How much does it cost to build a house?

Gladys T. Black

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In a tight housing market, building a home can be attractive, but costs can be steep. Learn more about the cost to build a house. (iStock)

The U.S. housing market has rarely been tighter. Home prices are rising at the fastest rate on record, and the number of homes on the market is extremely low. 

With competition so fierce, you might consider building a new home instead. You don’t have to get in a bidding war, and you might even save money: In some cases, building a new home can cost less than buying and renovating an existing house

Building a home isn’t for everyone, though. Let’s look at the costs of building a house and when this option makes sense.

If you choose to buy your home, check out Credible to easily compare mortgage rates.

Is it cheaper to buy or build a home?

In general, it’s more expensive to build a home than it is to buy an existing home on the market. But this depends on your local housing market, the availability of lots and land, labor costs in your area, and the inventory of homes for sale in the area where you’d like to buy. 

You can speak to home builders in your area and a real estate agent to help you do your research. You’ll also want to create a detailed financial plan and budget before committing to building a new home.

The cost of building a house

The median sales price of a newly constructed home sold in 2020 was $336,900, according to the U.S. Census Bureau. That’s significantly higher than the median price of an existing home in 2020, which was $300,200, according to the National Association of Realtors.

Costs depend heavily on where you’re building or buying. Here’s how the average prices compared by region in 2020:

Average sales price of a newly built home

  • Northeast: $617,300
  • Midwest: $346,900
  • South: $343,800
  • West: $472,700

Average sales price of an existing home

  • Northeast: $361,600
  • Midwest: $262,000
  • South: $299,400
  • West: $448,700

A breakdown of the cost to build a house

When you buy an existing home, the cost is pretty straightforward. But when you’re building a home, you’ll run into different costs at every step of the process.

First, you may want to hire a home builder to manage the process. Several national home builders craft homes across the country, but you might also choose builders and contractors who work in your area. Home builders may specialize in a particular type of home and have a few basic models for you to choose from, or you may work with a builder willing to create a custom home for you. 

You may also choose to serve as your own general contractor on your new home build, especially if you have experience with construction or project management. Instead of hiring a general builder or contractor, you could hire all the subcontractors for the project yourself, from framers and roofers to plumbers and electricians. While you may save a little money this way, you’ll invest significant time in the project.

Whichever way you go, here are a few of the major categories of expenses that come with home building, and their percentage of the total cost of building, according to the National Association of Home Builders 2019 Construction Cost survey. The average finished price of a new single-family home in 2019 was $485,128, the NAHB survey found. Of that, just under $300,000 came from construction costs. 

  • Buying land: 18.5%
  • Permits and fees: 2.75%
  • Foundation: 7.1%
  • Framing: 10.6%
  • Roofing: 2.1%
  • Siding: 4%
  • Plumbing, electricity, and HVAC: 9%
  • Cabinets, countertops, and appliances: 3.8%
  • Flooring: 2.4%
  • Driveway: 1.3%
  • Landscaping: 1.3%

Buying land

Building a new home starts with buying the land it’ll sit on. You can choose to buy a lot ready for building, or you could buy undeveloped land and pay for all the infrastructure that will get it ready to build. The typical cost for a lot and all the expenses needed to finish it is about $90,000, according to the NAHB. 

Permits

Construction projects generally need to be permitted and inspected by the local government in your area. The total cost of the inspections, building permits, and fees can add up quickly. 

Foundation

The foundation is a solid base for the home to sit on. The foundation price depends on the type of foundation you choose — concrete slab, crawl space, or basement, for example. 

Framing

Your framing is the basic structure of the home, including the interior of your walls, floors, roof, and ceilings. This is one of the biggest parts of the construction cost.

Roofing

Roofing materials go on top of the framing, typically an underlayment, and then shingles, slate, or another type of roofing. The cost will vary based on the material.

Siding

Siding goes on your exterior walls, protecting your home from the elements. The material used will vary based on the type of home and your area of the country, but it could be brick, fiber cement, stucco, or vinyl. 

Plumbing, electricity, and HVAC

These major systems power your home, bring in water, and keep your home warm or cool. You’ll need specialty tradespeople to install all the wires, pipes, and ducts.

Cabinets, countertops, and appliances

You’ll use these finishes just about every day, and they’re key to making your home your own. You’ll need to buy and install all the cabinets, countertops, and appliances.

Flooring

Your flooring goes on top of the slab or subfloor. Flooring materials could be hardwood, vinyl, tile, or some other material. 

Driveway

Your driveway is one of the last things to go in, but it’s important. 

Landscaping

Landscaping gives your new home curb appeal. The cost of sod, trees, shrubs, and mulch can add up fast.

If you decide to buy your home, visit Credible to compare mortgage rates from various lenders in minutes.

Square footage affects costs

The cost of building a new house can vary widely by the size of the home. The average sales price per square foot of a newly built home was $122.12 last year, according to the U.S. Census Bureau. For a 2,000-square-foot house, that would put the price at $244,240. For a 1,500-square-foot house, the cost would be about $183,180. A larger, 3,500-square-foot home would be around $427,420.

Other factors that impact the cost of building a house

Construction doesn’t always go smoothly —  a multitude of issues and costs can crop up while you’re building your home. Lumber and material prices have been volatile since the pandemic interrupted supply chains worldwide, and many of the appliances, materials, and finishes you want may be harder to come by — or more expensive.

As you’re building, you may choose to install things like a deck, pool, porch, patio, or an outdoor living area — these features will increase your costs. You’ll also want to factor in your cost of living while building your new home. If you’re renting a home during construction, those costs need to be budgeted for. 

Regardless, you’ll want to have a sizable contingency fund to cover cost overruns and other unexpected expenses. Be sure to leave room in your budget for when your estimates don’t match reality.

A lender that specializes in new construction can help you set a budget and figure out the loan amount you’ll qualify for. Loans for new homes are different from a traditional mortgage. Construction loans typically disburse funds to your contractor or builder over time as the project progresses, and interest rates can be higher than a typical mortgage loan. Once construction is complete, you’ll either need to refinance into a long-term mortgage or pay off the loan as a lump sum. Many construction lenders offer one-time close loans, where a single application process will cover a construction loan that converts into a traditional mortgage.

Pros and cons of building a house

Building a new home has plenty of advantages, but there are also significant drawbacks to keep in mind.

Pros of building a house 

Cons of building a house

  • The construction process is long. It can take a long time to build a new house — many months or even a year or longer. You’ll have to live somewhere else during this time period, and moving in can be delayed by a multitude of factors.
  • All the decisions can be stressful. Even if you’re building a standard home from a well-known home builder, you’ll still need to make dozens of decisions on the layout, features, and finishes of your new home. This can be stressful, and so can working with contractors and local government officials.
  • Costs may be higher. Building a new home can be expensive, and unexpected home-building costs can add up.

Thinking of buying your home? Compare mortgage rates with Credible and find the right one for you.

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