McAllen, Texas was once a farming community prior to becoming a tourist attraction. The city is known for its mild winter weather and low cost of living, which draws visitors and residents alike. Its most active industries are related to food and beverage production, health services, retail, and transportation.
Texas has generally recovered the jobs it lost from COVID-19-related issues. Roberto Coronado, a senior economist with the Federal Reserve Bank of Dallas, predicted robust job growth in Texas during the RGV Partnership Economic Outlook Luncheon in Harlingen. Texas was noted to have more jobs than it did pre-pandemic, including the McAllen-area market. McAllen has about 12% more jobs than before.
The Cost of Building a Home in McAllen
The labor market is continuing to recover, but experts do not foresee it reaching the same levels as in 2021. Unemployment went down to 5% as construction, financial services, and oil and gas firms have doubled down on hiring.
Despite the job recovery, there is still a labor shortage, and firms continue to struggle to meet demand. Additionally, the labor shortage has been said to be a partial result of a decrease in immigration. This decrease in immigration is estimated to have created a gap of about 2 million workers.
Giovanni Peri, an economist at the University of California at Davis, stated that firms will have to adjust to the shortage through increased wages and prices. Some construction firms have already reported raising their wages by 7 to 10% to entice more applicants and encourage employees to stay. Combined with the surge in material prices and supply chain disruptions, construction firms still have a ways to go before completely recovering.
The average cost of construction in the McAllen area is about $140 per square foot, which is much lower than the national average of $207 per square foot. Project owners may come across firms that price their construction services in the $90 to $190 per square foot range. Pricing will differ depending on details like level of intricacy, customization, and square footage.
The cost of construction is only a small portion of the total cost of building a home. The total cost can be separated into hard and soft costs. Hard costs are the aspects of construction that are physically part of the house, including framing, plumbing, flooring, and roofing. Soft costs, on the other hand, are things like the cost of land, permitting fees, and architectural and design fees. It should be noted that hard and soft costs fluctuate independently.
The cost of constructing basic and simple homes in the McAllen area will generally be in the $90 to $120 per square foot range, while mid-value type homes will cost around $121 to $150 per square foot. High-end homes that have customized features and higher-end finishes require more materials and specialized skills, which makes it more expensive at the $151 to $210 per square foot and above range. These numbers are estimates, as project owners may come across firms that charge more or less depending on different factors like square footage and additional features.
On top of construction costs, project owners need to take into account the costs incurred from foundation, roofing, heating, ventilation, and air conditioning (HVAC), and electrical installation.
McAllens’s roofing costs generally range between $136 to $1,530 per 100 square feet, depending on the roofing type. The following table provides price ranges that project owners can expect to see:
The cost for Major systems is a combination of HVAC, electrical, and plumbing. The following are the average costs for major systems: an HVAC system is about $6,000, while a plumbing system is $327, and electrical installation is $333.
Cost of the Land
McAllen is currently experiencing positive population growth, with an annual growth rate of 0.51%. Compared to cities with stagnant or negative population growth, plots of land in McAllen are more likely to become more expensive.
The plots of land available for residential development in McAllen on Zillow have an average cost of $122,389.90. The cheapest lot is located along North 27th Street. It costs $61,000 and is about 7,013 square feet. Meanwhile, the most expensive lot costs $365,000. The lot is 34,848 square feet and located along East Yuma Avenue.
Permits and Other Fees
Information on the permitting process for McAllen can be found on the local government’s website. Applicants are required to submit a fully completed Building Permit Application; forms can also be obtained from the Building Permits and Inspections office. The following documents need to be submitted alongside the permit application:
- Floor Plan
- Site Plan/Plot Plan
- Engineered Wall bracing Plan (if applicable)
- Energy Compliance Report (if applicable)
- Heating and Cooling load calculations
The cost of permit fees are based on the square footage of the new construction. New construction permits cost 16 cents per square foot; the minimum for a permit fee is $48. Additionally, a park fee of $700 may be charged to the construction permit of a new residence. Applicants may contact the Planning Department at (956) 681-1251 to check if the park fee applies to their lot.
For reference, the most common building inspections are listed below:
- Rough Plumbing Inspection
- Foundation Inspection
- Framing Inspection: electrical, mechanical & Plumbing
- Insulation Inspection
- Infiltration Inspection
- Final Inspection
Architecture and Design Fees
Most architects will price their services based on the total construction value. For McAllen-based architects, that is generally 8.50 to 8.92%, depending on the services rendered, project complexity, and architect experience.
Some firms may charge by the hour or by square footage. Pricing is dependent on the request, project location, and the architect’s position, experience, training, and reputation. The most common services are layered drawings, project management, concept development, consultation, and site visits.
The Future of McAllen’s Residential Construction Industry
According to Associated Builders and Contractors (ABC), America will need about 1.28 million more workers in manufacturing and construction industries by 2023 to meet with demand. Experts have noted that it will take three to five years for firms to fill the gap in the workforce despite the support from other industries.
Currently, the construction industry is investing heavily in workforce development programs. About 14,000 ABC member companies spent more than $1.3 billion on education and training last 2020. Additionally, 30% of ABC member companies are involved with internship programs connected to colleges or universities, high schools, job education centers, and military programs. Another 13% of members have apprenticeship programs registered with the state or federal Department of Labor.
Beyond workforce concerns, firms will continue to contend with supply chain backlog and material cost issues. The higher prices for lumber, copper, steel, aluminum, and concret slab is causing construction prices to rise. On top of this, supply chain bottlenecks are affecting firms’ ability to complete current and accept new projects.
The Associated General Contractors of America (AGC) have proposed ideas to the current administration to address supply chain hurdles. Some of the ideas include additional tariff relief for construction materials and waiving hours-of-service rules for shippers to handle freight backlogs.
While experts do see firms continuing to struggle with workforce and supply chain related matters in 2022, the uncertainty from the COVID-19 pandemic makes it difficult to forecast any other issues.
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