Analyzing the 2024 Cost of Constructing a Home – Insights for Real Estate Appraisers

The NAHB Special Study: Cost of Constructing a Home – 2024 provides a detailed examination of the cost components shaping the price of newly built single-family homes in the U.S. This study, conducted by the National Association of Home Builders (NAHB), offers critical insights for real estate appraisers seeking to understand the evolving cost structure of new residential construction and its implications for market valuation.

The 2024 survey results underscore a shifting economic landscape in homebuilding, where construction costs have reached an all-time high, land costs are declining as a percentage of total price, and home sizes are stabilizing following years of fluctuation. This report is particularly relevant to appraisers who must assess replacement costs, analyze market trends, and account for cost variability across regions.

Key Findings: Understanding the Cost Structure

NAHB’s findings indicate that the average total sales price of a newly built home in 2024 was $665,298, the highest ever recorded in the study’s history. This figure represents a continuation of the upward trajectory in home prices that began after the Great Recession, though it remains somewhat elevated due to post-pandemic demand shifts and supply constraints.

At the core of this price increase is the rising cost of construction, which now comprises 64.4% of the total sales price, up from 60.8% in 2022. Meanwhile, the cost of finished lots declined to 13.7% of the total price—marking a significant shift from historical trends where land has historically constituted a larger share of housing costs. The remaining components include financing (1.5%), overhead and general expenses (5.7%), marketing costs (0.8%), sales commission (2.8%), and builder profit (11.0%).

This shifting allocation signals that while land constraints persist, builders are facing mounting construction costs due to labor shortages, regulatory fees, and material prices. According to NAHB, “ongoing shortages of construction labor have led to elevated wage growth in the home building industry,” even as material price volatility has stabilized.

Breakdown of Construction Costs

Appraisers conducting replacement cost analyses will find the study’s breakdown of construction expenses particularly insightful. The average cost to build a home in 2024 is $428,215, equating to approximately $162 per square foot. This represents a steep increase from prior years—nearly doubling from the $80 per square foot recorded in 2011.

Among the key cost categories, interior finishes remain the most expensive component, accounting for 24.1% of total construction costs, followed by major system rough-ins (19.2%), framing (16.6%), and exterior finishes (13.4%). Notably, the share of costs attributed to framing has declined significantly from 20.5% in 2022 to 16.6% in 2024, signaling potential material cost stabilization or shifts in construction techniques.

Other notable construction components include:

• Site work (7.6%), covering building permit fees, impact fees, water and sewer fees, and engineering costs.
• Foundations (10.5%), with excavation and concrete-related work representing the largest subcategory.
• Final steps (6.5%), including landscaping, driveways, and clean-up.

For appraisers focused on cost-based valuation methodologies, these figures highlight the increasing variability in individual cost components, particularly as labor and regulatory expenses weigh more heavily on final construction figures.

Home and Lot Size Trends

The study reports that the average size of new single-family homes in 2024 is 2,647 square feet, a modest increase from 2,561 square feet in 2022 but still below the 2015 peak of 2,802 square feet. While this increase may suggest a stabilization in home size, it is still occurring in the context of affordability pressures.

Lot sizes have fluctuated significantly over the years. The average lot size in 2024 is 20,907 square feet (just under half an acre), rebounding from 17,218 square feet in 2022 but still subject to high levels of volatility. As the report notes, “lot availability has been a major headwind for homebuilders over the last decade,” reinforcing the land scarcity concerns that persist across many markets.

For appraisers, these metrics provide a valuable context for evaluating site value trends and forecasting how shifts in home size and lot availability will influence future property appraisals.

Implications for Real Estate Appraisers

For real estate professionals engaged in valuation, the findings from NAHB’s 2024 study offer several key takeaways:

1. Rising Construction Costs are Reshaping Valuation Models With construction costs now consuming nearly two-thirds of a home’s sales price, appraisers relying on the cost approach must carefully evaluate whether replacement cost estimates reflect the most recent labor, material, and regulatory expenses.
2. Declining Lot Cost Share May Distort Land Valuations While finished lot costs have declined as a percentage of total price, land values remain volatile, with high levels of geographic variation. Appraisers assessing highest and best use analyses should account for potential discrepancies between surveyed costs and actual market land valuations.
3. Home Size Stabilization Aligns with Market Affordability Trends The modest increase in home size suggests that builders are adapting to affordability concerns while still maximizing functional living space. Appraisers should consider how shifting buyer preferences and economic conditions are influencing home design.
4. Framing Costs are Declining, but Interior Finishes Dominate The drop in framing costs (from 20.5% to 16.6%) may indicate stabilization in lumber pricing, yet the rising dominance of interior finishes (24.1%) suggests buyers are demanding higher-quality amenities. This could influence comparables analysis where interior features play a significant role in valuation.
5. Lot Availability Will Remain a Constraint The study underscores how lot size volatility and scarcity continue to challenge builders, impacting long-term land use planning and development trends. For appraisers, this reinforces the importance of land valuation expertise in tracking evolving market conditions.