By Lee Whitaker • 2018 President

A primary focus at the HBA of Greater Austin is housing affordability. Our builders care about delivering quality housing at a cost the market can support. However, with prices rising in our area, many people wonder what goes into the cost of a new construction home.   

Last year, our National Association of Home Builders (NAHB) asked more than 4,250 homebuilders to provide data on home building costs for an average single-family home. They found the average price for a single-family home nationally was $427,000. The same size house, sold within a 60-mile radius between San Marcos to Georgetown, costs an average of $375,000. 

Of course, one of the leading causes of Central Texas’s rising housing costs is demand, which I am sure we all have experienced in our day-to-day here in the real estate industry. The Austin area recently ranked No. 1 in terms of where people were moving around the country. All of those transplants, coupled with large numbers of millennials entering the housing market and a limited housing inventory, and you have a recipe for affordability issues. Demand is just one factor impacting the price of a home. 

For one thing, land costs are getting more expensive. According to recent research from the Real Estate Center at Texas A&M University, 20.4 percent of a home’s price in the state is land cost. Since 2000, the land price index for single-family homes in the U.S. increased 95 percent; but Texas has seen a 122 percent increase and economists don’t see the momentum in Austin’s housing prices slowing until at least 2020.

Builders’ operating expenses have also risen as builders across the country have been dealing with a construction labor shortage for the past several years. In Texas, the shortfall was exacerbated by Hurricane Harvey hitting Houston in 2017. A new study by the Associated General Contractors of America (AGC) found that 80 percent of construction firms in this region have a severe worker shortage. Ninety-nine percent of firms said hiring laborers would continue to be a problem into 2019. These jobs include pipelayers, electricians, roofers and truck drivers. Firms are increasing pay, benefits and giving incentives which are then getting passed down to the homebuyer as an increased cost to build the home. A worker shortage leads to construction delays, which also increases building costs.

In Central Texas, there is a shortage of qualified laborers, even with the cities and inspection departments, and demand for new starts keeps rising. As an example, over the past five years in Austin, there has been a  70 percent increase in residential electrical inspections. Last May, a City of Austin audit revealed a backlog of nearly 500 inspection work orders and the department confirmed that city inspectors are overwhelmed with their workload. With a backlog, builders must wait on inspections to proceed and stopping work for a few days causes construction logjams and further delays with trades down the line. The resulting fees and work extensions can add thousands of dollars to homebuilding costs.

Unfortunately, the rising costs mean some homebuyers are priced out. We have reported before that with each $1,000 increase in the median home price here in the Austin MSA, 1,220 families are priced out. 

What goes into the cost of a building a home? Essentially, everything. It’s the tangible — land, foundation, floors, walls, and a roof — to the intangible — labor, taxes, profit margins. Ultimately, there is one factor that determines the estimated price of a new home more than almost anything: location. Each housing market is local, and a great way to learn more about the Austin area market is to talk with the builders!

The Parade of Homes™ offers an excellent opportunity to hear directly from a few builders with (new) builder guided tours at the event. Visit for more details. 

Don’t Forget – VIP REALTOR Days!

New this year, REALTORS are exclusively invited to attend on Thursdays, October 25 and November 1, when the tour is not open to the general public. Like in past years, REALTORS will use their business card as their ticket to attend free of charge. The HBA is partnering with the Austin Board of REALTORS, the Williamson County Association of REALTORS, Women’s Council of REALTORS and Platinum Top 50 REALTORS to make these new VIP REALTOR Days a can’t-miss event. 

The Parade of Homes will be open on REALTOR Days from 2 to 7 p.m. Sign up at and like our Facebook page at to get the latest updates.

The Parade of Homes will be open to the general public Fridays through Sundays from 11 a.m. to 7 p.m. October 19 to November 4. Tickets are on sale now. For more information and to buy tickets, visit