Among the obvious reasons are commodity, material, and labor prices as well as the run up in number of homes that where built and the availability of money. Among the lesser known reasons is the building code, minimum lot sizes, and expected amenities.
I have two 150 square drawings that I like to show clients. One is 10 x 15 has four corners and a 50’ perimeter. The other has an 86’ perimeter and 22 corners. We used to build them quick and inexpensive now we build them complicated and expensive. In the first 20 years I have been building it was rare to see a concrete pump truck visit a job-site. We used wheelbarrows and our backs. Now I’m not one to impede progress but that is a $500 item tacked onto every house. Granite was reserved for the well-to-do. Now it is in homes down in the $200k range. Irrigation systems are becoming normal, jetted whirlpool tubs, three and four bathrooms, and on and on and on. There is a point when the cost of a home outweighs the value of the home. That is part of what we have been seeing in this housing downturn.
The building code is designed for the safety and welfare of the homeowner. While it seeks to create a balance between cost and safety it generally errs on the side of safety. The most recent major change concerns an item known as Braced Wall Panels (BWP). More engineers and the plywood industry are making a bundle because of these regulations and for the most part the requirement is superfluous at best. But this requires additional work on the part of the home designer, the builder, the masonry contractor, the framing contractor, possibly the drywall contractor, and the building official at both the plan review stage and conducting inspections of the home during construction. Permit fees and construction time has increased because of this which leads to additional finance and carrying charges.
Many factors contribute to the cost of a home and most will ask for a cost per square foot. This can be terribly misleading and difficult to pin down because a lot depends on the choices of the homeowner. Most commodities that do fluctuate tend to not change the cost structure by too great a degree but a home owner never has a hard time finding a $600 sink that they just can’t live without.