We quickly found out that building a custom home is not cheap and building on the side of a mountain can drive up the costs exponentially. It was always our intent to build a modest size house with really nice finish materials. We thought this would allow us to stay within a reasonable budget range. Once we started meeting with architects, reality started to creep in. We adjusted some of our expectations and focused our design plan to our most important elements. As our plans were coming together, we worked to get construction estimates from builders and quickly discovered that this project was going to cost considerably more than we initially thought and we were going to have to give up some of the materials we wanted to use. It seemed ludicrous that we’d have to spend so much and still not get everything we planned for, but construction costs are high in Colorado and they are continuing to rise. After some soul searching and looking at a number of resale homes in the area, we adjusted our expectations down and our budget up to keep forging ahead. With some luck and disciplined decision making, we hope to come in within about 5% of our new budget.

Home construction costs over time

Big budget busters

An unfortunate fact of building a custom home is that there will be areas where you go over the original budget. Some of these overages are caused by things out of your control, like how deep you have to drill the well or price increases for required materials like lumber and steel. Others are caused by changes you decide to make during the construction process and can be rationalized. The worst budget busters are those that are created through underestimating during the budget process or human errors.

These are our biggest budget busters based on percent over original budget. Even though these are all over budget by a large percentage, some of them only impacted the overall budget by a few hundred dollars, while others resulted in thousands of dollars in overages.

• Building Permit: 28% ($$) – error during submittal process
• Traffic Control Pad: 45% ($) – uncontrollable, additional material required
• Fill Dirt: 61% ($$$) – planned contingency, additional fill required
• Tree Removal: 22% ($$) – underestimated
• Excavation: 10% ($$) – underestimated straw wattles
• Foundation Waterproofing: 59% ($) – change in material choice
• Foundation Insulation: 68% ($$) – underestimated coverage
• Well Drilling: 44% ($$$) – uncontrollable, deeper drilling required

Home construction costs by category