Memphis is located at the south-west corner of the land-locked state of Tennessee, along the Mississippi River. A melting pot of musical culture, it is recognized as the “Home of Blues” and the birthplace of rock and roll, along with other genres such as gospel, jazz, R&B, rap, and soul. Elvis Presley’s mansion, Graceland, is one of Memphis’ best known cultural landmarks. The superstar’s iconic home has been open to the public as a museum since 1982. Every year, approximately 650,000 visitors come to Graceland, making it the most visited privately-owned home in America.
Those visiting Memphis will find that there is plenty to see and do in this city. Nature lovers may visit the hiking trails or hop on a riverboat cruise, while those who enjoy the music and entertainment scene may visit the clubs along Beale Street and grab a bite of some Memphis-style BBQ.
Memphis is also a diverse city, with African-Americans comprising the majority (47.5%) of its population. It also has a booming Millennial population. In 2017, Memphis ranked fourth in Time Magazine’s listing of 25 top cities for Millennials to move. Downtown Memphis has the highest concentration of Millennial residents in the state of Tennessee, with 49% of the area population being young professionals under the age of 40. Many of these Millennials attest to low cost of living, affordability of housing, and low cost of healthcare as some of the advantages of settling down in Memphis.
Moreover, business conditions in Memphis are favorable for those looking to start an enterprise or looking for a job. Anchored by the growth of home-grown companies such as FedEx, AutoZone, Service Master, and St. Jude’s Children’s Hospital, Memphis’ steadily rising economy is set to bring in new jobs to the area. The region’s central location, complemented by its world-class transportation infrastructure and comparatively low rental rates, make Memphis attractive to both industrial and residential property-seekers.
Prior to the COVID-19 pandemic, Memphis had a hot housing market, with sellers commanding high prices for their homes and receiving offers from several potential buyers. However, as of late, rising land values, municipal fees and material costs pushed the price of an average Memphis home over $300,000 in 2020 — a price that many young homebuyers may find too steep for their first family home. The lack of starter homes in the area was also problematic for young adults planning to reside in Memphis, driving them to consider apartment rentals instead.
In addition, the pandemic brought about raw material shortages which caused the price of basic home-building supplies to skyrocket. Delays in the delivery of building materials also stretched construction schedules, effectively increasing the overall cost of building a new home. In 2021, however, the Memphis housing market experienced a slight rebound, with 15% more houses being sold compared to the last year.
Because of the national changes in materials available, the total cost of constructing a new home in Memphis could on average run up to $130.97 per square foot, or roughly $327,425 for an average-sized single family home. This is higher than the current national average cost of $287,466. However, prices may differ based on factors like location, square footage, and quality of materials used. Additionally, building a home requires various costs such as architecture and design fees, permit fees, land fees, and other custom features, along with framing, foundation, plumbing, roofing, and flooring. The different costs of building a home can be organized into one of two categories: soft or hard costs.
Hard costs can be considered the costs expected to build the physical structure of a home in Memphis, Tennessee.
An average Memphis home is around 2,500 square feet in size, with construction costs of up to $112 to $133 per square foot as of 2021 estimates. This gives us a range of $280,000 to $332,000 to build a home in the city. Many other factors can contribute to an increase or decrease in this figure including the types and the style of roofing that will be used, heating, ventilation and air conditioning installation, electrical services and renovations on specific rooms.
The cost of installing a concrete foundation is about $5.39 per square foot. Roofing costs can be affected by the roof’s pitch (steepness) and the home’s system of ventilation. Laminated (architectural) shingled roofs cost $3.5-$4.17 per square foot, while roofs using designer shingles cost more, at $7-$9 per square foot. Even more expensive are real slate and synthetic slate roofs at $18-$25 per square foot. Depending on the type of ventilation used, and the materials used for the roof’s valleys, additional costs can range from $980 up to $1500. Valleys installed to reinforce roofs against leaks may also incur an additional cost of $2,028 to $3,120. These are all additions to the average base cost of $3.5-$4.17 per square foot of roofing. Roofing alone for an average Memphis home can add up to a base price of $8,750-$10,425.
Additional hard costs include electrical contractor fees that can range from $57.33 to $69.98 per hour of service, excluding potential charges for the necessary equipment.
Soft costs pertain to the construction expenses of the home beyond its physical structure. These figures include architect fees, interior designer and engineer fees, building permit acquisitions, and cost of land, among others.
Cost of the Land
The population of Memphis is stagnant, with no significant increase or decrease observed in 2021. LandWatch data records $7 billion of land parcels and ranches for sale all over the state of Tennessee. The price of land in Tennessee runs around an average of $328,616.
Permits and Other Fees
Building permits may be filed at the Memphis and Shelby County Office of Construction Code Enforcement. The permit fee for new home construction is listed at $0.07 per square foot; however, there is a minimum fee of $125 for a single family residence or duplex. This fee does not yet include the standard administrative charge of $4.00, with an added surcharge of $1.00 for residential construction.
In Memphis, municipal fees alone can reach up to $40,000 per lot. The state charges these fees in order to discourage low-cost house construction. The state of Tennessee also imposes a 0.73% property tax on homeowners, paid annually. This property tax goes to the funding of local public schools.
Architecture and Design Fees
Architects in the city of Memphis also charge an average fee of $6,565 for labor and materials, while contractors charge around $6,200 to $7,750 for their services. This is higher than the national average of $5,665 (based on HomeAdvisor estimates). The fee mentioned above includes the average labor cost to hire an architect, the cost of materials and equipment, as well as any possible project costs and cleanup fees. In addition, interior design services cost $4,201 to $6,468 overall, or roughly $50 to $200 by the hour.
How do the custom home building costs in Memphis compare to other nearby cities?
There is high variability of costs across towns in Tennessee, depending on the affluence of the area. In less affluent areas, land tends to be sold in larger parcels for an average price of $7,000 per acre. On the contrary, land is sold in smaller parcels in more affluent areas, with prices reaching up to $135,000 per acre.
What Leading Custom Home Builders and Architects that Serve the Memphis Area Say
Ken Garland Custom Homes provides cost estimates for mid-range homes ranging from 4,500 to 6,000 square feet in size. With the inclusion of heating systems, houses this size cost roughly $150 to $200 per square foot to build. Meanwhile, upper end homes from 6,000 to 10,000 square feet in size cost roughly $250 to $300 per square foot to build. However, these values are not inclusive of lot costs, builder fees, and financing.
The Future of Memphis’ Residential Construction Industry
The real estate market still has a long way to go before it recovers fully from the effects of the COVID-19 pandemic. However, some changes are already visible in several areas across the country. As of September 2021, median home prices in Memphis are down by 4.6% compared to the last year, with an average list price of $246,000 — lower than the national average list price of $388,000. The relatively affordable price of housing, the low rental vacancy and the steadily climbing rental fees will likely push more Millennials into buying or building their first homes in 2022.
Speculation is another emerging issue in Memphis. In this practice, an investor buys and renovates an old, abandoned property with no intention of selling until values are high enough. The investor may not even reside in the area, and could be a private firm with thousands of properties in its name. Many citizens believe this problem is problematic, especially if the rehabbed houses become overpriced once the investors decide to re-sell. This, alongside a general decrease in available properties on the market, contributes to potential buyers having less of a chance of securing a home. In addition, industrial investors may buy numerous residential properties and may only pay residential taxes rather than commercial taxes. Local officials fear that this may cause the county to lose money intended for the public school districts, to which property taxes are usually allocated.