Comparing the Cost of Building a House vs. Buying
Determining Which Option Is Best for You
As a homebuyer, you have a few options for the type of home you'd like to purchase — among those choices are buying an existing property or building one of your own.
New-home sales had a median sales price of $320,000 and an average sales price of $377,200 in September 2018, according to the latest joint data report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. Housing inventory had 7.1-month supply.
The sales price for all types of existing homes (condos, co-ops, single-family and townhomes) was $258,100 in September, according to data from the National Association of Realtors (NAR). This represents a 4.2 percent increase compared to September 2017.
At the surface, we see that new homes have a bigger price tag than existing ones. But beyond that, how do you decide whether a brand-new or existing house is best for you? Below we take a closer look at the cost of building versus buying a home.
Building Your Home
The average cost to construct a single-family home is $237,760, according to a 2017 survey conducted by the National Association of Home Builders (NAHB). The organization also found that the average single-family home size is 2,776 square feet, which means the typical buyer might expect to pay about $86 per square foot.
Another estimate — from HomeAdvisor — puts the average cost to build a new house at $291,874. When factoring in the different markets across the U.S., the typical price range is from $148,974 to $435,534.
The following is a break down of many of the major categories of expenses, based on data from the NAHB:
- Foundations. Excavation, concrete and retaining walls: $25,671
- Framing. Sheathing, trusses, etc.: $41,123
- Site work. Architecture, permit fees, inspections, etc.: $15,903
- Exterior finishes. Roofing, windows and doors, etc.: $33,066
- Interior finishes. Drywall, flooring, insulation, paint, lights, appliances, etc.: $67,939
- Major systems rough-ins. Electrical, HVAC and plumbing: $32,746
- Final steps. Driveway, landscaping, clean up, etc.: $16,591
"Other," uncategorized expenses account for $4,722 on average, according to the NAHB. There's also the cost associated with buying the land you'd build on. The average price of a finished lot, including financing, is about $92,000.
The average length of time to complete construction on a single-family home is 6.5 months, according to data from the Census Bureau's Survey of Construction. This is after the month on average it takes to authorize new construction.
Buying Your Home
The median price on an existing single-family specifically is $260,500, according to the NAR's latest data. This is up nearly 5 percent from the same period in 2017.
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The average time to close is 44 days, according to the most recent Origination Insight Report from mortgage processor Ellie Mae. Closing in less than two months might be attractive to a buyer who doesn’t have much time to spare when searching for an ideal home.
An existing home also comes with the benefit of having a searchable purchase history and comparable sales, something you miss out on when building a new home.
Other Factors to Consider
If you care about having creative control over many of the exterior and interior features of your home, including the floor plan, countertops, cabinets, backsplash, flooring, etc., it might make more sense for you to build your home from scratch.
It's possible to modify an existing home, but that can often translate into an involved home improvement project, which might prolong your move-in timeline. It also means more money. HomeAdvisor says the average cost to remodel multiple rooms is $42,043.
Keep in mind you'll likely have older appliances in an existing home to contend with, versus a brand-new set in a house that you build. Overall, you should expect that your maintenance costs in an existing home could add up much more quickly.
Bottom line: Your budget, aesthetic preferences and timeline — among several other considerations — will likely drive which direction you take on choosing whether to build or buy.