With limited inventory and home prices at record highs, many Americans feel buying a ready-made house is impossible or outside of their budget. Building a home from scratch is an attractive, but costly alternative, but with construction costs growing as well, is it cheaper to build a house? A new StorageCafe study reveals where homebuyers will find it cheaper to build rather than buy.
Key Takeaways:
- In California, over $200K can be saved on average when building a house instead of buying one.
- In states surrounding Washington DC — Virginia, Maryland and Delaware — almost $100K can be saved.
- Rocky Mountain states — Colorado, Utah, Montana and Idaho — occupy more top spots than any other region does for home building vs. buying costs.
- In Hawaii, purchasing a house costs almost twice as much as building one.
- The Midwest states are the most cost-effective for buying a home — the costs of building one are from $64K to $178K higher.
- Western and South-Atlantic states prove to be the best places to build instead of buy.
- In California, no less than $200K can be saved on average, while around half that amount can be realized in states such as Colorado, Utah and those close to Washington DC. Away from the contiguous US, Hawaii can offer house builders great savings.
- In the Midwest, South and Northeast, meanwhile,lower house prices tend to make purchasing a home more attractive, though Florida and Massachusetts favor building.
Hawaii houses list for over $1M while constructing one costs half that
Hawaii has the highest single family home median listing price of any state, just over $1.045M — that is approaching twice the overall cost of building a house there, which stands at around $551K. The attraction of building in the Aloha State increases when considering the 0.62-acre average lot size for homebuilding — almost double the national average — and manylots for sale in Hawaiigive access to beaches and spectacular views.
"The median house price in Hawaii is typically higher than most other states, making buying an existing home significantly more expensive than building a new one from the ground up. Even so, constructing a residential property in Hawaii can still be costly compared to building on the mainland," confirms Nick Mueller, director of operations atHawaiianIslands.com. "The cost of building a new home in Hawaii can be substantial, with estimates ranging on average from $185 to over $400 per square foot.... typical costs for new construction on the mainland range between $80-160 per square foot before factoring in land fees or other related expenses.
California leads Pacific Coast states favoring building rather than homebuying
The cost of building a home in the West can be considerable. But owing to comparatively high single family home listing prices in the states along the Pacific Coast, the savings made there by building a new home are some of the highest in the country.
"Building a house in California is becoming increasingly cost-effective," says Scott Berens, CEO of California real estate expertsBalsamo Homes. "While purchasing land, hiring professionals, and paying out for the raw materials can add up to a hefty price tag, these tend to compare favorably to the listing prices of homes in the same area. That being said, house building in California has unique challenges due to the varied climatic conditions throughout the state. Right now, places like San Francisco and Los Angeles may be more expensive for house-building projects; however, several other locations in California, such as Marin County and San Diego, may provide better cost-efficiencies for housebuilders."
California stands out as the mainland US state where building a home looks most advantageous compared to buying one. The cost of constructing a home in the Golden State ranges around $495K, representing a saving of around $205K compared to the median listing price for single family homes of $700K. It should be noted, however, that the median lot size here is one of the nation’s smallest at 0.17 acres, though that should still be enough for a home with that all-important swimming pool.
Washington State is in 11thposition in the ranking of financial advantages that can be realized when building a home, with anyone who chooses that option instead of buying one able to save around $66K. Combined building costs are about the same as California’s at $493K, but this is compared to a much lower median house listing price of $559K. Land for building on is reasonable at a median cost of $44K per acre.
Oregon has considerably greater median residential land costs at $113K per acre, but savings of $43K can still be made by building rather than paying the median price of $545K for a ready-made house. Building costs can be a little more expensive in Oregon than in other West Coast states but building away from the big cities tends to lower the amount required.
Rocky Mountain states give savings of around $100K when building a home
The mountainous, western states of Colorado, Utah, Montana and Idaho are all in the top-10 for saving money when building a home. In addition, Wyoming, which also has Rocky Mountain views, is in the top half of the ranking of states in this regard. The region’s southern desert states of Nevada, Arizona and New Mexico tend to have lower home prices, making home building there look less profitable.
Colorado can offer the biggest aggregate savings in this region when choosing to build a home, no less than $107K, assisted by a rather reasonable median land price of $43K per acre, applied to a median lot size of 0.18 acres. This results in a combined home building cost of around $492K, compared to a median home price of $600K. The state has both building opportunities in cities with thriving employment markets and in more remote yet beautiful locations.
To the north, Montana and Idaho can allow savings of around $84K and $70K, respectively, for anyone looking to take the long way round to getting a house. The median cost of buying a house in both states is less than $600K, so this more northerly region is a little cheaper for anyone buying a house off the peg. Montana’s homebuilding numbers include the added advantage of a 0.36-acre median lot size, compared to Idaho’s 0.21 acres.
High home prices in Utah's Summit and Wasatch counties make building much more cost effective
Utah has been a rapidly up-and-coming state in recent years, with a booming tech sector and real estate prices to match. The median land price of around $234K per acre is in fact the highest in the nation, resulting in a total cost for developing a median-sized lot — which is 0.21 acres here — of $538K. However, that still looks good compared to a median house listing price of $635K, a $97K difference.
Among the Utah counties with available listings, Summit County gives builders the biggest savings, no less than $1.7M. The large median lot size of 0.38 acres results in a hefty price tag of $176K and a total building cost of $677K. But this is dwarfed by this sought-after region’s median house listing price of almost $2.5M. Wasatch County has the next best savings for builders at $843K, with a house listing price of around $1.5M and despite an even higher median lot price of $189K. Rich County offers lower profits of around $185K when building — the median lot purchase price of $82K is offset by a house listing price of $760K — and Washington County gives a small saving of $15K.
At the other end of the Utah spectrum, Cache County is best for buyers, and the total building costs of $643K cannot compete with a listing price of $498K, a difference of $145K, while Box Elder County has the next-best advantage for buyers of around $90K. Salt Lake County, by far Utah’s most populous, unsurprisingly has the state’s smallest median lot size at 0.16 acres but also the highest land prices at $1.3M per acre, and the total cost of building a home ($711K) exceeds the listing price ($636K) by $75K. In Davis, Sanpete, Iron, Utah, Weber and Kane counties it is cheaper to buy rather than build, with differences ranging from $14K to $73K.
States around DC knock a fifth of the price of a new home when building it
The nation’s capital draws workers from all over the country, but they can’t always live there. Fortunately, many can commute from the surrounding states of Virginia, Maryland and Delaware — this region is considered to be in the South of the country for the purposes of calculating building costs. In all these three states, savings hovering around $95K can be made by building instead of buying a home.
Virginia offers a low median price per acre for residential lots of $33K, and their median size here is 0.29 acres. The combined median homebuilding cost of around $361K compares to a median house listing price of approximately $458K, and the state has both communities over the river from DC and scenic areas further out. Maryland offers very similar numbers of $365K and $460K — though the median lot size is somewhat smaller at 0.17 — plus the city of Baltimore and other employment markets.
South Atlantic states offer homebuilders savings with Florida leading the way
Still in the South, Florida tops the list for the amount of savings anyone building a single family home instead of buying one can make, with North Carolina and Georgia also putting money in their pockets.
Florida can offer savings of $76K when building a house, with the cost of residential land being fairly pricy at $108K per acre and the median size being a compact 0.20 acres. While the savings are comparable to those obtained in the Western mountain states, the median prices are considerably lower — the costs of building and buying are $375K and $451K, respectively, meaning the savings would stretch further to pay for more real estate construction work.
Within the Sunshine State, there is a very wide difference in costs across the various counties and regions. For example, Monroe County, which includes the exclusive Florida Keys communities, has the state’s highest-priced houses, with a median price of slightly over $1.5M. And although land is unsurprisingly expensive here too — $1.3M per acre, with the median lot size being a compact 0.14 acres — building a house would generate huge savings of around $1M compared to buying one.
Other places where building gives a big financial advantage include the coastal Panhandle counties Walton and Gulf — the benefit in the former would be no less than $657K due to an average listing price of $1.1M. Similarly, Gulf Coast retirement-paradise counties Collier and Sarasota also favor building, having low land costs of $81K of $108K per acre, with building a home in the former costing around $576K less than a median listing price there of approaching $1M. Other counties rewarding builders are the desirable addresses of Palm Beach and Martin, north of Miami, and Orange, which includes the employment-magnet city of Orlando.
Anyone wanting a house in or around Magic City should know that Florida’s highest land prices of $2.5M and $1.7M per acre, in Broward and Miami-Dade counties respectively, make buying far more economical than building on a median-sized lot there. Interestingly, inland countiesare often the ones that mostfavor buying a ready-made residence, with Washington and Jackson in the Panhandle making purchasing $145K and $128 cheaper and Putnam and Bradford near Jacksonville leaving buyers with averages of around $100K in their pockets — in all these cases, although total building costs are not exorbitant at less than $400K, median listing prices are less than $300K.
To read the full report, including more data, charts and methodology, click here.
FAQs
Are you better off buying or building a house? ›
Pros Of Buying An Existing Home
Less costly: In general, you'll likely find it cheaper overall to buy an existing home, but that also depends on the market. A home loan is less risky than a land loan, and typically comes with a lower down payment and better interest rate.
Is it cheaper to build or buy a house? As a rule of thumb, it's cheaper to buy a house than to build one. Building a new home costs $34,000 more, on average, than purchasing an existing home. The median cost of new construction was $449,000 in May 2022.
Is it cheaper to build or buy a house in California? ›The Golden State is the second-most cost-effective state for home building in the United States, trailing only Hawaii. Yardi's data estimates that it could be more than $200,000 cheaper to build a home from the ground up, rather than purchase one that's already standing.
Is it cheaper to build or buy a house in Florida? ›Is buying cheaper than the cost to build a house in Florida? As a general rule, buying an older home will be cheaper than building a home. The median cost of new construction was $385,000 in January 2023. Comparatively, the median cost to buy an existing home was $329,634 in December 2022.
Why building a home is better? ›When you build a house, there are no costly repairs for appliances, updates or remodeling. Most homes are built in newer neighborhoods that are very desirable. Add to that the annual savings you'll realize with newer, more efficient appliances and construction techniques, and you've got some real financial benefits.
Is a house worth more after its built? ›Although you may pay for their charm and individuality, these old homes still cost significantly less upfront than their newer counterparts. The price of a newly built home is often higher than that of an older home by a staggering 30% or more.
What are the disadvantages of building a house? ›- Longer timeline: While an existing home is often move-in ready, a new build can take several months to complete. ...
- Limited flexibility in price negotiation: While you can save money if you build your own home, you will not have as much negotiation in the price.
Framing. Perhaps the most expensive part when it comes to building a home is the framing, which consists of wooden beams that make up the home's skeleton. Forbes states that high-quality lumber averages about $33,000 for a home in the United States. Metal stud framing systems begin around $20,000.
What costs the most when building a house? ›Framing is the highest material cost for most new home builds. High-quantity lumber framing averages $33,000 for a home in the U.S. This includes floors, walls and roof trusses. Metal stud framing systems start at about $20,000.
How much does it cost to build a 2500 sq ft house in California? ›| Home Size | Average Price Range |
|---|---|
| 1,500 sq. ft. | $750,000 |
| 2,000 sq. ft. | $1,000,000 |
| 2,500 sq. ft. | $1,250,000 |
| 3,000 sq. ft. | $1,500,000 |
Why is building more expensive than buying? ›
On the high end, you could pay more than $2.5 million to complete your project. There are two key reasons why building in California is so expensive: the parts and the labor. Construction materials in California match other cost of living expenses.
How much does it cost to build a 1200 sq ft house in California? ›On average, building a custom home in California will cost $500 or more per square foot, according to Aballi — while building a tract home in California will cost $300 to $350 per square foot, according to Laniado.
How much does it cost to build a 3 000 sq ft house in Florida? ›If you want a 3,000-square-foot house then you will need between $300,000 and $600,000 to build your property.
Why are Florida houses so cheap? ›Insurance and Property Taxes
One of the first reasons that the median property prices for Florida houses are cheaper than in other states is because, in some areas, the insurance and property taxes are very high. Florida is known to experience unstable weather conditions throughout the year.
While the average cost to build a house was $285,956 in 2022, most homeowners spend $111,892 – $460,414 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.
What is the cheapest type of house to build? ›The cheapest way to build a home is to design a simple box. Sticking to a square or rectangular floor plan makes the building and design simple. Generally speaking, building up is cheaper than building a sprawling one-story home, so you may want to consider planning for a multiple-story home if you need more space.
Is it better to build big or small house? ›Big homes usually mean high sales value when you sell them. Spare rooms can also be rented out which adds to your potential earnings. A big home will ensure a bigger resale value in the long term, this could be used to offset small retirement savings.
Why are old houses built so much better? ›Old homes have better-quality construction
Even the walls are likely different. In an older home they're probably built with plaster and lathe, making them structurally stronger than the drywall construction of modern homes. These older materials also provide a better sound barrier and insulation.
Many first-time home buyers believe the physical characteristics of a house will lead to increased property value. But in reality, a property's physical structure tends to depreciate over time, while the land it sits on typically appreciates in value.
What raises the value of a home? ›Homes are valued and priced by the livable square feet they contain, and the more livable square feet, the better, says Benjamin Ross, a Realtor and real estate investor based in Corpus Christi, Texas. As a result, adding a bathroom, a great room or another needed space to a home can increase function and add value.
Does house age affect value? ›
4. Age and condition. Typically, homes that are newer appraise at a higher value. The fact that critical parts of the house, like plumbing, electrical, the roof, and appliances are newer and therefore less likely to break down, can generate savings for a buyer.
What's the hardest part about building a house? ›- Managing expectations. ...
- Finding the right build site. ...
- The wait. ...
- So many decisions! ...
- Unexpected delays. ...
- Unexpected expenses that add to construction cost. ...
- Relationship strain.
It's normally cheaper to buy an existing house, mainly because construction is expensive, especially since labor and material costs have increased with inflation.
Is building a house too stressful? ›The decision to build a new home could be one of the most rewarding — or stressful — experiences of your adult life. It's a huge commitment in both time and money; and with a lot at stake, it's easy to get overwhelmed.
What is the biggest expense on buildings? ›The highest cost you'll experience in the building budget for your home is when it's time to frame. This is the skeleton of your home, and it takes a lot of lumber to build the bones. When purchasing high quality lumber, estimates can cost $25,000 for a modest size home to more than $80,000 and up for larger homes.
Which room in a house is most expensive? ›1. Kitchen ($10,000 to $30,000) One of the most important rooms in the house, it makes sense that kitchens are also one of the most expensive to build or remodel. From plumbing and electrical, to the layout, to the materials in the room, it adds up.
What city is the most expensive to build a house? ›San Francisco Named the Most Expensive City
According to Turner & Townsend's 2022 international construction market survey, San Francisco, California, in the U.S. has reclaimed its top spot as the world's most expensive city to build in 2022.
Cement. Cement is a popular construction material because it is the most important ingredient of concrete. Cement is mixed with water and other aggregates to form a paste that dries to form concrete. Cement is one of the most expensive construction materials.
What is the most expensive part of home renovation? ›Typically, when homeowners remodel their kitchen countertops, they invariably succumb to the temptation to purchase all new appliances as well. This helps to explain why kitchens are typically the most expensive room to remodel.
How much does it cost to add 1000 square feet to a house? ›How much does it cost to add 1000 square feet to a house? Based on a cost of $80 and $200 per square foot (£627 and £1,567 per square metre), you can expect to pay between $80,000 and $200,000 (£58,244 and £145,589) to add 1000 square feet to a house.
Is it cheaper to build a big house or buy one? ›
Overall, it's cheaper to build a home than to buy one in California, with 13 out of the 20 counties saving you money if you decide to build your house from scratch. Budget-wise, building is more favorable in Southern California whereas Central California caters best to those interested in buying.
How long does it take to build a 2500 sf house? ›A 2,500 square foot home should take approximately 6–9 months to complete. The standard build cycle time for a 2500 square foot home for a production home builder is right around 16–18 weeks from dig to completion. That is for the builder who is building one after another, lot by lot, through a subdivision.
How long does it take to build a house in California? ›Step-by-Step Process to Build a House in California
Building a home in California takes an average of seven months, but it can take more or less time depending on a variety of factors including your home's size and style, the availability of labor and materials, and even the weather.
Housing is so expensive in California as there is a limited supply of housing but a high demand for housing due to an increasing population.
Why are modern houses more expensive to build? ›Structural challenges must be solved with style
The sleek look of modern homes means every surface needs to serve a purpose. This often results in fewer walls than might be found in a traditional home. “Fewer walls make contemporary homes more structurally challenging to build,” says Dougherty.
How Much Does It Cost To Build A 2500 sqft House In Los Angeles? You need a $200,000 to $1 million budget to construct a 2,500-square-foot house in Los Angeles, depending on the construction area, architectural design, and amenities. A standard 2,500-square-foot home can be built within a $650,000 budget.
How much does it cost to build a house in California right now? ›Generally, building a standard home in California will now start at about $400 per square foot. A mid-range home, which could include more customized features and higher-grade fixtures, will cost about $500 per square foot. On the other hand, a luxury home could cost $600 per square foot and beyond.
Can I build my own house in California? ›The California Business and Professions Code (7044) allows for the owner of a property to act as his/her own contractor under certain conditions. If you are thinking about acting as an Owner-Builder, there is important information you need to consider BEFORE pulling your permit!
What size house can you build on a 5000 sq ft lot? ›What is the Floor Area Ratio (FAR)? In an R1 zoned lot with a Lot Size of 5,000 square feet, the Total Development Potential for a one-story Single Family Dwelling is 2,600 square feet. For a two- story Single Family Dwelling, it is 4,940 square feet and for a three-story Single Family Dwelling it is 7,020 square feet.
How much does a 4 bedroom house cost to build in Florida? ›The average price to build a house in Florida with four bedrooms is between $388,000 and $465,000. This range is higher than the average Florida construction costs due the fact that four-bedroom houses are typically newer than those with three or fewer bedrooms.
How much is an acre of land in Florida? ›
florida Farmland Prices
Over the last 20 years, the price of farmland per acre in florida has risen by an average of 5.7% per year to $7,190 per acre as of 2019.
Florida is becoming one of the most popular places to live. That's also making it more and more expensive. Inflation has hit Miami harder than any other metro area. Ultimately, it doesn't matter where you live; you're probably struggling to keep up with skyrocketing inflation, which hit a 40-year high last year.
What part of Florida is cheapest to buy a house? ›- Jacksonville.
- Cape Coral.
- Gainesville.
- Dade City.
- Dunedin.
- Kissimmee.
- Bartow.
- Homosassa Springs.
Overall, the Florida housing market is likely to remain strong in 2023, with continued demand for homes and steady price growth. However, the market may begin to stabilize as the growth rate slows down, which may lead to more balanced conditions between buyers and sellers.
Is it financially smart to build a house? ›As a rule of thumb, it's cheaper to buy a house than to build one. Building a new home costs $34,000 more, on average, than purchasing an existing home. The median cost of new construction was $449,000 in May 2022.
Is $300000 enough to build a house? ›Updated November 27, 2022
The average cost to build a house is about $300,000, which is nearly $100,000 more than the median home value in the United States. This guide will help you understand all the costs involved in building a home so you can figure out if it's the best path for you.
If your budget is under $200,000
On average, you can build a modern home of about 1,000 to 2,000 square feet with this budget. This equates to a one- to four-bedroom home, which can cost as little as $100,000 (but up to $400,000). So much depends on how you use the square footage you can afford.
The land is always a profitable investment as you can make money off it quickly. You can either sell your land, use it to grow crops, use the land as boat storage, or lease it out. The highest and best use of land is an imperative factor that determines the value of your land.
How much does it cost to design a house? ›Here's how much it will cost to have an architect draw plans
Most architects claim to charge between 5% and 20% of the cost of the building. That means if a home costs $100,000, you can expect the price of the architect to be somewhere between $5,000 and $20,000.
It costs about $100 to $150 per square foot to build a house in Minnesota. So, you would have to spend $200,000 to $300,000 to build a 2,000-square-foot home in Minnesota. These costs will vary depending on the exact location, property types, labor costs, material costs, etc.
Are 1.5 story houses cheaper to build? ›
People typically expect a 2-story home to be more expensive than a 1-story, but that's not always the case. A 1.5-story home is actually the most expensive. Learn why in this helpful checklist. We get asked lots of questions about the cost for building your perfect home, no matter the size!
What is the most efficient shape for a house? ›When it comes to the most efficient building shape, uncomplicated dome and cube structures retain the most heat. This is because the air can circulate more efficiently around a dome whilst a cube has the smallest surface area to floor area ratio, so it loses minimal amounts of heat.
Are modern homes less expensive to build? ›The cost to build a contemporary home varies depending on the location of your home, the cost of labor where you live, the quality of the materials you choose, and your desired square footage. But one thing is certain: building a contemporary home is more expensive than building a traditional one.
What is the best age to buy land? ›Buying at an early age (25-30)
“There is no disadvantage in buying a property at an early age as it is an asset for a family. However, if one can delay the decision and accumulate more amount to pay for the property as the down payment, the percentage of loan at a later stage can be reduced.
“Real estate assets are typically the best inflation hedge available,” he said. “Real estate will grow in value with inflation, cash in the bank will not. … Its buying power will actually be eaten away by inflation.”
Is land a good investment in 2023? ›Land investment may not be as common as residential real estate, rental properties, or REITs, but it's looking like a solid choice in 2023, and beyond. Investments in land have steadily increased over the last decade. Investors may purchase land for agricultural purposes or residential and commercial real estate.
What is most expensive part of building a house? ›Framing. Perhaps the most expensive part when it comes to building a home is the framing, which consists of wooden beams that make up the home's skeleton. Forbes states that high-quality lumber averages about $33,000 for a home in the United States. Metal stud framing systems begin around $20,000.
Is a building designer cheaper than an architect? ›Both design professionals often charge a flat fee for plans or per square foot. And while rates vary by region and individual professional, architects tend to cost more than designers. An architect can charge 7% to 10% of the build costs.
How much does it cost to build a 3000 sq ft house in Florida? ›If you want a 3,000-square-foot house then you will need between $300,000 and $600,000 to build your property. Digging deeper into your home building costs can help you set a more realistic budget. After all, most builders don't have $300,000 in leeway when it comes to their spending.
Can I legally build my own house in Minnesota? ›You can obtain permits to do work on your own home. The License Law was written to insure a reasonable degree of protection for you as the consumer of construction services, not to discourage homeowners from doing work on their own property. For your safety, building permits are required for most construction projects.
How long does it take to build a house in MN? ›
In Minnesota, a new construction home can be built in a time span of three months to one year, depending on location, season, and contractor availability.
What is the average square footage of a house? ›The median size of homes across the United States is 2,014 square feet. However, this number varies significantly depending on where you live.