How Much Does It Cost to Build a House?
Shopping for a new home can be a lot of fun. In fact, some people enjoy touring real estate so much that they attend open houses just for pleasure, even though they are not really looking to buy. Occasionally, though, the house hunting process can be a tad demoralizing, specifically when you just cannot seem to find a house that is to your liking.
In these cases, it may be tempting to simply design and build your own dream house from scratch. Certainly, this is a good way to make sure you find a house that is exactly what you want, without having to make any compromises. Of course, the big downside is expense.
For those wondering how much to build a house, there are several factors to consider. Read on for more information about the cost to build a house.
The Cost of Building a House: An Overview
For starters, the cost of building a house can vary depending on several different factors; we will list a few of them in the following section. For now, just be aware that there is no one standard price for building a house. It is going to look a little different for every person.
But what about an average cost? According to data from Home Advisor, the average cost of building a house is $299,692. At the low end, it is possible to construct a new home for as little as $155,415. And at the upper extremity, it may cost $478,398 or more.
If you want to break this number down further, it comes out to between $200 and $500 per square foot.
And where does all this money go, exactly? Home Advisor states that about 40 percent of the total cost goes to labor. The rest goes toward materials as well as the different permits required for constructing a home.
What Can Affect the Cost to Build a House?
Now that we have provided a general ballpark amount, let’s hone in on some of the specific factors that can impact the total cost to build a house.
The Region Where You Are Building
Geographic location is one of the most important factors. The cost to build a house can vary from state to state and even from city to city, simply depending on local demand, the cost of the local permitting process, and more.
For instance, Home Advisor notes that the average cost for building a home in the State of Alabama is between $200,000 and $380,000. For those who live in California, the cost to build may be as high as $600,000. And in Connecticut, it may be as high as $800,000.
The same data shows that the average cost for building a home can vary even within a state; for example, it may be a bit more expensive to build in Asheville than in Charlotte, even though both cities are in North Carolina.
The Size of the Home
Another factor to keep in mind is home. Simply put, you will pay more per square footage, if only because the cost of materials will increase. Also keep in mind that the bulk of your costs go to labor; larger homes will take longer to construct, which makes those labor costs go up.
The Cost of Land
Something else to remember is that you will have to have a plot of land to build on, and that can increase your expense considerably. You may spend several thousand dollars on a plot of land, with plots in existing housing developments usually going to a minimum of $50,000. You will also need to consider the cost of clearing the land, preparing it for construction. Construction prep costs, which includes things like backhoe rentals, may total anywhere from $1,500 to $5,000.
There is also the question of whether you have a finished or an unfinished lot. An unfinished lot is one that is not yet connected to sewage, cable, etc. The cost of making these connections can total a few thousand dollars, further inflating the total cost of your build.
By contrast, if you can build your home on an existing foundation, that can lead to significant cost savings. In fact, building on an existing foundation may slash anywhere from $5,000 to $25,000 off the total price tag.
The Type of Material
Additionally, determining the cost of building a home means thinking about the type of building material. A timber frame house will cost significantly more than a metal frame house, while brick walls cost a lot more than vinyl siding.
Additional Costs for Building a House
There are several other factors to keep in mind as you think about how much it costs to build the house of your dreams. Just a few quick examples include:
- The number of stories. Adding additional floors increases the scope and complexity of the project considerably, and thus has an impact on the total cost.
- Unusual design shapes. Generally speaking, the more corners a home has, the more it is going to cost to build. Custom designs often have more unorthodox shapes, which can be a little pricier. Similarly, unusual roof lines can compound the price.
- Perks and design features. There are plenty of amenities that can cause the cost of building a home to increase. Just a few examples include:
- Large decks or patios
- Outdoor kitchens
- Smart home automation systems
These factors all come down to personal preference, of course. If you are truly looking to build your dream home, however, be prepared for some additional expenses.
Is it Cheaper to Buy or to Build?
As you wonder how much does it cost to build a house, you may wish to compare it with the cost of buying a house. Granted, when you build your own place, it allows you to design a home that is totally to your specifications; you are unlikely to find something so perfect on the existing housing market. Still, you will want to ensure your decision is a financially sound one.
According to the National Association of Realtors, the average cost of buying a single-family home is currently around $300,000. Of course, this number varies, and can be impacted by some of the same factors that affect the cost of building. For example, the cost of real estate can vary from one state to the next. And, you may pay more or less depending on square footage, housing materials, perks and design features, etc.
The initial cost of constructing a home can actually be quite a bit cheaper than that… but wait. Do not forget that you also have to pay for permits, buy a plot of land, clear the land, and ensure your lot is connected to utilities. These can all be significant expenses.
The bottom line: Once you factor in all the costs associated with building a house it is generally going to be more expensive than purchasing a home that’s already been designed and constructed.
What are the Next Steps to Building a House?
For those who feel that the added expense is worth it, there are a few steps that can guide your path toward building that dream home.
Check the Financing Options
You will likely need to take out a loan in order to pay for your new home. And here is the thing: Conventional mortgage loans won’t be an option. Instead, you will need to get a construction loan (or, as it’s sometimes called, a self-build loan). The standards for loan approval here tend to be fairly rigid, as you’re not looking for money to buy an existing home, but rather you’re asking a lender to invest in the concept of a home. You can expect that the rates will be a little higher than with a conventional mortgage loan, and you will likely be required to make a down payment of 20 or 25 percent.
Find the Right Lot
Once you feel confident that you can secure financing, you will be ready to look around for a good lot. Often, the easiest way to do this is simply by hiring a local real estate agent.
Plan and Design Your Home
Naturally, you will hire a team of architects and designers to handle the specifications of your custom home. However, there are a few issues that will require your direct input. For example, you will want to think in advance about the number of rooms you need, the kind of outdoor space you prefer, the number of stories you want, the general style of the house, etc.
Once you have done some initial brainstorming, that is when you will want to begin the process of interviewing and ultimately hiring your team.
Find Out More About Your Real Estate Options
Whether you are looking to build, or you’ve decided to buy something already constructed, a crucial step in the process is selling your existing home. To find out more about your options for selling your house, take our FREE quiz, available now here at SOLD.com.