Many of my clients have inquired with me recently about the options of purchasing an existing home or buying a lot and building a home to their specification. It’s a very interesting question in today’s Telluride real estate market. Please allow me to be clear that I’m talking about residential construction here, not commercial or condominium development. It also needs to be understood that I am talking in generalities and that each project will have unique factors and costs unique to its own.
The equation to understand construction cost is land + hard costs + soft costs = project total cost
The important factors to understand when evaluating new home construction in the Telluride market:
Availability of Labor, Services and Materials:
There are incredible home builders in the Telluride market. However, basic supply and demand is dictating an increase in construction costs due to the supply of qualified contractors. Workers are being drawn to Denver and other areas of the Western Slope where conditions and pay may be favorable. There is also a shortage of young people entering the trades.
Almost all the materials used for building homes in Telluride are now imported; lumber and steel from Canada are an example where proposed tariffs may increase the costs further.
Hard Costs are the actual construction costs and can vary dramatically upon the size of the home and what quality of finishes, lighting and appliances are desired by the owner. These costs also depend on which municipality you choose to build in. In the Town of Telluride there may be workforce mitigation fees and historical preservation impacts. The Town of Mountain Village has very specific architectural guidelines such as a 35% stone requirement which ultimately preserves the overall consistency and property values of the community.
A general range of hard costs is between $450 to $600 sq/ft
If you are looking to build a mountain modern, contemporary home, Mountain Village, or Aldasoro Ranch may be the best options as their design guidelines are now more geared to this style of home.
Soft costs are fees for architectural design, engineering, and municipal development fees such as building permits, construction mitigation, water and sewer tap fees.
One important tip is to identify your builder early in the process and connect them with your architect to avoid over-designing outside your budget. Some builders and architects already have a great track record and comfort with each other to achieve this.
A general range of softs costs is 10% of the project total for architecture and engineering and 15% to 20% of the project cost for development fees.
Purchasing a Lot
There are currently 86 lots for sale in Mountain Village at an average size of .67 acres at an average price of $1 Million. One item to note is that I have seen recent engineering and architectural designs that work well with steep lots that can provide excellent land value and amazing views.
In the Town of Telluride, there are only 17 lots available for sale at an average size of .84 acres and an average price of $1.6 Million. Price is at a premium as the Town of Telluride is rapidly approaching build out.
Other options for vacant land two surrounding sub-divisions that provide amazing access, privacy and value. In Aldasoro Ranch, there are 16 lots available for sale at an average size of 3.3 acres and average price of $787K.
The Ski Ranches there are 6 lots for sale at an average size of 1.7 acres and an average price of $488K
New Construction vs Purchasing an Existing Home – The Bottom Line
A general range for total new construction costs are $700 to $850 sq/ft plus the cost of the land. In today’s market the cost of new construction may be similar to the cost of purchasing an existing home.
The question to ask is if the owner is willing to invest time in the process and then be OK with an up to 18-month construction timeline once municipal approvals are granted. The benefits of new construction are to design and enjoy a home of your dreams and there may greater appreciation potential for newer homes.
Please contact me for more information on vacant land and home construction.