How Much Does it Cost to Build a House?

Whether you’re a first-time homebuyer or a seasoned veteran of the real estate market, the process of getting into a new home is undoubtedly an overwhelming one. 

The whole process has gotten exponentially more complex in today’s competitive market. 

Sellers have come to expect over-the-top offers and cash upfront for properties that don’t even come close to checking all the boxes on your “wants and needs” list. 

If you’re like the many potential buyers out there, you might be feeling as though buying an existing home is an out-of-reach goal for you financially. Or perhaps you’re just sick of browsing options that won’t work for you and your family. 

Ditching the housing market in favor of building your own home is undoubtedly an enticing alternative. Suppose the thought of a custom-built option is getting you excited about homeownership all over again. In that case, it might be time to think more seriously about what that would entail financially. 

Read on for a complete guide on the ins and outs of building your own home versus buying to see if it’s a cost-effective option for you.  

The Average Cost to Build a House

1. Planning and Permits 

At this early stage, what you’ll mostly be paying for is a combination of expert design skills and permit fees. This is when you’ll have an architect draw up potential floor plan options, as well as consult with a general contractor about material purchases. 

Based on what they suggest and your state and county regulations, you’ll have to then apply for any necessary permits, which always come with fees attached. 

On average, this stage should set you back about $18,000 depending on the complexity of the designs and the related permitting process. 

2. Prepping the Exterior

Preparing your future home’s exterior correctly will ultimately determine the success and timeliness of the rest of the project, so you don’t want to skimp here. After all, you’ll sleep much better at night, knowing your structure will be sound and up-to-code for years to come. 

The exterior prepping encompasses many different areas, namely the foundation, the frame, and the siding. Foundations usually cost around $35,000, while the frame and exterior come out to roughly $90,000-$100,000. 

3. Installing Utilities

What’s a beautiful structure without running water, electricity, or heat, right? Your home can be as aesthetically pleasing as you want but will be uninhabitable without these critical features. 

You’ll have to make some pretty big decisions at this stage, such as whether you want to go by gas or electric. No matter what, though, you’ll have to install some sort of piping system, as well as bring in an electrical contractor to wire the structure and connect it to the power grid. 

In total, this step should come out to about $45,000. All this behind-the-scenes work isn’t exactly the most glamorous, but no one wants to live in a house without these basics of safety and sanitation. 

4. Designing the Interior

Now for the fun part! It’s finally time to put all those design concepts you’ve seen in the magazines into action. 

Drywall, flooring, and doorways are the first design features that must be added. You can also have a blast picking out things like countertops, light fixtures, cabinets, windows, and appliances. 

The costs are variable, depending on the choices you make. Expect to spend at least $75,000 at this stage, and potentially a lot more if your tastes are expensive and you still have room left in the budget. 

What Factors Affect the Cost of Building a House?

How much it will cost to build your dream home – and whether or not the bottom line will be cheaper than buying something similar — is hard to say for sure. So much of it depends on a long list of factors, such as the size of the home, quality of materials, cost of land, and average labor fees in your area, just to name a few. 

According to recent data, the average cost to build a home in 2021 comes out to $285,239, compared to the average home sale price of $408,800. These numbers from the U.S. Census Bureau and the Department of Housing and Urban Development are a little complicated, though, as they also say that it costs most homeowners somewhere between $120,537 and $452,335 to build a home. 

That’s a huge gap if you’re trying to make up your mind whether to take the home building leap or not!

Before you make the final call whether to build or to buy, consider these steps and try to determine more precisely your unique costs. 

1. Property Costs

Before you can even think about building your home, you need a place to build it. So, to some degree, you’ll still have to go through the property purchase process to do what you want with the land, although it will be much simpler than buying land plus a structure. 

If you are flexible about where you want to live, you’ll probably be able to navigate this step reasonably cheaply. Even in today’s market, there are many cheap land deals out there if you know where to look.  

Once you have the price of the land negotiated, there are still other location-specific costs to keep in mind. Property taxes vary from town to town, so you’ll have to pay more every year to live in your dream spot. 

Still, though, there are plenty of deals out there for stunning pieces of property if you’re relatively free of limitations. 

2. House Size 

Even if you’re one of the least experienced buyers on the market, it should come as no surprise that a bigger house will come at a higher price. Whether you’re buying or building, the more palatial the structure, the more money you’ll have to shell out. 

To feel prepared to make your decision, though, you should probably know that there’s a bit more to the story here. 

Pure square footage is a key determining factor. Though the numbers range, you can expect to spend about 100-200x the square footage when building. So, if your blueprints clock your home at 2,000 square feet, expect the build to cost between $200,000 and $400,000. 

This is a massive spectrum, though, so you can’t base your decision purely on square footage. Listing features such as the number of bathrooms and bedrooms are also critical. 

Of course, size then alters the cost of materials. The two can’t be evaluated separately from one another. 

Adding another bathroom will increase the value of your home, but it will also mean opening up your wallet for extra plumbing and fixtures. Similarly, putting up an additional wall to carve out another bedroom will also involve more materials and labor. 

3. Custom Finishes

Maybe an echoey mansion isn’t exactly your ideal, and you find yourself daydreaming about the sleek designs and appliances you see in architectural magazines instead. 

The fact of the matter is that style can be costly. The housing market is like any other industry in that there are pricey trends that come and go but are desirable selling points nonetheless. 

This isn’t to say that you need to deprive yourself of any fun aesthetic additions to keep your home affordable. The beauty of building your own home rather than buying it is that you have the flexibility to pick and choose where you want to invest your money. 

There are tons of times when potential buyers come across modestly sized homes that are still way out of their price range, just because there are some unnecessary additions and features thrown into the mix that they wouldn’t necessarily choose for themselves. 

So, this is one area where you can see the potential for cost-effectiveness. When building versus buying, it’s up to you whether or not you want to skip the heated floorboards in favor of some simple yet stunning built-in bookcases. 

4. Labor and Construction Fees

When people talk about building their own homes, they rarely mean that they are the ones building it from the ground up. If you have handy construction skills, that’s great, but you’ll probably need some licensed contractors, sub-contractors, and architects to do the technical stuff. 

Like everything else in the home building process, physical construction comes at a price. Keep in mind that these professionals are experts in their field and have years of training and testing that make them qualified to take on such big, important projects. 

Similar to property pricing, the area you live in will affect how much you pay for labor. Different states and regions have average housing prices and cost-of-living expenses that vary greatly, and the price of hiring labor will be determined accordingly. 

However, don’t look at labor costs as just something you have to write a check for. On the contrary, your contractor or architectural team can help you cut down on costs and pay for themselves. 

A good contractor or architect can guide you through choosing materials or deciding on building plans. They generally know the housing market inside and out, and can therefore clue you in on whether or not that addition you want to make is a good investment or just a waste of time and money. 

FAQs:

 1. Is it Cheaper to Build a House or Buy One?

The simple answer to this is that it depends! The beauty of building your own home is that you get to make it into what you want, out of whatever materials and design features you want. 

Then, the question is whether you can achieve what you want out of a home build while still staying within budget. This goal is usually achievable with the right experts guiding you and a touch of flexibility. 

2. What if I Want to Add On Later? 

For many people who take on home build projects, there is the concern that they might not be able to continue building and improving upon their property later on. Perhaps they don’t have the budget to achieve the addition that they want right now but still want to leave the door open to it in the future. 

While it’s cheaper to do it all at once to avoid extra consulting, permitting, and cleanup costs associated with reopening a project, there is no steadfast rule that you can’t go back to finish it all up later down the line. 

3. How Can I Calculate Labor Costs? 

Calculating labor costs can be, admittedly, pretty tricky. So much of it depends on the going rates of the experts you want to employ. Like anything else, you pay for quality and expertise. 

The only way to calculate these costs ahead of time is to do your research. Call around to contractors in your area to get some quotes. Arming yourself with some knowledge of the local going rates also helps so that you can negotiate or prevent getting taken advantage of. 

Conclusion:

As you can see, the numbers you read online with just a quick Google search can only take you so far when it comes to calculating the cost-effectiveness of building a home versus buying one. 

While the national average indicates that building can be cheaper than buying, this is still just a baseline that can fluctuate drastically depending on where you are located and what kind of build you have in mind. 

Don’t let the wide range of prices and complicated pricing charts overwhelm you, though. A huge benefit of building your home is that you are in control of everything, from the tiniest doorknob to the plot of land.

If you’re contemplating selling your current house to build your dream home — and you’d like to avoid the hassles, delays and costs of using a traditional real estate broker — reach out to the real professionals at Kind House Buyers

You’ll get a fast, cash offer on your house at fair market value and as-is. Channel your energy into the house you dream of building, not the one you want to sell…

Reach out today and change your life tomorrow!

Keith Sant

Keith is a blogger, entrepreneur, and real estate investor who truly enjoys helping others. He grew up in Washington where he graduated from UW with degrees in Marketing and economics. Besides flipping houses, Keith enjoys snacks, cycling, and hiking the Pacific Northwest with his fiancee Amanda and their boxer Tuna.

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