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I've been looking at a lot of new construction trends online lately.
I live in Kingsport, a somewhat depressed town of roughly 50,000 in northeast TN. Median household income is only $30,524. Average weekly wages are now at the bottom of all the state metros. There has been basically no net job growth since 2000 and the local housing stock is generally old, dated, and in need of a lot of work. Below is a typical house in typical condition for the town.
Trulia has only two new construction listings for about a fifteen miles radius from downtown - one starting at around $137/sq. ft, and the other at $129/sq. ft. These homes are between $330,000 and $360,000, and are just average homes - nothing fancy. The last home was in the same development, but was $187/sq. ft and is now gone. Almost no new SFH residential construction is being built in this metro. There has been no new townhome/condo construction for sale built since 2010 that I can tell.
Go down the road a hundred miles to Knoxville, TN. Knoxville is growing at a healthy clip (though not booming like Nashville) with a median household income of roughly $48,000 and the highest weekly wages in the state (this is surprising). Much of your average new construction is under $120/sq. ft, with some approaching $100/sq.ft. There is more new construction and it is cheaper. I saw the same thing around Chattanooga, with new construction at a wide variety of pricepoints, and generally cheaper for similar housing than you can get new construction for here locally.
Cost of living is about a wash between the areas, Chattanooga may be nominally more expensive. We are a poor area and the only new construction available is priced at basically ten times the median household income.
With so few offerings, will builders charge an extra premium for new construction?
You have it backwards. They don't charge a premium for a single, rural build. It costs more for a single, rural build.
If a builder is developing an entire subdivision, they will be able to get supplies for a greater discount because they will be buying such a large quantity. They will also likely save on labor as they will be able to keep all crews busy and onsite instead of scheduling each trade individually. There is no down time. If they run into a problem in one place, you move the crew to another. This shortens the timelines. These things combined will lower the builder's cost.
Lots of retirees moving to NE TN. Low COL compared to many places retirees already live, no state income tax, decent climate, lots of outdoor recreation, etc., etc., etc.
For people coming from many places in the US mid $300,00's is not a lot of money for a new house.
Cost of building is heavily influenced by scale. Build 100 copies of a tract house plan quickly and it can be done much cheaper. Both materials and labor done in volume is cheaper per unit.
Levittown, Long Island, NY was the first of the tract home builders.
Price of the house is whatever the market will bear. If there is little competition, the price can be quite high. Any relation to cost is merely coincidental.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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We have the finishing touches going on a development of 150 new homes, starting at 1.5 million, 4,000 sf, and they are almost sold out. Median family income is $160,000. The materials cost may be similar to yours, but land, labor, and government permits and infrastructure requirements are much higher. The average cost/sf to build even with the economy of scale is $300. Unskilled construction laborers are getting paid $20-30/hour. This is a suburban city of 60,000.
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