Home Price Estimate for House Construction in Houston

08:28 Jan 2024

Developing a home price estimate for Houston new house construction and establishing a Houston home estimated value for existing house use many of the same tools and resources.

For new house construction, developing a home price estimate is useful for many reasons before, during and after the owner builds a house with the Houston construction company.    

First a home price estimate is needed as a construction budget to share with the home designer. This helps the home designer to create an architectural design within the financial resources of the owner.

Secondly, the home price estimate is used to establish short term construction financing and to qualify for a mortgage amount.  

By establishing a home price estimate for house construction, the house building contractor can also use it as accost control tool through the house building process.

Developing a home estimated value for house construction consist of part science, part history, comparable house prices and current market economic conditions.

The primary difference between establishing a home price estimate and establishing a resale home estimated value is that new house construction is often a one-of-a-kind event and there may not be a price comparable that falls inside the guidelines of appraisals.

House prices have continued to climb since the financial and banking crisis of 2008. Buyers and sellers’ confidence has continually gained momentum as a result of a strong economy and record low unemployment rates.

The prices of Houston homes are a combination of existing house values, economic conditions effecting supply & demand and the neighborhood locations.

Any and all of these factors will have some measured effect on the immediate house price. 

There are other factors that influence house values other than the major fore-mentioned factors.

The condition of the house, like the amount of deferred house maintenance, the vintage of the house and architectural style will have a substantial influence on the home’s value.

Other elements such as product design updates, the age of key replacement products like roofs & air conditioning units will also dictate the ultimate house price.

Determining a home’s value is part science, part observation and a great deal of research.

One of the more interesting phenomena associated with this topic is that house prices are not always consistent with house values.

As we have noted there are many contributing factors to these occurrences. One of the most difficult factors to predict and plan for when preparing to price and sell your property is the fickle nature of buyers.

This characteristic even challenges the most seasoned real estate sales professionals.

So, we will focus this article on the major features that contribute to home values and home prices for both sellers and buyers.

The major factors are that have a substantial influence on house prices and ultimately house values are appraisal values, property tax assessments and national economic conditions.

In addition to the traditional house value assessments local house value factors are new home prices, land prices, neighborhood demands and local employment conditions.


Appraisal Values

The most traditional method of determining a home’s value is by means of an appraisal.

This method is the real estate and banking communities most important assessment tool in determining the home’s value.

Most real estate sales people use this to help owners decide their homes sales price.

The appraisal value establishing process is normally conducted by a certified real estate appraiser. They research comparable properties that have sold in the past 6 months and use these to establish a value benchmark.

These benchmarks are used to establish the fair market value of the subject property. This process is not without its short comings, but remains the primary resource for the residential industry.

 Property Tax Assessment

Another generally accepted method in establishing the fair market home value is the use of the county’s property tax assessment value.

The county tax assessor researches hundreds of relevant factors in calculating a home’s value to extensive to address in this article.

They use the general home’s condition, neighborhood sales prices and land values to make their assessments.

The property tax assessing method is more effective in neighborhoods and with homes that are uniformly consistent.

The more unique the dwellings features are the more ineffective the tax assessment method is at establishing the fair market property value.

Another challenge with Houston tax assessment methods is the Texas homestead tax law.

The Texas residence homestead exemption provides some relief from real estate taxes through providing an exemption amount and a maximum 10% cap amount allowed in increasing the annual tax assessment value.

The homestead exemption can skew the actual fair market value through the assessment cap.

If an area of town goes through a sudden market value gain or loss, using the property tax assessment value can be very misleading of the homes real market value.

 National Economic Conditions

The national economy has a huge impact on a home’s market value. National factors such as job growth, interest rates and tax laws can influence the buyers and sellers purchasing motivations.

The national economy and outlook provide a general confidence for both buyers and sellers when evaluating the best time to transact a property.

One of the reasons that during an economic recession residential real estate activity decline is due to fear of the unknown.

Sellers worry about receiving the best possible house price and buyers worry about too high of interest rates.

The national economy will always play a role in both the buyers and sellers’ confidence.

 Local Economic Conditions

The local economy even has a greater influence on the confidence of buyers and sellers then the national economy.

These factors include local employment, supply and demand of available homes and local home prices.

These factors have a considerable effect on the local confidence of house buyers and sellers.

The interesting thing about the differences between the local and national economy factors are that the national economy can be in a troubled state, while the local economy can be booming.

The opposite can also happen, leaving buyers and sellers with a high level of uncertainty. The housing market is a cyclical industry and can be difficult to anticipate the cycles.

This is one on the factors that make house buying and selling somewhat speculative.

The lines between the local housing market and national market have changed in the last decade. Single family homes have become an investment target for national and local investors.

Although there has always been an attraction in rental homes, Wall Street has found an appetite for bundling local and national homes in large portfolios.

These means that local buyers are now not just competing with other buyers but with investors as well.



New Home Construction Prices

New home construction prices also have an effect on the local housing market. The cost of a new built home sets the upper benchmark for house values for that immediate area.

New constructed homes offer the newest in architectural design and house product to buyers.

They also contribute toward maintaining a healthy level of replacement housing inventory.

The cost of a new house compared to cost of remodeling will always be a consideration in the property buying process.

As homes get older the cost of obsolete house product replacement becomes an important part of maintaining and protecting your property investment.

The cost of upgrading and house maintenance can be considerable and should be evaluated against building a new house.

Neighborhood Locations

The most impactful factor in home estimated value is the location of the property. One can have an identical property 10 miles away and the location of the house can affect the value of the property up to 50%.

This is due to land values, which in turn is a result of demand and supply of certain locations.

Things like school districts, shopping & dining and life style needs can be very appealing to the right buyer.

Understanding the factors that can shift house prices and home estimated value in Houston provides both sellers and buyers in making the best decision for their situation.

In today’s changing housing market buyers and sellers need to verify the information they receive. Nothing is better to achieve this goal then proper research.


Developing a Houston home estimated value for new house construction requires the market knowledge of local resales, appraisals and comparable resale data to properly establish the base price.

With the local knowledge and establishing the owner’s financial resources the house designer can develop the architectural house design that fits the new construction budget.

The home price estimate is an essential house building practice that provides guidance, a baseline budget estimate for the house design and obtaining financing.

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