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Housing Prices Reflect Production Costs

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Bordering the Future

According to Marshall and Swift's Residential Cost Handbook, the cost of building an "average" quality, 800-square-foot, single-story, wood frame house in Texas is about $40 to $45 per square foot, or $36,000--not counting the cost of acquiring and developing a lot, and the builder's profit.1

Land acquisition and development can add $10,000 to $20,000 to the cost of a house. For a new subdivision, the acquisition cost may be only a few thousand dollars per lot. But the 1998 cost of infrastructure--such as streets, power, and water--could be as much as $15,000 per lot or higher in some areas. An "infill" lot in an existing subdivision, on the other hand, would only need to be tapped into existing services at a cost of perhaps $3,000. Yet, the cost of such a lot can run as much as $15,000, or in some cases considerably more.

Some builders have suggested they could cut the cost of construction to as little as $25 to $30 per square foot for traditional construction, lowering the replacement cost of an 800-square-foot house to as little as $20,000. The Texas Department of Housing and Community Affairs has been experimenting with "panelized" construction methods using pre-cut wall panel systems, which could cut construction costs a little more as well as increasing each home's energy efficiency--although builders say that because construction workers need to be trained in the panelized method, it cannot be applied widely right away.2


1 Marshall and Swift's Residential Cost Handbook, 1992.

2 Interviews with Curtis Davidson, Clark Wilson Homebuilders, Austin, Texas, November 20, 1997, and Mike Jennings, Texas Department of Housing and Community Affairs, HOME program, November 18, 1997.