Photo by Jon Ogg of construction scene looking rather messy

Owning a home can be a core strategy to save towards your retirement. If you have lived in your home for 10, 15 or 20 years ahead of retirement, there’s a good chance you have the home paid for or are much closer to you owning it rather than the bank owning it. Home ownership can simply be an incredible forced savings vehicle regardless of annual appreciation. When you need to sell the home to help pay for or supplement your retirement, there is suddenly a large sum of money to help.

Tactical Bulls is a firm promoter of home ownership. The caveat is if you may have to move around the country for work or if you have limited job prospects where you are at a given time. This is when you can become trapped in a home, and that does have to be considered by any intelligent home buyer. And coming up with a 20% downpayment can be a sizable hurdle for many buyers. But if you don’t have the risks of becoming trapped in your home and can afford a downpayment (and the monthly expense versus renting), then owning a home should be accompanied by years of appreciation and increased equity.

BofA has issued its “Who Builds the House – 2024” report showing an overview of the residential building products industry in the U.S. While some part of this feature the companies offering the materials, there may be a clear read here for anyone wondering what the next home build or home improvement project will cost.

For anyone who wants to buy a home, or do a remodel, it is imperative that you know what home “content” costs are to build. That also means knowing what the most expensive home products are. Please also keep in mind that the costs for materials make up only about 24.5% of the sale price of a new house. The median sale price of a new home was $428,600 in 2023, according to the US Census Bureau.

While BofA identified 14 major components in a single-family home, the top-10 items are the lion share. The top-4 component categories alone make up almost half of all the product and materials costs. So even if you are just wanting to do a remodel, you will see below that adding rooms on the ground with a foundation-pour and framing it out with an exterior might not be the cheapest home improvement you can make. Here are the top 10 component and product categories for home construction (and the cost per home) at the present time:

• 15.8% — Framing Lumber/EWP ($16,648)
• 11.9% — Concrete/foundation ($12,560)
• 10.8% — Windows/Doors ($11,380)
• 9.1% — Siding ($9,526)
• 7.5% — Plumbing ($7,879)
• 7.3% — Cabinets ($7,690)
• 7.3% — HVAC ($7,685)
• 6.0% — Roofing ($6,329)
• 7.0% — Flooring ($7,398)
• 4.1% — Structural panels ($4,280)

It may seem surprising that drywall and appliances are not in the top-10, but this review was for a “typical” new home. BofA shows that the value of content in an average U.S. new single-family home was $105,000 in 2023. For a comparison way back in time, in 1982 that cost was $23,073 on average.

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Where your home is located may have a lot to do with some costs, and high growth areas with solid incomes are going to have to worry about labor costs for those construction crews more than most input (or “content”) prices like lumber, concrete, roofing, sheetrock and so on. And, yes, home construction prices have surged and remained high since the pre-Covid year of 2019. BofA shows that 2024 costs are trending slightly higher with a materials cost gain of about 3.2% year-to-date (2024). The current cost to build in 2024 of about $109,000 is about 35% higher than in 2019. This is just the cost of the materials and products for building. The report also indicates that raw land costs and the costs for development and entitlement are rising actually rising faster than direct building costs.

The report even points out that the construction labor market remains tight. In short, if you feel like you are paying a lot more for the labor your hunch is almost certainly correct. There may be at least some good news on the all-in costs to build a home, as the report says:

The bill of materials for an average new single-family house declined (14%) YoY or roughly $15,000 in 2023 due to lower lumber and wood product costs following three consecutive years of unprecedented inflation. The average material cost to build a home, however, is still up $25,000 or 30% (6.9% CAGR) since 2019 compared to a roughly 33% increase in average national new home prices over the same period. In general, building product price increases have been sticky across most categories over the last few years except for commodity inputs like lumber, which have now reverted near 2019 levels.

For a personal reference, knowing your home building costs can help massively even if you are not planning to make any changes. Knowing what the input costs are can greatly help your case when it comes time for you to protest your property taxes (hint — taking a chart showing a rapid decline in lumber prices can go a long way!). And in property tax negotiations, remember that even if you keep $500 off your base tax payments that can also translate to a base case of being $500 lower every year into the future you are in that home.