Home Building Cost In Denver & The 5 Factors That Influence It.  

One of the most frequently asked questions, is, how much does it actually cost to build a home in Denver?  With sky-high (and rising) home prices in many areas on the Front Range, buyers are turning to luxury and custom construction as a way to have their cake and eat it too. If you’re going to make such a large investment, you might as well get exactly what you want. Unfortunately, the process for determining the cost of such a venture can be quite opaque, particularly if you’re not well-versed with the ins and outs of land prices, construction projects, or material and labor costs. 

Luckily for you, we’ve got decades of experience constructing luxury homes in and around the Denver Metro Area, and you can leverage our learned experiences to gameplan your next custom home build. We really understand the home building cost in Denver.  Whether you’re looking for your dream home in Greenwood Village, Castle Rock, or any of the other communities on the Front Range, we’ve got you covered. The region has seen tremendous year-over-year growth, with double-digit growth not uncommon- which is good news for homeowners and investors. 

But you want to go into any investment- real estate included- with a firm understanding of the fundamentals underlying the asset in question- whether it’s a publicly-traded company’s balance sheet or the all-in cost of building a luxury property.

Each and every project is unique. The location, timeline, and features of a home will vary widely from state to state and even town to town. For instance, your land costs and permitting costs are going to be different if you’re building in Denver’s Cherry Creek neighborhood compared to Greenwood Village. Parker will have different costs than Littleton, and so on and so forth.

However, there are generalities and commonalities that you can use to ballpark how much your home build will cost. We’ll cover the fundamentals in this article, and you can then apply this knowledge to your individual situation. If you’re still having trouble after you’re finished reading, you can reach out to a member of the Thomas Sattler team to discuss providing you with a more accurate estimate.

#1 Home Building Cost In Denver: Land Cost

In many cases, land costs are your single biggest expenditure- even in the luxury home space. This makes sense because luxury homes are typically situated in highly desirable areas, often on spacious lots with views and other luxe amenities, like a gated community or nearby golf club. 

The land simply costs more in Greenwood Village or Cherry Creek compared to Arvada or Commerce City. Since this guide is oriented to the Front Range and Greater Denver Metro Area, let’s look at home prices in a few cities. Of course, land prices will even differ from city to city and lot to lot, but we’ll look at the median list price to give you a rough estimate of what you’re looking at as far as costs for the underlying land. 

For example, right now, the median list price in Greenwood is $1,401,966, according to Realtor.com, with Commerce, Colorado coming in at less than half that number, $495K, so you can deduce your land costs are going to be substantially higher with the former, and that the latter will offer cheaper land costs. Keep in mind that costs will vary substantially in larger cities, so we’ll focus on some of the smaller, luxury-oriented communities in the Greater Denver Metro Area.

Centennial Colorado Land Costs

Median Sale Price: $610,000 (up 18.4% year-over-year!)

Median Listing Home Price/Sq Ft: $228  

Median Sold Home Price: $627.5K

Castle Rock Land Costs

Median Sale Price: $685,569 (up 27.4% year-over-year!)

Median Listing Home Price/Sq Ft: $218  

Median Sold Home Price: $574.5K

Greenwood Village Land Costs

Median Sale Price: $1,401,966 (up 21.6% year-over-year!)

Median Listing Home Price/Sq Ft: $369  

Median Sold Home Price: $1,002,500

Littleton Land Costs

Median Sale Price: $700,826 (up 22.9% year-over-year!)

Median Listing Home Price/Sq Ft: $255  

Median Sold Home Price: $577.5K

Parker Land Costs

Median Sale Price: $724,911 (up 27.1% year-over-year!)

Median Listing Home Price/Sq Ft: $217  

Median Sold Home Price: $569.9K

*above data collected from Realtor.com and Redfin.com

Home Building Cost In Denver #2 – Build Cost (Materials/Labor)

Materials and labor represent a significant portion of the overall cost of a newly constructed home. As you’re probably well aware, the State of Colorado, as well as many states across the country are facing a profound labor shortage– potentially pushing back deadlines and generally increasing the cost of labor. Additionally, supply chain issues, combined with inflation, are causing a rise in many construction materials, with lumber, in particular, experiencing wild volatility and record-high prices. 

Prices of goods used in residential construction rose 3.6% in January 2022. According to data from the National Association of Home Homebuilders, building material prices rose 20.3% year over year since January 2020, and as of this writing, the index has climbed 8.4% in the last four months alone. The index, which tracks the prices of goods used in residential construction, was particularly influenced by huge growth in the price of softwood lumber- which rose 25.4%, and a 9% increase in the cost of indoor and outdoor paint. 

What you end up spending will be partially determined by your timeline- i.e. how soon you start your project and are able to order construction materials before they continue to increase. Your build cost will also tend to be higher in less developed areas. For instance, an existing empty lot in an established city will have ready access to gas, power, sewer, water, internet, etc., while you might have to pay out of pocket to bring in utility line connections or other fees to get connected in a more rural area.

Home Building Cost In Denver #3 – Price Per Square Foot

New home construction in some regions costs between $100 and $200 per square foot. In the Denver Metro market, we range from $200 to $350 per square foot for value engineered to mid range new home construction. This number increases for luxury/custom construction, from $350 per square foot and above. When you’re constructing a larger home, you can potentially benefit from a reduced cost per square foot depending on the efficiency of the design. For example, a design that stacks reduces the foundation / structural floor and the roof, saving costs. Whereas, a ranch style home that sprawls and spreads out rooms and footage on one level, requires far more foundation and roofing. 

When you have a home go from 6,000 to 7,000 square feet it does add some in costs, but it can have a big impact on the eventual valuation of the home- which is nice for investors looking to maximize their ROI from a custom or luxury property investment. This is evidenced by the chart below- you’ll see that you always have a baseline amount you’ll need to construct a home of any size and that the cost per square foot can decline with a larger size relative to a smaller, similarly appointed home.

Source: Quicken

Home Building Cost In Denver #4 – Features & Finishes

Features and finishes also substantially affect the cost of building your own home in the Denver Metro area. It’s pretty simple. The more unique or lavish the feature or fixture, the more it is likely to cost. Things like pools, indoor bowling alleys, in-home movie theaters, large paver decks, patios with outdoor kitchens, and other luxe options will drive that cost up. However, high quality is absolutely essential, and what defines the luxury space. 

You might get away with using an off-brand Home Depot faucet in a multifamily apartment rental property, but buyers and renters in the luxury market are going to expect designer fixtures like sculptured glass faucets by Tapologie or a Kohler sink that looks like it came straight out of 2001: A Space Odyssey. Even quality hardwood flooring and high-end quartz will come at a premium- particularly in today’s market. 

Home Building Cost In Denver #5 (Maybe) – Scrape Cost

Scrapes, the process of demolishing older homes to make way for newer, larger structures, is another cost you may need to consider, depending on the circumstances of your build. They are particularly common in urban areas, like Denver, where most buildable areas are already, well, built. The cost can be significant as well, so you tend to see residential custom scrapes concentrated in popular neighborhoods with relatively high property values. 

As the property market continues to see record growth, so too do we see growth in the number of scrapes, as the value proposition for investors and home buyers goes up. Demolition permits in the City of Denver averaged roughly 100 a year in the mid-90s, peaking at 400 in 2007- right before the 2008 crash. By 2011 they had fallen to a low of 92. Contrast that with today, where 2021 almost hit the record number of scrapes for the city, at 373. 

They remain a powerful vehicle for real estate returns, and investors are often on the frontlines of these projects, as your typical homebuyer might not have the time, non-financed cash, or ability to complete a scrape and rebuild. The Denver Post recently covered the increased number of scrapes in the city and described one investor’s experience, and the almost 50% return netted from the teardown of older home stock and redevelopment into a contemporary duplex. 

The national average cost to demolish a home sits between $3,000 and $35,000, depending on the size of the property and the market. The exact cost will depend on dump fees, if it is a complete or partial teardown, outbuilding demolition, and potential city requirements. There are also other permits and environmental fees associated with both a teardown and construction. These will vary from city to city and county to county, but you can find a comprehensive list of Denver-area building and development fees at the city’s website, here.

Cost Offsetting – Location Investment Growth

We get that choosing to build a custom home is a big deal, and very expensive.  In some cases, you can defray the cost of building a home if you make the right choice of location, particularly in the current real estate landscape. For instance, say you purchase a 1-acre lot in Greenwood Village for $975,000. Next, you try to decide if you start with an architect or a builder first, or you have a custom home/luxury specialist like Thomas Sattler Homes take care of everything you need to get started. After getting through the planning stages you find out that it will take about a year to complete your home. If that underlying property rises in value during that year, you’ve already started to chip away at your initial outlay for the home with rising appreciation. 

Considering that the median sale price in Greenwood Village rose 21.6% in the last year, that’s a pretty good dent in the value of the home versus what you’ll end up paying for the home- even before you move in! Of course, there are always outliers, and past performance is no guarantee of future returns, but the Colorado market remains solid due to several factors, including low inventory, strong current and future economic growth, thriving employment sector with rising wages, net in-migration from other states and countries, and interest rates that have risen slightly but still remain very low historically.

Last year, the average price of a single-family home in the Denver Metro area rose by 19%, which brought the average single-family home price to $682,489. Attached homes also saw significant growth, growing by 14.3% to $428,825. Additionally, while we saw a slight pullback from the phenomenal pandemic growth in 2020, we still saw a 0.3% increase in the total number of listings sold. 

The luxury market is also flexing its muscles, with a large increase in homebuying activity year over year. If you look at the six counties that make up the Denver Metro area, you’ll find that the total number of luxury listings that sold in 2021 rose 59.9%- for a total of 4,200 homes sold. The average sale price of luxury listings grew by 3.7%, bringing it to a healthy $1,613,563. The two-pronged attack of rising sale prices and rising home sales account for the phenomenal 65.7% jump in total dollar volume sold, which came in at a whopping $6,776,964,868.

Source: Denver Post and Sotheby’s

-Thomas Sattler Homes

Located that perfect scrape-down property? Stumbled upon your ideal lot? Already own land? 

Call us today to schedule your free feasibility estimate! Know your total project cost before you commit to any decisions. We pride ourselves on a customer-oriented experience, always putting your needs first. 

You can reach the Thomas Sattler Homes Sales Team at <a href=”tel:7204493562″>Call (720)449-3562</a> or online at ThomasSattlerHomes.com.