About

How much does it cost to build a home in the Bay Area?

We get this question several times a week. The quick answer: no canned, one-size-fits-all response exists. The answer you seek is typically drawn from knowledge and insight our team has accumulated from building homes in the Silicon Valley. Clients need a comprehensive understanding of all the costs involved in building a custom home to ensure expectations are in line with the Bay Area’s real estate market.

Housing demand in Silicon Valley has far exceeded supply for many years, particularly when it comes to new construction. This trend has pushed costs to unprecedented levels. Median single-family home prices in the The Bay Area surpassed $800,000 in May, breaking the previous record of $752,000 set in June 2016. Santa Clara County homes topped the $1.05 million mark this past September, a near 15% increase from September 2016.

Vacant lots in Silicon Valley are rare in the 21st century. Clients commencing the custom build process for their dream homes have two choices: demolish an existing home and build a new structure on the lot, or renovate an existing structure. The latter route limits customization options, so acquiring land with an existing structure is the common and most likely course.

Silicon Valley Land Values - November 2017

Land acquisition is typically the highest single cost associated with building a new home in Silicon Valley. Prices vary greatly depending on location and whether there is an existing structure on the property.

Here is a quick snapshot of average lot sizes and prices in some of Silicon Valley’s most popular neighborhoods (NOTE: data derived from CoreLogic and Trulia; accurate as of November 2017).

Construction Costs

Now that you have an idea of what the lot will cost, let’s move to construction costs. There are two categories: direct (hard) and indirect (soft) costs. Hard costs includes everything to build the actual structure: labor, materials, fixtures, excavation, landscaping, contractor fees, etc. The geographical location and the orientation of your lot can also be a huge factor in calculating hard costs. Excavation/Grading fees vary depending on your specific needs and request. A home built on a 15% grade slope (hill) may require more digging and leveling depending on how you choose to orient the house on the property. Of course, a basement would also greatly increase excavation fees.

It’s typical for soft construction costs to equal anywhere from 17% to 25% of hard construction costs throughout Silicon Valley. Soft costs typically makeup, permit fees, surveyor and engineering fees, architect fees, insurance, utilities. The most significant soft cost is typically the architect fee. Architect rates and services rendered (space planning, as-built review, etc.) will determine the scope of the fee.

Total project costs will also vary based on the type of home desired. Homes built in contemporary/modern style often have large glass panes with steel frames, both of which increase costs significantly. Mediterranean-style homes use stucco as a primary building material, which is relatively inexpensive. But the barrel tile roofs, travertine flooring, and oil-rubbed bronze or black fixtures commonly associated with these homes quickly increase costs. Craftsman homes utilize a variety of materials - brick, stone, wooden clapboard, etc - that vary hard costs. Features like built-in shelves, hardwood floors, specialty doors are also common features of Craftsman homes that influence hard material costs. A client's personal interior design choices will impact the total project costs and should be considered from the start.

Calculating the Numbers

The best way to determine total costs is by the square foot. The median home sale price per square foot in Palo Alto was $1,437 on October 31, 2017. Keep in mind that price includes the land and acquisition thereof. Hard construction costs typically fall in the $300 - $500 per square foot range, with soft costs adding an additional $75 - $125 per square foot.

Let’s say your family just purchased a 7,500 square foot lot in Midtown Palo Alto for $2.3 million (based on the chart above). You want to build a transitional home with an ultra-modern interior. You’ve set the hard construction budget at $350 per square foot. That means a 3,000 square foot home would cost $1,050,000 million to build. Now add in the soft costs: $1,050,000 * 25% = $262,500. That brings the rough, high-end grand total to $1,312,500 to build your home ($1,050,000 hard costs + $262,500 soft costs). Now add the acquisition costs to the construction costs ($2,300,000 + $1,312,500) and your new home all in will have cost you $3,612,500. Currently, the price of a brand new home Midtown Palo Alto would start at $4.5 million dollars.

Getting Started

A well-organized, reputable general contractor is important for streamlining both the permit processes and coordination of all the professionals who build your home. They should have a body of work to show, be well-connected with relevant city and county departments, be excellent communicators, and have strong partnerships with local subcontractors.

The home building process, when done correctly, can be an enjoyable, collaborative effort. You and the family will directly participate in all decision-making processes throughout and create memories that last forever. Our team has built some of the most magnificent homes in Silicon Valley over the last few decades. We’d love to hear more about your custom home project and answer any questions you may have. Contact our team at AK Construction today.

Factors such as; the availability of workers, materials selected, the square footage of the home, weather conditions, and the processing of permits by your city or county, all effect how long it could take to build a new custom home.  If you are looking to build in the SF Bay Area, you should expect the construction of a new home to take anywhere from 8 months to 18 months or more.

Yes, AK Construction is currently accepting new projects. Please give our office a call so that we can begin to learn more about your needs.

Yes, AK Construction offers Design + Build services to our clients. We have an in-house Architect who can take your vision and turn it into a reality. Partnering with us for both the design and the build of your project provides you with a single point of contact and ultimate collaboration. Learn more about our Design services here, or by giving us a call today.

While AK Construction was founded in finish carpentry and house remodels, our business is no longer set up to service this type of project. We now focus our resources and attention exclusively on Construction Management, Custom Home Construction, Land Development, and Multi-Family Projects.