Is it Cheaper to Build or Buy a House?

If you’ve been touring homes for sale, you might find yourself asking plenty of questions about how you might change them to better suit your style. What would it take to add another bathroom? Why did the seller choose those cabinets and that flooring for the kitchen? Could the deck be converted to an enclosed porch?

As you consider making changes, you might also be considering whether you should build a home instead of buy one, and how much it would cost. Here’s a breakdown comparing the two options.

Is it cheaper to buy or build a house?

If you’re focused solely on initial cost, building a house can be a bit cheaper — around $7,000 less — than buying one, especially if you take some steps to lower the construction costs and don’t include any custom finishes. The median sales price of an existing home was $309,800 as of December 2020, according to the National Association of Realtors, while the average cost of building a house is $302,817, HomeAdvisor reports.

Don’t let that fool you, though. Building a house is still a very expensive endeavor that requires finding a loan (which will likely have a higher interest rate than a conventional mortgage) and paying for permits. Depending on where you’re building and what kind of home you want, it can be much more costly than buying one. Consider some of these common costs:




Source: HomeAdvisor

Construction cost Price range
Buying land $3,000-$150,000
Clearing land $1,500-$5,000
Framing $20,000-$50,000
Plumbing installation $1,500-$20,000
Electrical wiring $20,000-$30,000
HVAC $1,500-$13,000
Slabs for the foundation $4,000-$7,000
Roofing $5,000-$11,000
Windows $3,000-$9,000
Exterior painting $2,000-$4,000
Interior finishing $50,000-$175,000

As you can see, these figures can vary widely based on where you want to live and the kind of house you want. The price for land alone can be really cheap — $3,000 in remote rural areas — or really pricey in areas with limited supply. Don’t forget that you might need to pay for other expenses such as a garage, fencing and a driveway, as well.

Beyond the upfront cost, it’s important to look at the long-term expense of owning a home. According to a 2021 analysis by the National Association of Home Builders, the operating cost on a new home — which includes property taxes; utilities, water and trash; maintenance and homeowners insurance — is lower than that of an older home. Homes built after 2010 have operating costs equal to around 3 percent of the home’s value, while the operating costs on homes built before 1960 are more than 6 percent, according to the NAHB.

Should you build or buy a house?

In addition to cost, there are some crucial components to consider when weighing whether to buy or build a home.

“The cost of new construction and the buyer’s moving timeline are some of the factors to consider, but also the area [and] location that they are looking to move into,” explains Rose Kemp, a Realtor with RE/MAX Town Centre in Orlando, Florida. “In some cases, there is better value in a new home for the purchaser versus resale. Also, sometimes the resale homes in an area may be older.”

Pros and cons of building a house

Pros Cons
  • Get exactly what you want
  • Avoid the hassle of competing offers
  • Eliminate the need for renovations
  • More time
  • More decisions
  • Contractor challenges
  • Cost overruns



Pros and cons of buying a house

Pros Cons
  • Faster move-in time
  • Potential bargaining power
  • Older appliances and infrastructure
  • Potential market competition



Bottom line

As you consider whether building or buying a home is right for you, it’s important to recognize that both processes include plenty of costs and potential stressors. The end result, though, should feel well worth it. Think about the existing properties you’ve toured, your timeline for moving in and your expectations of this new home.

Whether you decide to build or buy I can assist you.  Call me with questions for anything real estate.  309-256-0649

Article written By David McMillin David McMillin’s Twitter profile


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