Complete Guide to Building a Custom Home in Carmel

Why Build a Custom Home in Carmel?

Carmel-by-the-Sea occupies a singular place in California’s residential landscape. This one-square-mile village on the Monterey Peninsula has no street addresses, no home mail delivery, no traffic signals, no parking meters, and no chain restaurants. The city was founded in the early 1900s as an artists’ and writers’ colony, and that spirit of creative independence continues to shape its character, architecture, and regulations.

For homeowners drawn to Carmel’s beauty, the choice between buying an existing cottage and building new comes down to priorities. The existing housing stock is charming but often limited in layout, size, and modern amenities. Building a custom home lets you create a residence designed for how you actually live while respecting the architectural traditions that make Carmel unlike anywhere else.

Beyond the village, Carmel Valley offers a different proposition: larger lots, a warmer microclimate, wine country aesthetics, and more design flexibility. Together, the village and the valley represent two distinct but equally compelling options for custom home construction.

For a step-by-step overview of the full building process, see our custom home building process guide.

Carmel-by-the-Sea: Village Character and Market

The village of Carmel-by-the-Sea has a population of roughly 3,900 within its one square mile. The median home value exceeds $2.5 million, with premium properties on or near the beach reaching $5 million to $15 million+.

The real estate market is defined by extreme scarcity. There are approximately 3,400 homes in the village, and turnover is limited. Many properties have been in families for generations. When homes do sell, the combination of the lot value, the village character, and the proximity to Carmel Beach drives strong pricing.

Most custom home projects in the village involve purchasing an existing cottage or home on a desirable lot and either extensively renovating it or doing a teardown-rebuild. The teardown approach requires demolition permits and adherence to the same design guidelines that govern new construction.

No Street Addresses

Carmel does not assign street addresses to residences. Homes are identified by geographic descriptions relative to cross streets (e.g., “SE corner of Dolores and 10th”). All mail is picked up at the Carmel Post Office. For practical purposes, properties are tracked by lot and block numbers in county records. This tradition is part of Carmel’s identity and is unlikely to change.

The Design Review Process

Carmel’s design review is among the most detailed in California. The Planning Commission and staff evaluate every aspect of a proposed home’s exterior to ensure compatibility with the village character.

What Gets Reviewed

• Roof forms. Pitched roofs are standard. Flat roofs are generally discouraged in the village. Roof materials, colors, and profiles are evaluated.
• Exterior materials. Natural materials (wood, stone, stucco) are favored. The review evaluates material quality, texture, and color.
• Windows and doors. Proportions, style, and placement are reviewed. Large expanses of unbroken glass that feel commercial or contemporary may face pushback.
• Colors. Exterior colors should be muted and natural, complementing the forest setting. Bright or high-contrast color schemes will not be approved.
• Landscaping and fencing. The landscape plan is part of the design review. Native and drought-tolerant plantings are encouraged. Fencing must be low and permeable (no tall solid fences blocking village walkability).
• Lighting. Exterior lighting must be minimal and downward-directed to preserve the village’s dark-sky character.
• Height and mass. The city limits building height (typically 18 feet for flat roofs, up to 24 feet for pitched roofs) and evaluates massing to maintain the intimate village scale.

Process Timeline

Design review in Carmel-by-the-Sea typically takes 2 to 6 months. Simple projects that align closely with the guidelines may be reviewed administratively. Larger or more complex projects go before the Planning Commission. Expect 1 to 3 meetings with staff or the commission before receiving approval.

The Forest Character Overlay

The Forest Character overlay zone is one of the most significant regulatory features in Carmel. It applies to residential areas and is designed to preserve and enhance the town’s urban forest canopy.

How It Affects Construction

• Tree preservation. Protected trees (typically any tree with a trunk diameter of 4 inches or more) must be preserved where possible. Removal requires a permit and is evaluated against strict criteria.
• Root zone protection. The buildable footprint is influenced by protected tree root zones. Construction cannot occur within the drip line of protected trees without arborist approval and protection measures.
• Canopy requirements. The overlay encourages maintaining or increasing tree canopy coverage on each lot. Landscape plans must include appropriate tree plantings.
• Lot coverage limits. Maximum lot coverage is limited to protect root zones and maintain the forest character. On a typical village lot, this can mean building no more than 40 to 45% of the lot area, including all structures, driveways, and hardscape.

Impact on Home Design

The Forest Character overlay means your home design starts with the trees, not the floor plan. Mapping existing trees, their canopy extents, and their root zones is the first step. The home’s footprint, driveway, and outdoor living areas are then designed around these existing assets. This process is more constrained than typical custom home design but often produces homes with exceptional character, as the mature trees become an integral part of the living environment.

Building in the Village vs. Carmel Valley

Village Lots

Village lots are small by custom home standards, typically 4,000 to 6,000 square feet. Given the setbacks, lot coverage limits, and Forest Character overlay, buildable areas are compact. Most village custom homes range from 1,200 to 2,400 square feet. The design challenge is creating a home that feels spacious and luxurious within a modest footprint.

Successful village homes emphasize quality over quantity: custom millwork, handcrafted details, premium kitchen and bath fixtures, and seamless indoor-outdoor connections to maximize the perception of space.

Carmel Valley

Carmel Valley, stretching inland from the village along the Carmel River valley, offers a fundamentally different proposition. Lots range from half an acre to 20+ acres on ranch and estate properties. The climate is warmer (less fog), the terrain includes rolling hillsides and valley floor, and the architectural style leans toward ranch, contemporary, and wine-country estate.

Carmel Valley falls under Monterey County jurisdiction, not the City of Carmel-by-the-Sea. The design review process is different, typically less restrictive than the village but still subject to county planning review and environmental regulations. Larger lots offer more design freedom, with custom homes of 2,500 to 5,000+ square feet common.

Zoning and Development Standards

Village (City of Carmel-by-the-Sea)

• Lot coverage: Maximum of approximately 40-45% depending on the specific zone and lot configuration
• Height: 18 feet for flat roofs, up to 24 feet for pitched roofs
• Setbacks: Front setback of 15 feet, side setbacks of 3 to 5 feet, rear setback of 3 to 15 feet (varies by zone)
• Parking: Off-street parking is required, typically 1 to 2 spaces
• Floor area: Limited by lot coverage, height, and setback calculations

Carmel Valley (Monterey County)

• Lot sizes: Half-acre minimum in subdivisions, larger on rural parcels
• Height: Typically 25 to 35 feet depending on zoning
• Setbacks: More generous than the village, typically 20 to 30+ feet
• Lot coverage: Less restrictive than the village, but still regulated

Cost Expectations

All pricing is approximate, reflects 2026 Bay Area market conditions, and is subject to change. Every project is unique. Final costs are determined on a project-by-project basis during our design phase.

Village Construction Costs

Custom home construction in Carmel-by-the-Sea costs $400 to $800+ per square foot in 2026. The higher end of this range reflects the premium materials expected by the design review, the complexity of building on small lots with protected trees, and the premium finish levels typical of village homes.

For a 1,800 sqft village home:

• Land (teardown): $1.5M to $5M+
• Construction: $720K to $1.4M+
• Architecture, engineering, permits: $60K to $150K
• Landscaping: $40K to $120K
• Contingency (10%): $72K to $140K

Valley Construction Costs

Carmel Valley construction costs range from $350 to $700+ per square foot in 2026, reflecting the less restrictive building environment and typically larger, simpler sites.

For a 4,000 sqft valley estate:

• Land: $1.5M to $5M+
• Construction: $1.4M to $2.8M+
• Architecture, engineering, permits: $100K to $250K
• Landscaping: $80K to $250K
• Contingency (10%): $140K to $280K

Architectural Styles

Village Styles

Storybook cottage. The quintessential Carmel style. Stone or wood exteriors, steep pitched roofs, irregular forms, handcrafted details, and an intimate connection to the garden. These homes echo the original artistic colony architecture and move through design review with the least friction.

Craftsman. Covered porches, exposed rafter tails, natural materials, and simple, well-proportioned forms. A strong choice for the village that aligns with the design guidelines.

California coastal. Light-toned exteriors, natural wood accents, and ocean-inspired palettes. Works well on lots near or with views of Carmel Beach.

Contemporary (with care). Modern designs can be approved in Carmel, but they must demonstrate contextual sensitivity. Clean lines and restrained materials work better than overtly sculptural or industrial aesthetics. Expect more scrutiny and potentially longer review cycles for contemporary designs.

Valley Styles

Ranch estate. Single-story or partial two-story with wide porches, natural materials, and connections to the surrounding landscape. The most natural fit for the valley.

Wine country contemporary. Clean lines, stone and wood, large windows, and expansive outdoor living areas. Influenced by Napa and Sonoma estate architecture.

Mediterranean. Stucco, tile roofs, courtyards, and arched openings. Complements the valley’s warm climate and golden-grass hillsides.

Neighborhoods and Areas

Carmel Point

The neighborhood closest to Carmel Beach and Point Lobos. Premium location with ocean views. Small lots with high land values. Some of the most restrictive Forest Character overlay protections due to mature Monterey pines and cypress.

Southeast Carmel

Quieter streets further from the ocean. Slightly more affordable lot prices. Less tourist foot traffic. A popular area for families and full-time residents.

Carmel Highlands

South of the village along Highway 1. Dramatic coastal cliffs and ocean views. Larger lots than the village. Some properties fall under county jurisdiction rather than the city. Construction on cliff-adjacent lots involves additional geological and environmental review.

Mid-Valley and Upper Carmel Valley

Ranch and estate properties stretching east from the village. Sunny, warm climate. Wine-tasting rooms and equestrian properties are part of the landscape. Lots of 5 to 20+ acres are available for buyers who want room to build a compound-style estate.

Why Build with Custom Home Design and Build

Carmel’s design review process rewards experienced teams who understand the village’s expectations and can present designs that align with its character. Custom Home Design and Build brings the design quality and review board experience needed to move projects through Carmel’s process efficiently.

Our two-phase process is well-suited for Carmel’s regulatory environment. In Phase 1, we complete all design, design review preparation, engineering, and permitting. Every material, color, and detail is resolved and approved before construction begins. In Phase 2, we build with the craftsmanship Carmel homes demand.

If you are considering a custom home in Carmel-by-the-Sea or Carmel Valley, we would welcome the opportunity to discuss your vision, evaluate your lot, and show you what is possible within the local guidelines.

Contact us to start the conversation.