60% of a Home’s Sales Price Goes to Construction Costs

Construction Costs
Published

NAHB’s latest Cost of Construction Survey reveals that 60.8% of the average home sales price consisted of construction costs in 2022, similar to the 61.1% breakdown posted in 2019. Since the inception of this series in 1998, this is just the fourth time construction costs represent over 60% of the total price of the home — it was 61.7% in 2013 and 61.8% in 2015.

The finished lot cost was the second largest cost at 17.8% of the sales price, down from 18.5% in 2019.

At 5.1% in 2022, overhead and general expenses were also essentially unchanged when compared to 2019 (4.9%). The remainder of the average home sale price consisted of sales commission (3.6%), financing costs (1.9%), and marketing costs (0.7%). These percentages are also similar to their 2019 breakdowns.

Survey respondents broke down construction costs into eight major construction stages. Interior finishes, at 24.0%, accounted for the largest share of construction costs, followed by framing (20.5%), major system rough-ins (17.9%), exterior finishes (11.8%), foundations (11.0%), site work (7.4%), final steps (5.9%), and other costs (1.5%).

These total construction costs accounted for $392,241 of the average home sales price of $644,750. It should be noted that these survey results are national averages, and the survey sample is not large enough for a geographical breakdown.

However, the construction cost percentages in the survey serve as a useful yardstick as these component shares are relatively comparable for other average home prices. For example, the sales price of a $450,000 home would likely factor in construction costs of around $270,000, or 60%.

NAHB economist Eric Lynch provides more analysis in this Eye on Housing blog post and the infographic below includes more details on the construction cost breakdown.

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