The cost per square foot of a single-family home decreases as the home size increases, according to an analysis from the National Association of Home Builders’ Eye On Housing blog. This is known as economies of scale, where unit costs go down as operations grow larger. In home building, economies of scale can occur in various ways, such as building in larger subdivisions or by larger companies. However, when looking at U.S. Census Bureau data, the NAHB found that the price per square foot can be impacted in the same way. In fact, the median price per square foot for a home under 1,200 square feet is $200, while homes that are over 5,000 square feet cost $132 per square foot.
There could be several reasons for this. A conventional explanation is that some components of construction cost—for example, design, regulatory and waste disposal costs—may be more or less fixed and not change much with house size.
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