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How Much Does it Cost to Build a House in Detroit?

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Detroit, the largest city in the state of Michigan, is best known as the birthplace of the modern automobile. In the 1900s, it became the United State’s center for automobile manufacturing. Its strategic location enabled the city to receive raw materials and deliver finished automobiles easily. In addition, the availability of a workforce trained in railroad manufacture also contributed to the city’s success in the automotive industry, which was crucial to the 20th century economy. 

But there’s much more to Detroit than just cars. The city also has an abundance of historic and cultural significance: Motown Records, one of the pioneer Black-owned record labels in America, was originally headquartered here. Music enthusiasts can enjoy touring the Motown Museum, also known as “Hitsville USA,” which contains the original studio used by musical legends like Stevie Wonder, Marvin Gaye, and Diana Ross. Other important cultural institutions include sothe Cranbrook Academy of Art and the Detroit Institute of Arts. The Henry Ford Museum in the Detroit suburb of Dearborn, Michigan, houses transportation artifacts from yesteryears. Greenfield Village is a historic village in Dearborn featuring relocated or reconstructed buildings throughout the United States, with roots also tracing back to Ford.

The Motor City tops Forbes Magazine’s list of ten most affordable cities to buy a home. Although the median salary in the area is lower than other areas of Michigan, so are home prices, with mortgage values at only 6% of a median earner’s monthly income.

The Cost of Building a Custom Home in Detroit

Although Metro Detroit was not exempt from the economic downturn during the COVID-19 pandemic, as jobs and consumer spending declined, the housing market continued to follow an upward trend. In 2020, the median price of a single family home in Detroit increased by 23.3% from the first quarter to the third quarter of 2020. Meanwhile, there was no change in the number of construction permits, another indication that the market had remained just as strong. In 2021, new construction boomed even more, as high competition and prices drove more buyers to opt for a freshly built home.

The average median home listing price in Detroit was only $59,000 in 2020. In 2021, the median home price escalated to $77,500 — a massive increase from the previous year, but still affordable compared to other areas. In the greater Metropolitan area of Detroit, median prices are even higher, averaging between $218,000-$230,000 as of 2021. Yet this is still lower than the national average, which hit $374,900 in the second quarter of 2021. 

Figure 1. Typical cost breakdown of a single-family home constructed using the conventional method, according to Home Builder Digest. Image Source: National Cost Guide.

Costs for each new home construction will vary depending  on the labor and resources used. Most homeowners interested in building homes from the ground only focus on the cost of framing, foundation, plumbing, roofing, and flooring during the planning phase. However, there are other costs associated with new home construction like architecture and design fees, builder fees, permits, and additional custom features. The items related to the building of the structure of the home fall under the category of hard costs, while the fees for manpower and labor involved in designing and building the house fall under soft costs. Hard costs and soft costs of a project may fluctuate independently.

Hard Costs

The figures below reflect the cost of building the physical structure of a home in Detroit, Michigan. This includes construction and supply fees, as well as the cost of individual sections of a home including foundation, roofing and plumbing.

Detroit homebuilding costs vary depending on the grade of construction that homeowners will opt for. Standard home construction runs at $100-$140 per square foot; premium grade construction can range from $140-$180 per square foot, while luxury grade construction can set one back as much as $180-$220 per square foot. With lot sizes in Detroit averaging 1,530 square feet, one can expect a cost of $153,000 for a simple home and as much as $336,000 for a more high-end home. On average in Detroit, building will cost $153 per square foot.

Of course, these costs are all influenced by the cost of individual factors during construction such as ventilation, roofing, and setting a foundation. Heating and ventilation services in Detroit run an average of $5,816. Plumbing contractors alone have an average price of $69.37, excluding the price of parts and materials. Roofing costs vary widely depending on the material homeowners prefer. Installation alone costs $6,550 to $11,900. Metal shingles are the cheapest material to use for roofs, costing between $5,000-$12,000, while slate roofs could go as high as $18,000 to $45,000 or more.

Soft Costs

Soft costs include all expenses homeowners are expected to face unrelated to the construction of the structure. These can include architect and engineer fees as well as government permits and taxes.

Cost of the Land

Detroit is located along the Detroit river with its Metropolitan areas found along Lake Erie, Lake St. Clair, and the St. Clair River. The city’s lands are generally flat, rising slowly towards the northwestern part of the city. There is still much open space, making migration of new homeowners to Detroit a possibility. The land also gives homeowners ample flexibility when constructing their lots. The average cost of Michigan land is at $23,765 per acre, or roughly $0.55 per square foot of land. The average lot size is $21,780 square feet. It is also worth noting that the cost of building a lot in Detroit differs between the city’s metropolitan and suburban areas. The price of land and construction can differ by as much as $40 per square foot.

Permits and Other Fees 

Building permits cost $1000 to $2000 to file. To apply for a construction permit, a complete site plan, construction drawings, and cost estimates of the project must first be presented to the city’s Buildings Division. These should be furnished by a licensed architect or structural engineer. Permits can be requested through Detroit’s local government website. Here, owners can file a request for inspection that can grant them the permit they need. This request will go through the city’s Buildings, Safety Engineering and Environmental department.

Most essential utilities require individual permits. These can set a homeowner back as much as $1,360 to $3,500, depending on the extensions or upgrades homeowners need for individual homes. Electrical permits can range from $10 to $500. Mechanical permits can add up to $50 to $100. Permits for plumbing and ventilation can cost $50 to $500, and $250 to $400, respectively. Upgrades or amenities such as fireplaces, water heaters, and pools require additional permits as well. 

Architecture and Design Fees

Professional fees for architects range from $60 to $125 per hour of service. Engineers charge an hourly rate of $100 to $150. This value may change depending on one’s location in the city. For those willing to scout for interior designers, their fees may range from $94.53 to $128.07 per hour, plus the cost of any materials they may need. A homeowner needs to shell out an additional payment of $254.53 per hour of work if they want to avail of these services.

How do the custom home building costs in Detroit compare to other nearby cities?

Compared with other cities in Michigan, building a home in Detroit can be more costly. The average Detroit home is priced at $234,090 — which is second to Grand Rapids with an average price of $253,980. Flint is noted as the cheapest city in the state to construct a home with an average building cost of $159,120. The most common types of houses in Detroit are the Detroit Bungalow and the classic American Four Square — a catalog-ordered house that is boxy and simple in design and form.

What Leading Custom Home Builders and Architects that Serve the Detroit Area Say

We reached out to various construction and architectural firms that serve Detroit to give more value and context regarding the construction and architectural fees. We also asked for their insights regarding the current trends in the industry and their forecasts.

Tony McGuckin of Trademark Building Company, Inc. provided prices for their various tiers of custom home builds. Modular homes tend to start at around $185 per square foot for a 1500-square-foot home. Mid-range homes, modular homes with high-end finishes, standard stick-built homes or even barndominiums start at $225 per square foot for a 2000-square-foot home. High-end custom homes can be further divided into three types – contemporary or ranch homes, which start at $260 per square foot; high-end European provincial style homes, which often have modern looks and masonry exteriors, which are in the $320 per square foot range; and finally, full modern homes, which cost $500 per square foot and up.

Regarding the future of the construction industry, McGuckin expresses that costs of base materials may either continue to go up or stay flat. Labor rates will have to go up eventually, although labor-saving options and new materials will add value and balance the costs. Modular homes are the future of affordable housing, while custom homes will become more custom. Multi-family homes will become even more prevalent. As people become more environmentally conscious, “net zero” homes will also become more popular.

The Future of Detroit’s Residential Construction Industry

In 2020, the Detroit Land Bank Authority announced the New Neighborhood Lot Program granting residents of Detroit the ability to purchase vacant lots adjacent to their own land. This is an extension of the Side Lot program which was designed to turn vacant, publicly-owned, and tax-foreclosed properties into yards, driveways, and gardens for residents. These programs aim to reduce blight, improve the community, and raise property value. For as low as $250, residents now have the opportunity to expand their current lot, or use the added space as they please – whether for personal, commercial or community purposes.

The rising number of residential permits in 2021 shows possible promise for the future of Detroit’s construction industry. Despite a decline in construction supplies, there is still a definite rising demand for land in the city. Several community development organizations have also been engaged in programs converting run-down houses and empty lots to affordable housing — increasing the supply of homes to meet a continuously growing demand.

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