How Are New Homes Priced in Omaha, NE?

New Home Pricing in Omaha, NE

What you should know…

Aurora Homes, in Omaha NE, understands that it’s hard to compare new home prices. We want you to know how we price our new construction projects so that you can make fair comparisons when making such an important decision. As you compare new home builders in Omaha, NE it is critical that you understand how new homes are priced so that you can make the most informed decision as possible. Knowing how new homes are priced is critical information for anyone considering building a new home.

Why?

We firmly believe that the more information you have BEFORE you start building your new home, the better the outcome. For example… in all our years of building homes we’ve never had anyone say they’re looking forward to breaking their budget due to surprises in the building process.

So, to help keep you on track (and your project within your budget), we offer these insights into the four primary pricing factors for your new home. We call them the 4 L’s.

1. Land:

Price factor number one is what we in the industry like to call the dirt. The spot you pick to build your home. As you may already know, picking a home site that’s a good fit for your home is part art, part science. Don’t forget to use our free checklists before you pull the trigger!

Some things to keep in mind with Land:

• The ratio of land-to-house in your overall home package will run somewhere between 14 – 30%. That is, your land costs should fall within those parameters.
• If you find you’re below 14% you’re probably overbuilding for your location.
• Over 30% and you’re under building (exceptions can be waterfront, infill/teardown and acreage).
• If you’re land-to-home ratio falls outside of 14 – 30% of your total project costs, you may find the bank’s appraiser unable to get the appraisal to match your purchase price. You’ll need to make adjustments or put down more cash to get your financing.
• Normally the land cost is about 25% of your total price. 

2. Lending:

What’s more important – price or the interest rate of your mortgage? Check out these scenarios:

Would you have guessed a $350,000 home at 5% interest with a $280,000 mortgage would cost less each month than the $300,000 home at 7% interest with a $240,000 mortgage?

Unless you’re paying cash or trying to sell your home right away, the interest rate you pay on your home’s mortgage trumps the overall price. And don’t forget most people can deduct the annual mortgage interest paid along with real estate taxes. Check with your tax professional to see if this applies to you.

3. Lumber (a.k.a. “Sticks & Bricks”)

Any of the materials used to build your home fall into the lumber category. Normally the total lumber bill will be 25 – 40% of the project depending on the finishes you select. Lumber costs are based on a world-wide commodity market. Unless one builder is going to buy and inventory a massive quantity of one particular item, the price varies very little from one to the next.

Large publicly traded home builders will use this “buy and inventory” process to produce a lower priced home. You will give up the ability to customize or at the very least pay a HUGE upgrade price to change anything. This is because they buy items by the train car (e.g. toilets) and then force their customers to use them. The tradeoff is they buy at a lower price but you don’t get much of a say in the color, style or quality of the items. 

4. Labor:

The fourth and final L in the price equation of a new home is Labor. Labor will account for 35 – 50% of the total project cost. Labor rates will vary based on the skill set of the tradesperson/trade partner along with your project’s Scope of Work. The Scope of Work is the details for how the lumber in your home should be installed.

This is one of the biggest misconceptions in the housing industry. Many prospective home buyers believe that because a municipality provides a building inspector, all homes are assembled the same way. To put it bluntly, building a new home to code is the equivalent of getting a C- on a report card. Building codes are not quality control. One tradesperson can install an item that meets building code but will give you headaches after only a few years of living in your home. The challenge for you is the vast majority of your home’s labor is covered up by finishes (paint, flooring, siding, etc.) and you don’t discover the shoddy workmanship until years after your warranty has expired.

It is imperative that you understand what you are buying.  Be sure to ask your builder regarding  detailed Scope of Work expectations to go along with the Plans and Specs for your new home. Your builder should also have extensive internal inspection processes after each phase of construction is completed. It’s in their (and your) best interest to catch problems early in the construction process instead of discovering them through some sort of a failure years down the line.