If you’re thinking about becoming a homeowner, you might be asking whether you should build a house or buy one. Factors such as price and how quickly you can move in might guide your decision.
Construction can mean a longer wait to move in, but it could be worth it if you’re able to build your dream house.
Though, what about the price — how much does it cost to build a home?
The average cost to build a house
While the average cost to build a house is $283,900, according to HomeAdvisor, most homeowners spend $116,792 – $451,452 to build their homes. Even though you can get a general idea of what you may pay, it’s important to keep in mind that there are numerous factors that will impact the cost to build.
Keep in mind: These numbers reflect the data listed at the time of publishing and may fluctuate. Be sure to check the link for updated costs.
Breakdown of homebuilding costs
The price tag of building can depend on factors such as the location of the home, the cost of buying land, the square footage, the materials used, and cost of labor. Based on the average price of building a home, here’s how you might allocate your building budget:
|Purchasing land||$3,000 to $150,000 per lot|
|Clearing and prepping land||$1,500 to $5,000|
|Building permits||$1,200 to $2,000|
|Materials (lumber, roofing, etc.)||Up to 50% of the total build|
|Labor||30% to 60% of the total build|
|Foundation||$4,000 to $25,000|
|Framing||$20,000 to $50,000|
|Plumbing, electrical and HVAC||$35,000 to $75,000|
|Exterior finishing||$40,000 to $60,000|
|Interior finishing||$50,000 to $175,000|
Fees to the builder or an architect to draft the floor plan and model for the home can add another $2,000 to $8,000 to your budget.
Top factors that impact cost
When calculating your potential price, it’s helpful to consider the various factors that can affect your total:
One of the most obvious factors that influences how much you’ll pay to build a house. The larger the house, the higher the cost.
Real estate is all about location, location, location. Areas where land, materials, permits and labor are more expensive can increase the final tag.
Depending on where you plan to build and how much work needs to be done, your labor costs can vary drastically. If you’re adding in a lot of upgrades or using specialized materials, you’ll likely pay more.
You can’t build a home without the right materials. Depending on the materials and what’s going on in the economy, the price of those items can vary greatly. For example, over the past two years, the cost of plywood and plumbing supplies have soared. An increased interest in home improvements has caused demand to skyrocket, but disruptions in the supply chain has resulted in shortages.
So be sure to consider overall pricing trends before deciding whether building a home is affordable for your own financial situation.
Is it cheaper to build or buy a home?
Build vs. buy? Which one should you choose? Depending on where you’re looking to buy (are prices remaining steady in the area or even decreasing?), you could potentially save money by purchasing an existing property. Buying can also save you stress since you’re only dealing with your agent and a lender, such as Ally Home, instead of builders and suppliers.
On the other hand, if you’re looking to buy in a hot market, then building could be a cheaper option.
At the time of this article, the median home value in the U.S. is $331,533, according to Zillow. Home values jumped in 2021, rising 19.9%. The 2022 housing market outlook has prices continuing to climb, but at a slower rate.
Ways to save on new home construction
If you want to build but also need to be cost-conscious, you have several options:
- Consider a stock floor plan in place of custom blueprints
- Choose a smaller square footage
- Skip pricey upgrades that don’t add value to the home
- Shop for the best deals on materials and purchase them yourself
- Purchase cabinets and fixtures wholesale instead of choosing more expensive custom options
- Stick with standard sizes for doors and windows
- Don’t buy land without a perk test (meaning it can be hooked up to a septic or sewer system)
You could also consider doing some of the work yourself. Keep in mind: DIY could end up costing you more money if you have to pay a contractor to correct any mistakes you might make.
Do the math on building vs. buying
New homes and existing homes have both their pros and cons. When deciding your path to home ownership, cost is an important factor to keep in mind. Whether you build or buy, you want to come home to a place that fits your needs and your budget.
With no lender fees, we help you get the home you want.