the spectrum for super high-end custom homes, the cost per square foot can go as high as, or over $1,000. The numbers from our contractors and architects yielded an average cost for each home value category: $450 per square foot for a value-conscious home, $550 per square foot for mid-range homes, and $775 per square foot for high-end custom homes.
San Francisco architect, Steven House AIA of House+House Architects, a renowned architectural firm in the region, reported the same range based on the projects that they have designed in recent years.
Lead builder Erik Bergstrom of EBCON Corporation | Hughes Construction, Inc., a design-build company that has been serving the Peninsula for over two decades also weighed in and confirmed the numbers.
Allen Gilliland from the design-build company and sustainable home expert, One Sky Homes, reminds project owners that “custom (premium) home costs have doubled from the $300 per square foot range fifteen years ago to the $600 per square foot range today in our niche. These projects are premium quality construction but not with crazy exotic “high-end” finishes. So they probably fall in the “mid-range” while being Zero Energy, Passive House.”
On architectural fees, Mark English Architects, a firm based in San Francisco which serves Northern California, pointed out that there is not much of a difference intra-regionally in terms of design fees. Architect Mark English added that “basically, for small projects or ADU’s with predictable entitlement processes, we charge around 10% of construction costs…our fee is typically hourly to a max based on the construction costs (final), typically around 12-15% for projects less than 1.5 million, 8-12% for larger projects.” The firm also emphasized that whether it is a mid-range or high-end home, the amount of work is similar.
The Future of San Francisco Bay Area’s Residential Construction Industry
Across all market sectors, the San Francisco Bay Area’s construction industry is expected to continue to expand in the coming years. The region is projected to retain its place as one of the country’s leading cities where construction is booming and in demand. While this is great news for the region’s economy, the same can’t be said for aspiring homeowners
Construction management and cost consulting company, Cumming, projects an almost 28% increase in investment in the residential sector this year, as compared to 2019 and 2020 data. The said increase also means a higher value assigned to the prime residential communities of the region.
If you’re planning to build a custom home in the San Francisco Bay Area, having the right team of home builders can make a big difference. The companies listed on the Best Custom Home Builders & Design-Build Firms in San Francisco Bay Area provide an extensive, full-service approach to homebuilding that has helped first-time homeowners navigate through the construction process from conceptualization through completion.
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