In certain circumstances, constructing a new home may be more cost-effective than purchasing an existing one. How much does it cost to make a home? Is it more affordable to build or buy a house?
The construction cost in 2023 will vary widely, ranging from $112,000 to $480,000, with a national average of approximately $295,000, land not included. In comparison, the U.S. Census Bureau estimates that the average price of a new single-family residence will be $501,000 in April 2023.
There are numerous advantages to building a new home rather than purchasing an existing one. Everything will be brand new, to begin with, from the carpets to the basins to the dishwasher. And you can influence the design so your home will be exactly how you envision it.
In certain circumstances, constructing a new home may be more cost-effective than purchasing an existing one. How much does it cost to create a home? Is it more affordable to build or buy a house?
The construction cost in 2023 will vary widely, ranging from $112,000 to $480,000, with a national average of approximately $295,000, land not included. In comparison, the U.S. Census Bureau estimates that the average price of a new single-family residence will be $501,000 in April 2023.
In this post, we’ll break down these costs, provide square-footage estimates, and provide examples of what you can afford based on your budget.
There are numerous advantages to building a new home rather than purchasing an existing one. Everything will be brand new, to begin with, from the carpets to the basins to the dishwasher. And you can influence the design so your home will be exactly as you envision.
Step one: Consult a professional!
In 2020, the prices of single-family homes skyrocketed as people moved out of apartments and into single-family homes in search of more space during pandemic lockdowns. The increases continued through 2021 and 2022.
Existing-home inventory is low, and the median price of single-family homes is just above $371,000, according to data from the National Association of Realtors (NAR) for the first quarter of 2023. Living in an expensive area may appear cheaper to do it yourself.
Your precise cost will vary based on variables such as the region where you wish to reside, the square footage you desire, and the materials used to construct. There is also a price difference between a custom home and a production home, where developers have planned subdivisions with various available lots and floor plans.
Let’s get into the specifics.
Whether you purchase a developed site or undeveloped land, the property significantly impacts the total cost of construction. Depending on the land’s size and location, the price to purchase a parcel varies substantially. It could range anywhere from $3,000 to $150,000 or more.
Lot preparation must also be factored into your building costs, which HomeAdvisor estimates to range between $1,300 and $5,600. This may include charges for soil testing, land excavation, land grading, and surveyor fees.
The National Association of Homebuilders (NAHB) reports that the median lot price in the United States is $55,000. In New England and the Pacific regions, however, lot values increased by 67% and 39% in 2021, bringing lot prices to all-time highs.
Numerous purchasers must consider financing to cover these expenses, as land loans are frequently distinct from new construction loans. Nadia Aminov, a real estate agent with 18 years of experience in Baltimore, Maryland, was discouraged by the financing process.
“If you don’t have the cash to purchase the parcel of property, you must obtain financing. First, you locate the parcel and then acquire the funds to purchase it. Then, you finance the home’s construction, but these are two distinct processes,” explains Aminov, adding that combining them can be complex.
Fundament: $8,609
The average cost of foundation installation is $9,067. If you want to create a substructure (possibly to be furnished later), you will need more material, reinforcement with rebar, and additional excavation, which will increase your costs.
Between $20,000 and $50,000
Framing, the procedure of giving your home its desired shape, costs between $20,000 and $50,000. Since structure typically requires wood, be aware that lumber prices have increased since April 2020, a trend that could improve this aspect of your home-building expenses.
Roof: $10,000
The national average cost to install a new roof is $10,000. However, this estimate will increase if you want alternatives to asphalt shingles or if your roof is more prominent than average.
Consider installing solar panels on your new roof. Budget approximately $20,650 after tax credits, or consider leasing solar panels.
Between $3,000 and $15,000
Additionally, your new home will require new appliances, such as a refrigerator, dishwasher, and washer and dryer. If this is your first time purchasing large appliances, research price ranges so you can include these costs in your calculations.
Essential techniques: $17,000 to $72,000
It’s not as exciting as selecting countertops or paint colors, but pay attention to your home’s essential systems. A new HVAC system typically costs between $5,000 and $10,000. As for electricity, the average cost per square foot to wire a new residence is between $3 and $5. Plumbing is another major category. Plumbing costs for new construction can range from $1,500 to $17,500. The total square footage of your home will be a significant factor in determining the total cost of each system.
$42,000 to $175,000 for fittings and fixtures.
Do you fantasize about granite countertops in your kitchen? This upscale option will be priced between $40 and $100 per square foot. Solid hardwood flooring costs $7.80 per square foot when purchased.
A bathtub and liner installation costs an average of $5,871, while a walk-in shower costs an average of $6,641 but can cost up to $10,000 per shower if you go all out.
Especially if you are concerned about resale value, consider this aesthetics when determining your budget.
Permissions and rules: $93,870
You may have heard that excessive red tape is increasing construction costs. Each residential permit costs money, from the foundation to the fencing and driveways to the roof, and these permits add up. The cost of overcoming regulatory hurdles accounted for 23.8% of the ultimate purchase price of a new single-family home, according to an NAHB study conducted in 2021.
About 10% of this amount is attributable to regulations surrounding the site’s development, while the remainder is attributable to rules during construction. Each home addition may require its permit and associated fees, which, as you can imagine, can rapidly add up.
Additional attributes: Varies contingent on choices
You may be intrigued by customizing your home. An average 10-by-10 deck costs approximately $2,200. Need a pool? This will cost roughly $35,000. Need assistance with landscaping? This cost can range from $1,000 to $40,000 or more, depending on the extent of the landscaping labor required for your property.
These features incur additional maintenance expenses, so pay attention to account for them.
Square footage affects pricing.
In January 2023, the average cost per square foot for new home construction is approximately $150. The average new-home size is about 2,200 square feet, and the total construction cost is $281,000.
Factors Influencing the Cost of Building a Home
The construction costs estimate the everyday expenses incurred when constructing a new residence. The dimensions and style will unquestionably impact the budget and finishing touches. Note that customizations can increase a project’s cost.
Home Size
The scale of the home and the number of bedrooms and bathrooms are significant determinants of the cost of constructing a new home. Additionally, the square footage of a house influences both the construction cost and the monthly mortgage payment.
Home Design
Design is crucial when constructing a house, impacting construction costs in ways you might not expect. For example, a place with an open floor plan may be more expensive than a conventional home because it requires more electrical receptacles and other utilities.
Features and Finishes
Finishes and features have a significant impact on the price of constructing a new home. Luxury materials, appliances, and fixtures can considerably increase the price of a home. In contrast, small touches such as ceiling fans, window treatments, and backsplashes increase the home’s value and profit.
When to Consider Constructing a Home
Building a home is an essential and monumental life achievement. It can be enjoyable, exciting, and rewarding for homeowners but also stressful and time-consuming. Numerous variables can make determine when to construct a home complex.
Sometimes it makes sense to build your residence, and sometimes it makes more sense to purchase something that has already been constructed. For instance, buying is typically more straightforward than building if you have a fixed budget. Before building one’s ideal home, those with no particular restrictions must consider factors such as their budget and the amount of space they require.
How to Finance Construction of Your Own Home
A home construction loan is one of the most affordable ways to build a residence. This loan can pay for construction materials, labor, and other related expenditures. Upon completion of your property, your bank will often convert the construction loan into a traditional mortgage loan with monthly payments.
