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I receive inquiries on an almost-weekly basis that go like this:

“Hi Mike! We are wanting to build a modest custom home in Colorado Springs. Our budget is $400,000. Can you help us?”

The short answer to this is no. (I’m sorry, I know that’s not the answer you were looking for. That’s not the answer these people are looking for either.) But here’s the honest truth: you just cannot build a custom home in the Pikes Peak region for $400k. It ain’t gonna happen.

Let me give you a few reasons for why this is.

1. You can hardly buy a new production home in El Paso County for $400,000.

Real estate prices in Colorado have risen significantly over the past five years or so. Particularly on the Colorado Front Range (Colorado Springs, Woodland Park, Black Forest, Monument, etc.), we have seen double-digit annual increases for over half a decade. Housing prices travel as a group, whether that’s for production homes, custom homes, or even rent – housing costs move up and down as a group.

As of the date of this article (Fall 2019), a new 3,000 square foot home in El Paso County would typically be priced somewhere in the $450,000 range. Very rarely do our clients want a home that’s less than 3,000 square feet, but occasionally it does happen. (I’ll address exceptions at the end of this article.)

Custom homes will always cost more to build than a production home (also called a “spec home,” “tract home,” or “pre-built home”). This is because you don’t have the same efficiencies in building one specific home just one time, as compared to building the same home multiple times, or to building multiple copies of the same models of homes in a single neighborhood. When you build lots of homes in the same area, this larger scale gives you significant efficiencies in architecture and engineering, reduced mobilization costs of trade partners, and increased efficiencies in subcontractor costs, as well as overhead.

2. The customer experience of a production home is very different from a custom home.

With a production home, the customer is allowed very few selections, and is allowed few changes or modifications (if any). In a custom home build, virtually everything can be looked at, discussed, customized, or changed. This adds significantly to the supervision and management costs of a custom build. The expectation level of a custom home client is, typically, much higher than the expected level of a production home buyer. Put simply, nicer things cost more.

3. The cost of land is much higher for a custom home than for a production home.

Production lots are bought in bulk. Also, the infrastructure (such as utilities, sidewalks, etc.) is bought in bulk, and the lots themselves are typically pretty small. In most cases, the lots for production homes are just big enough to accommodate the size of the house plus the required setbacks, and not much more.

With a custom home lot (which is almost always 2.5 acres or larger), the cost of the lot is much higher as a percentage of the total project cost. This is the biggest factor of all; a typical custom home lot in Colorado Springs and the surrounding area runs in the neighborhood of $150K or so. A typical production home lot is a fraction of that cost (and, as I mentioned, it’s usually a fraction of the size as well).

There are some exceptions to this, but they’re few and far between. For example, Paramount Homes is currently building a home some clients for just a tad over $400K.

To make that happen, though, two specific elements had to be in place;

  1. The house itself is small; just shy of 1,900 square feet.
  2. The land was already purchased and not part of the construction budget.

We do see this type of scenario occasionally, and we’re delighted to be able to work on these projects, but it’s rare. More often than not, though, you can count on having to spend $450,000 at a bare minimum in order to build a new custom home in Colorado Springs, Monument, Woodland Park, Peyton, and other locations in and around Pikes Peak. Of course, we sometimes build home that cost up to $2 million, but that’s on the higher end.

I hope you’ve found this helpful. Thank you for reading, and, as always, if you have any questions about the cost of building a custom home in Colorado, just call me or contact me online. I’m always willing to help.

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