You own a plot of land. Or maybe you’re tired of bidding wars in a tight market. Or perhaps you see a rental property with serious upside. Building your own home makes sense for a lot of people.
But there is one number that stops the dream in its tracks.
How much does it cost to build a home from scratch?
It isn’t a single number. It’s a range. And that range is wide. The final price tag depends on three main things.
The size of the house matters. A 5,000-square-foot home costs significantly more than a modest 2,000-square-foot one. It’s simple math. More square footage means more concrete, more lumber, more roof.
Then there are the finishes. Do you want marble countertops that cost more than a used car? Or are you okay with laminate that looks decent? Luxury upgrades stack up faster than you think. They add up fast.
Geography is the third factor. Construction costs vary wildly by region. You will pay more in the Northeast and West. The South is usually cheaper.
Building vs. Buying: Do the Math
Let’s look at the numbers.
According to May 2023 data from the U.S. Census Bureau, the average sales price of a new single-family home hit $487,300. That was up from $464,200 in 2021. The median sales price sat at $416,300.
The National Association of Home Builders (NAHB) says the average home-building cost was $392,241. That works out to about $153 per square foot.
On the surface, building looks cheaper. The difference is over $95,000.
But these numbers are not apples to apples.
The $487,300 average sales price includes the land. The $392,241 building cost does not. That figure is just the “contract price.” It is what the contractor charges to put the walls up. It excludes the dirt the house sits on.
If you already own land, building is likely cheaper.
If you do not own land, you might save nothing.
The NAHB surveyed its members in 2022. The most recent data available. They found the average lot cost nearly $114,622. The average lot size was 17,218 square feet. That is the smallest average lot size since 2011.
Lot costs are rising. In 2020, the average lot cost was $90,000. The size was also bigger at 22,000 square feet.
Also, the Census Bureau figures include existing homes. The NAHB puts the sales price of a newly built single-family home at $644,750. That includes the build cost, lot cost, marketing, sales commission, and profit.
The General Contractor Trap
Those figures assume you hire a general contractor.
General contractors add 20 to 30 percent to the total cost. That is their compensation. They handle the subcontractors. They manage the chaos.
Twenty to 30 percent is a lot of money.
You might want to act as your own general contractor. You want to save those tens of thousands of dollars.
Don’t.
It is a massive time commitment. If you are new to construction, you will make mistakes. Expensive ones.
Subcontractors will charge you more than they charge a pro. They know when you are green. Those potential savings get eaten up by higher labor and material costs.
You will also miss permits. Contractors know which permits you need. They know when to apply. You might not.
So you save on management fees but lose on inefficiency. The math rarely works out for the amateur.
The average cost to build a single-family home in the United States hit a record high in 2022.
According to a survey by the National Association of Home Builders (NAHB), the average construction cost for a 2,561-square-foot home was $392,241.
That is the highest figure recorded since the NAHB started tracking this data.
But there is a catch. That number covers the structure itself. It does not include the price of the land. It also ignores financing, marketing, and developer profit. If you are looking at the total sales price including those extras, the average jumps to $644,750.
The numbers shift wildly depending on where you build. But if you want to know where your money actually goes during the construction phase, here is the breakdown.
What You Pay for the Land and Lot Prep
Before a single wall goes up, you are paying for the ground and the legalities of building on it.
The finished lot cost, including financing, averages $114,622. This accounts for about 17.8% of the total sales price.
Inside the construction budget, the first chunk of spending is “Site Work.” This costs about $29,193, or 7.4% of the construction cost.
This includes:
– Building permit fees ($8,292)
– Impact fees ($5,208)
– Water and sewer connections plus inspections ($5,800)
– Architecture and engineering fees ($4,724)
– Miscellaneous site expenses ($5,169)
Foundations and Framing: The Big Ticket Items
Once the ground is prepped, you dig. The foundation category averages $43,086.
Most of that ($39,731) goes to excavation, concrete, retaining walls, and backfill.
Next comes the skeleton of the house. Framing is the most expensive single phase of physical construction. It costs $80,280 on average.
That is 20.5% of your total construction budget.
This category covers:
– Wood framing and roof structure ($60,831)
– Trusses ($11,479)
– Sheathing ($5,383)
– General metal and steel ($1,168)
Lumber prices were extremely volatile in 2022. They hit high peaks that drove these costs up significantly compared to previous years.
Exterior and Systems: Keeping the Weather Out
After the frame is up, you seal the envelope. Exterior finishes cost $46,108.
This includes:
– Exterior wall finishes ($19,746)
– Roofing ($11,496)
– Windows and doors, including the garage door ($13,158)
Then comes the guts of the house. Major systems rough-ins cost $70,149.
You are paying for:
– Plumbing pipes (excluding fixtures) ($22,706)
– Electrical wiring (excluding fixtures) ($23,892)
– HVAC systems ($21,845)
Interior Finishes: Where Budgets Die
This is the most expensive category. Interior finishes cost $94,300.
That is 24% of the construction cost.
Why is it so high? It includes every door, lighting fixture, toilet, and countertop.
The list is long:
– Insulation ($6,530)
– Drywall ($13,184)
– Interior trims, doors, and mirrors ($12,727)
– Painting ($8,793)
– Lighting ($4,502)
– Cabinets and countertops ($17,775)
– Appliances ($6,263)
– Flooring ($13,019)
– Plumbing fixtures ($5,166)
– Fireplaces ($1,608)
Paul Emrath, vice president of surveys and housing research for the NAHB, notes that this category offers the most flexibility. You can economize here. Choose cheaper countertop materials. Skip the fireplace. Use less expensive interior trim.
But be careful of “upgrade creep.” Every time you say yes to a slightly more expensive appliance or fixture, the total climbs.
Final Steps and Hidden Costs
The last phase of construction costs $23,065.
This covers:
– Landscaping ($9,123)
– Outdoor structures like decks and patios ($2,178)
– Driveways ($8,775)
– Cleanup ($2,280)
There is also $6,059 listed under “Other” for construction costs.
Is Building Cheaper Than Buying?
If you factor in land costs, it is generally cheaper to buy an existing home than to build one from scratch.
There are exceptions. In states like Hawaii and California, it can sometimes be cheaper to build, according to reports from The New York Times.
For those without enough cash on hand, short-term construction loans exist. These can convert to traditional mortgages once the house is completed.
Do Prices Stay Stable?
No. They do not.
Predicting material costs is nearly impossible. The COVID-19 pandemic caused shortages and skyrocketing prices for lumber. No one saw that coming.
Price fluctuations are common. Materials like concrete often ship internationally. A few years ago, a surge in the Chinese economy consumed international shipping capabilities, leading to a concrete shortage.
Global events disrupt supply chains. Local demand shifts pricing.
The average cost is a snapshot. It is not a guarantee.
If you are planning to build, your personal preferences will dictate the final bill far more than the national average. You can spend less. You can also spend a lot more.
The framing and foundation costs are tied to volatile market prices for wood and concrete. The interior costs are tied to your taste.
Which one will you control?
