Whether you already live in Phoenix or Tucson or want to relocate to an affordable Arizona city and build a home there, following a step-by-step process can get you the new home you want. According to GoBankingRates, the estimated average cost to build a house in Arizona is $209,341, which is the 14th highest in the U.S. Arizona — particularly Phoenix — has been an extremely hot housing market in recent years, but average construction labor costs, estimated at $15.84 per hour, keep the cost to build a house in Arizona out of the top 10 highest states.
The cost to build a house in Arizona, like anywhere else, depends on three main factors: location, materials, and labor costs. The median sales price for homes in Arizona rose 28 percent between March 2021 and March 2022, a function of high demand and a limited number of homes for sale, according to the Arizona Regional Multiple Listing Service. So building a home in Arizona can be a good option to get the home you want and one that is built to today’s standards.
Custom vs. Production Homes
Before you get into the step-by-step process of building a house in Arizona, it’s important to understand the difference between a production home, a semi-custom home, and building a custom home. “Production home” is the term for a home built on a builder’s lot, usually in a cluster of homes or a planned community. Generally, production homes have one price that includes the land, design, materials, and labor costs. Sometimes buyers need to pay extra for a special lot or for some optional features. Builders sometimes offer “semi-custom” homes that allow for greater personalization and some structural changes to the home design. How much personalization you do with a production home depends on each builder.
A custom home typically requires an architect or a design/build firm and to pay separately for the land and the construction of the house. Prices for custom homes vary even more widely than for production homes because so much depends on what infrastructure is in place, the permitting process, the design, and the materials.
This article looks at how to build a production home in Arizona.
Step-by-Step Process to Build a House in Arizona
In most areas of the country, including Arizona, it takes an average of seven months to build a house. The specific timeline to build a house in Arizona depends on numerous factors, including how much your builder has done in advance, such as preparing the land and requesting initial permits to build.
The following steps outline the process to build a home in Arizona.
1. Budget for your new home
Before you begin your plans to build a house in Arizona, you’ll need a financial plan. Not only do you need an estimate of your price range for a home, but you’ll also want to have a sense of the maximum monthly housing payment that you can comfortably afford. Your housing budget should include principal and interest on a mortgage, property taxes, homeowner’s insurance, and more than likely, homeowner association dues.
In addition to reviewing your own finances, it’s smart to get preapproved for a loan before you shop for a community and a builder. Consulting a lender will help you understand your price range and allow you time to address any issues with your credit or your cash needs. You don’t have to borrow your mortgage from the first lender who provides you with a preapproval, which means you can switch to another lender recommended by your builder later if you prefer.
The price per square foot to build a house in Arizona averages $125 to $170, which would be $312,500 to $425,000 for a 2,500-square-foot house. But costs vary widely according to your location, land costs, the style and size, and the materials used to build your home.
Generally, materials cost about 50 percent of the total cost to build a home. Labor costs in Arizona are a little lower than in many other states and represent 30 percent to 40 percent of the overall cost.
You can work with your builder to discuss the best material choices for your home. Prices for materials such as lumber and siding vary widely according to market conditions, but most production home builders can negotiate bulk purchases to keep the costs as reasonable as possible. Typically, lumber costs from $25,000 to $65,000 and a roof costs between $1,000 and $3,000. But many homes in Arizona have a stucco exterior and a tile roof to handle the desert sun, and most are built on a slab rather than having a basement. Roof tiles cost about $8 to $14 per square foot, depending on the style.
Your interior choices for appliances, flooring, lighting fixtures, and paint will impact the cost of the house. Some builders offer options and upgrades while others make those choices for all the homes they build. Flooring can cost from $1 to $5 or more per square foot.
While homeowner association dues will vary according to the size of a community and its amenities, you can include homeowner’s insurance and property taxes in your financial estimate of the cost to build a house in Arizona.
Homeowner’s insurance in the state costs an average of $2,242 per year, according to Insurance.com, which is lower than the national average of $3,144. Property taxes are also lower in Arizona than in most other states, at an effective rate of 0.62 percent compared to a national average of 1.07 percent, according to SmartAsset.com.
You may also need to budget for closing costs, which average 2 percent to 5 percent of the purchase price of a home, although some builders pay those costs for their buyers. You will need cash for a deposit when you sign the contract and for a down payment at the closing.
2. Choose your builder and community
Most people who build a house in Arizona start online to search for a builder and a community. Your price range can help you narrow the choice to communities where homes are being built that match your criteria and budget. Many planned communities include more than one builder, so you can visit the websites of each builder to see if they offer homes with the features and style you want. After you’ve done your online research, you can visit communities and model homes to talk with sales professionals on-site about the timeline and options. You can also ask people who live in new-home communities about their experiences with different builders in Arizona. You can also check reviews on a builder at TrustBuilder®.
3. Line up your financing
After you choose the community and the builder, you’ll need to start the financing process. Your builder may want you to apply for a loan with their in-house lender or a lender on their preferred list. You’re not obligated to work with that lender, so you may want to compare rates and fees with another lender. However, a preferred lender may provide a better experience since they will have worked with the builder before. Sometimes a builder will offer to pay closing costs in Arizona or include an optional feature if you work with their lender and title company.
While you’ll need to make a deposit when you sign the contract, you may also want to look into state and local homebuyer programs to see if you qualify for down payment assistance in Arizona. You can search DownPaymentResource.com for programs by location.
You’ll make your down payment at the closing, and in some cases, you may need to pay additional cash for upgrades that are unusual for the community or require structural changes.
4. Choose your lot and floor plan
An important part of the step-by-step process to build a home in Arizona is to pick the right floor plan and lot that fit your budget and your needs now and in the future. The on-site sales professionals can provide advice about this process. Be sure to ask about which features are standard and included in the sales price and which are optional.
Remember to ask about plans for the community that could impact your lot choice. For example, a green space now could be slated for retail, recreational, or educational purposes in the future.
In some cases, your choice of lot will be limited to specific locations where you can build the floor plan you like. This could be because of the streetscape of the community or because of specific structural elements that don’t fit on every lot.
5. Be aware of permitting and inspections
Arizona doesn’t have a statewide building code, but local jurisdictions have adopted codes that your builder must follow. Your builder will handle all permits and inspections in Arizona, but you are allowed to hire your own third-party inspector if you want to have an additional inspection before you move into your new home. You can work with your builder to determine the appropriate time for that inspection.
6. Consider the local climate
Arizona’s warm and dry climate is one reason people are attracted to the state, but when you build a home in Arizona it’s smart to be aware of the impact of droughts, extreme heat, and potential wildfires. Your builder can help you choose features that save water or are energy-efficient and materials that can make your home more resilient to weather issues. Another resource with state-specific information is the Buyers Guide to Resilient Homes.
How long it will take to go through the step-by-step process to build a house in Arizona depends on many factors such as the availability of materials, the style and size of your home, and even the weather. Stay in close contact with your builder for updates during the construction process and with your lender so you’re ready to move when your home is complete.
Michele Lerner is an award-winning freelance writer, editor and author who has been writing about real estate, personal finance and business topics for more than two decades.