Atlanta is the cultural and economic center of the Atlanta metropolitan area. It serves as the home to more than six million people and features the densest urban tree coverage in America. The city’s diverse economy includes major sectors like aerospace, transportation, logistics, film, media operations, medicine, and information technology. Reports have also shown that while Atlanta has been affected by the COVID-19 pandemic, market experts anticipate a quick rebound. Additionally, the Atlanta construction industry has a healthy backlog of projects in varying stages of budgeting and planning.
The Cost of Building a Custom Home in Atlanta
Buyers in the real estate industry are experiencing an increase in their purchasing power due to record low-interest rates and low mortgage rates despite increasing home value. This is causing the market to struggle with meeting the strong demand, especially since Atlanta’s unemployment rate is at its lowest ever at 2.5%.
As the real estate market struggles to replenish the home supply, the construction industry is presented with a window of opportunity. Given increasing home prices and the limited number of homes available, new home construction is becoming the better option for most prospective homeowners. This is a trend currently being reflected by reports, with the industry experiencing more single-family units under construction than multi-family units.
Additionally, about 2,409 permits were filed last August 2021 and 2,270 permits for September 2021. There were 907 new residential permits filed for 2021.
The national average for new home construction is recorded to be $100 to $155 per square foot. The cost of home construction in Atlanta, meanwhile, can start at $136 per square foot, which is for value-conscious projects. The more decent custom homes are priced at $169 per square foot and can go up to $245 and above per square foot for luxury homes. Total construction costs will also vary based on other factors.
Other than the price per square foot, homebuilders will have to keep hard and soft costs in mind when budgeting for a project. Hard costs cover all physical aspects of home construction like framing, foundation, plumbing, roofing, and flooring. On the other hand, soft costs are focused on other remaining facets of the project, which include land, architecture and design fees, builder fees, permits, and other additional features. Hard and soft costs fluctuate independently of one another.
Basic home construction costs will vary between firms, but the most common starting point for projects is $136 per square foot. For more customized homes, the pricing can go up to $169 per square foot to accommodate the cost of other finishes and materials. A fully customized home with more expensive features and finishes will usually start at $245 per square foot.
Dan Ellsworth, founder of Precision Custom Home Builders, meanwhile shared that his firm based at north part of the metro in Cherokee County, has experienced pricing basic homes at $150 per square foot. His customized homes are usually priced at $200 per square foot, going up to $250 per square foot for more customized projects. While firms such as Precision Custom Home Builders may have such prices, some firms also adjust their prices to adapt to different factors like labor, supply chain disruptions, and the cost of materials.
Such changes are seen in the construction industry today. Currently, the industry is struggling from the national labor shortage. About 4,000 jobs were added in Atlanta for September, which is equivalent to a month of jobs lost. Moreover, unemployment is at 2.5%, which is an all-time low for the city. In addition, material costs for construction have increased. The price increase is recorded at a peak of 24% growth, which has led to supply chain problems that are expected to bleed into 2023. For example, lumber costs increased by $30,000 per single-family family home. Steel, copper, aluminum, and gypsum prices are also going up.
The supply shortages are compounded by other factors like port congestion, semiconductor shortfalls, and weather conditions. This has led to minimal supply on hand and slowed production times for some building materials. Additionally, the limited labor pool has resulted in fewer people making products or ensuring that materials are shipped. Demand for materials continues to rise and has resulted in increasing prices.
Besides labor and material supply costs, other hard costs include roofing, which can be anywhere between $2,000 to $25,000 depending on the type. Most 3-tab asphalt shingles are $2.50 to $2.70 per square foot, architectural asphalt shingles are $2.70 to $3 per square foot, designer asphalt shingles are $3.25 to $5 per square foot, standing seam metal is $7 to $9 per square foot, and slate or cedar shingles are $10 and up per square foot.
Soft costs are the costs of new construction that are not physically part of the house itself. This includes, but is not limited to, architectural fees, permitting fees, and the cost of land. Other factors to consider include the millage rate, property taxes, and new construction loan interest rates. For Atlanta, the millage rate is 40.51%, the city property tax rate is 1.24%, the total tax is 1.63%, and the new construction loan interest rates will differ based on the number of years. For 10 years, the interest rate is 2.62%, for 15 years it is 2.5%, for 20 years it is 3.125%, and for 30 years it is 3.25%.
Cost of the Land
Population movement has been going from the Northwest and Midwest towards the Southeast and Southwest areas. The most popular cities that received population growth were Phoenix, Houston, Dallas, Atlanta, and Denver. This trend is expected to raise the value of land in the area, with some areas increasing more than others.
The average price of Atlanta lots posted on Redfin is $155,950. The lowest price in the batch is $10,000 for a 7,026-square-foot lot while the highest price is $2,500,000 for an approximately 16,552.8-square-foot lot. The $10,000 listing is within the city limits of Atalanta. Meanwhile, the $2,500,000 listing is located on high-traffic Piedmont Avenue in the heart of newly developed high-rise residential condos. The green space to the left is owned by the Georgia Department of Transportation and is restricted from being developed.
Zillow provides similar figures for lots, with the lowest priced Atlanta lot at $10,000 for 7,013 square feet. The lot is located within the city limits of Atlanta, close to an up-and-coming Southeast Atlanta area. Its highest-priced listing goes for much higher than on Redfin. It is a 393,129-square-foot lot in the Heart of Buckhead and costs $6,000,000.
The lowest-priced Atlanta lot on Landwatch is located in the city limits of Atlanta. It is approximately 6,969.6 square feet and costs $10,000. Meanwhile, the highest-priced lot is $10,900,000 for approximately 267,022.8 square feet. This particular lot is in the Heart of Buckhead near Tuxedo Park and is located 950 feet above sea level.
Permits and Other Fees
Permits for Atlanta can be applied for through the city’s online permitting portal. Information and instructions on how to use the portal can be found in the city planning section of the local government’s website. The department of city planning has also provided an online document detailing the permitting process, which is simplified as follows:
- Research your property
- Submit applications using our online permitting portal
- Completeness check by DCP staff and customer fee payment
- Zoning or Historic Preservation review
- Plans routed for review
- Agency review and plan revisions
- Review complete and final customer fee payment
- Permit issued and approved plan retrieval
Permit costs are dependent on the details of each new construction project, which can be calculated through Atlanta’s Code & Permit Calculator. The following tables provide figures for building and mechanical, electrical, and plumbing-related permits. It can be viewed under the “What will this cost?” tab of the Zoning, Development, & Permitting Services section of the local government website.
Architecture and Design Fees
Architectural fees are typically 7% of total construction costs and also depend on the amount of detail. This type of pricing is generally used for new construction or total overhaul remodeling projects. Some firms and independent architects may use higher or lower percentages. The figures can also change based on the type of services being provided. Lower percentages will usually be used for drafting and minimal consultation. Higher percentages will provide on-site project management. The usual range is 5.76% to 8.75%. According to William T. Baker, founder and principal of William T. Baker & Associates, there are also some firms that charge 10% to 15% of construction costs.
An architect may also opt to charge per hour or by the square foot. The hourly pricing is generally meant for smaller projects, providing consultation, refining project concepts, or drafting documents and plans. If an architect charges by the hour for large projects, there will also be a maximum number of hours they can charge you for. Atlanta-based architects charge an average of $60.63 per hour, plus materials. This falls under the range of $45 to $76.25 per hour.
Architects charging by the square foot will base overall pricing on their training, services, project complexity, and other factors. Baker said that architects will charge anywhere between $2.50 to $15 per heated square foot.
The average cost to hire an architect varies based on the job. Basic plans will range between $2,000 to $20,000 while full house design and services will require $15,000 to $80,000 and up. The average architect fees are 8% to 15% of construction cost for drawing up house plans. The hourly rates are $100 to $250, or $2 to $15 per square foot.
How do custom home building trends in Atlanta compare to nearby cities?
Data from the last five years gathered from online contractor marketplace BuildZoom (BZ) show that the average cost to build a house in nearby areas tends to be lower than in Atlanta.
To build a house in Decatur, which is six miles from Atlanta, it costs an average of $177,762.23. The highest value of home construction is $290,000 while the lowest is $75,000. Most permits for Decatur are electrical permits, and residential permits are mostly for townhomes. Single-family detached homes are usually two stories with garages.
East College, meanwhile, has an average cost of $286,220.20 for new home construction. The highest value of home construction is $467,000 for a new single-family residence and retaining wall. The lowest value of new home construction is $236,277 for a detached single-family home. Most of the permits for East College are for power reconnection. Residential permits for the area are also generally for townhomes.
Riverdale has similar costs to East College; new home construction has an average cost of $283,450.85. The highest value of home construction is $379,831 for a single-family home located in Embassy Trace. The lowest value is at $150,000. Riverdale permits are usually for mechanical services and residential permits are mostly for detached single-family homes.
What Leading Custom Home Builders and Architects that Serve the Atlanta Area Say
Dennis Tidwell, founder and owner of Rockethouse Design+Build, LLC, shared his experience with building custom homes in the Metro Atlanta area. Rockethouse Design+Build reduces its costs on construction by partnering with China-based suppliers for high-end details like staircases, glass handrails, and exterior doors. Tidwell said, “Our import process allows us to pay 20-30 cents on the dollar for these items. For example, purchasing a glass handrail locally would cost about $300 per linear foot. We are able to import glass handrails from China for $45 per linear foot.”
Working with its China-based partner Python allowed Rockethouse Design+Build to pay $8,500 for materials instead of $30,000, which was a quote given by an America-based supplier. While market disruptions have resulted in increased shipping costs and delayed build time, Tidwell shared that the partnership was still worthwhile.
In terms of construction pricing, the homes Tidwell worked on four to five years ago were priced at about $135 per square foot. Some of these projects are seen in the photos below:
More recent projects like the featured photo below now cost $155 per square foot.
Tidwell estimates that future project costs, which include fees, permits, and surveys minus financing and lot costs, will come out to around $160 per square foot.
“I expect that our firm is on the low end for modern homes in Atlanta due to our ability to import items and pass that savings to our clients,” Tidwell added.
Randy Arndt, founder of high-end custom builder firm Legacy Custom Homes LLC, observed that most homes now include a finished basement, a pool, and an outdoor kitchen area. The firm’s most recent project featured a 7,269-square-foot traditional home that had a budget of $1.5 million. Additional designer finishes added $200,000 to the total cost. Another project of the firm, which is 6,560 square feet, costs $2 million and also has high-end finishes.
Arndt noted an increase in material cost during the construction of both projects. According to him, most quotes are only valid for a week due to the rapid price changes. He said, “Some prices changed as much as 50% over a 12-month period. Lumber prices have been the most volatile. We have had to move from fixed-price construction to cost plus a fixed fee because of the volatility of pricing.”
Demand was observed to be well above average but has since slowed down from its 2021 peak. Legacy Custom Homes will sometimes help clients find lots for their projects, but the market’s competitiveness continues to be an obstacle. The firm does practice purchasing lots and marketing homes built-to-suit.
In regards to permits, Arndt said the process has become cumbersome in Atlanta. He said, “There are 13 different permitting authorities within a 10-mile radius, all with substantially different permit requirements. It is taking twice as long to get permits and Certificates of Occupancy as it was before the pandemic.”
Additional permitting requirements often cause added redesigns, which lead to increased costs that can be substantial. The permitting process also results in lengthy delays in starting the actual construction. Arndt has noted more requirements for stamped engineering design details, engineer inspections, multiple surveys before, during, and after construction, stormwater management, tree restrictions, limits of disturbance, and restrictions on lot coverage.
Arndt suggests homebuilders partner with builder firms that are familiar with the specific municipality the home will be built in. Builders who are not familiar enough may run into long delays and cost overruns.
William T. Baker of William T. Baker & Associates, shared that his firm prices high-end custom homes between $300 to $435 per square foot. High-end coastal homes, meanwhile, range from $650 to $1,000 per square foot.
“I believe costs will continue to rise but the supply chain issues will subside. Over the next eight years, a large number of our subcontractors will reach retirement age and the industry will be short of skilled labor,” Baker said. This will lead to more pressure and result in increased labor costs. Baker believes the best time to build is now.
Architect Ross Piper, founder of Ross Piper Architect Inc, shared that the pandemic has brought in more clients for additions, renovations, and new home construction projects. He said, “It’s simple, people are at home more so they want more space and want to customize spaces for more relaxed living. For example, “Zoom rooms” are popular—just a fun name for a modern office—this can be an addition, a bedroom take over, a living room conversion, or whatnot.”
According to Piper, there are a lot of factors to consider for custom home projects. Firms and home builders have to consider variables like possible design changes, options, amount of detail, and plan and site coordination. He estimated the costs for new construction to be at $165 per square foot for value-conscious projects, $225 per square foot for mid-range projects, and $325 per square foot for high-end projects.
Robert Ross, principal of Ross Design, Architects, said that while he serves value-conscious clients, his firm is not a cost-effective solution for low-budget clients due to the permit requirements of Atlanta. For renovations, Ross charges $1 per square foot of roofed space to document the existing structure. That gets projects to the starting point. Afterward, 7% of construction costs will be charged to cover the plans required for the permitting process. That covers plans, elevations, finish notes, interior and cabinetry elevations, electrical plans, and special details.
More customized homes with specialized materials and construction techniques will cost more at 10% of the construction costs. This is partly because detailing takes time and research to do properly.
Construction management is provided hourly, depending on the client’s wishes and contractor’s ability. Ross said, “I’ve done jobs where I go out three to four times and I have other jobs where the client wants me on site once or twice a week.”
Costs are continuously rising, but have been exceptionally volatile over the past year according to Ross. He shared, “While I expect them to come down, they will not hit where we were before.”
The critical materials at the moment are appliances, windows and doors, and plumbing fixtures. With lead times lengthening without notice, it is important to make decisions at the beginning of construction to maintain schedule. Ross said, “Construction did not stop with Covid and most of the colleagues I’m connected with are reporting a six to eight month backlog of projects.”
Ross advised homeowners to take time to plan out the project. He shared, “The more time they invest in product and material decisions early in the process will speed the construction process by giving the contractor the information he needs to get accurate pricing.
Some material will cost more upfront than others, but Ross suggested saving money for the long-term aspects of the project. Ross said, “I try to stay away from allowances and help clients specify everything for their projects. I will also try to steer my clients away from short-term trends to give them a timeless home that is truly theirs.”
The Future of Atlanta’s Residential Construction Industry
The current Atlanta housing market is facing a housing shortage, which has become a trend across America and a factor in the increasing prices. Home prices have more than doubled in Atlanta compared to what it was in 2012.
According to MarketNsight Founder and Chief Analyst John Hunt, the market will continue to be in deficit until 2022. He said, “Decades of under-building and under-developing, combined with development timelines, exclusionary zoning issues, and a myriad of other factors, means it will take years to start to meet the current demand.”
The current concern is not about demand, but the ability of the industry to make its supply levels meet it. This is especially true given the population growth coming from inward migration due to Atlanta’s strong business environment and relative affordability. Reportedly, the Atlanta unemployment rate has been steadily going down since November 2021. The migration is bringing in new talent that is adding to the demand for houses.
Still, market experts are looking favorably at the performance of Atlanta’s construction industry for the end of 2021. The industry is expected to return to pre-pandemic levels by the end of December before surpassing them in 2022 and beyond.
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