How Much Does It Cost To Build A House in 2023?
Cost to Build asq. ft. Home
What You Should Know
- The average cost to build a new house in 2022 ranges between $117,000 and $450,000
- The national average cost of building a new home is $138 per square foot
- Buying a new construction home costs on average $170 per square foot
- Home construction and labor costs can vary based on your location, home type, materials, upgrades, and customizations
- The cost of building a home in the United States has risen by 60% over the past ten years and has doubled since 2000
Costs of Building a Home Since 1964
Historical Home Construction Cost Calculator
Use this calculator to estimate how much it would have cost to build a house and compare it to historical costs.
Most people in their homeownership journey debate between buying a house versus building their own home. You can custom design your home from the floor plan to the number of rooms and layout. If you have a lot of detailed specifications and requirements, it might be in your best interest to consider building your own home, especially with the average price of resale homes rising.
However, building your own home is not cheap as the average cost of building a house can be anywhere from $200,000 to $450,000. There are several factors involved in determining the cost of building a house, for example, square footage, service/labor fee, materials cost, real estate trends, and location. So how much does it cost to build a house?
How much does it cost to build a house?
In 2022, the average cost to build a house ranges between $117,000 to $450,000 according to HomeAdvisors. When looking at the price per square feet to build a house, the national average cost per square foot is $138 per square foot, while the median cost per square foot is $125.
According to the U.S. Census, the median size of a new construction single-family house built in 2020 was 2,333 square feet. At $138 per sq. ft. and a size of 2,333 square feet, that puts the average cost of building a house to be $321,954 and the median cost to be $291,625. That's close to the actual median price of contractor-built homes, which was $298,500 in 2020.
Meanwhile, the median sales price of new construction homes in 2020 was $336,900. That rose to a median sales price of $397,000 in 2021. This means that the cost per square foot of buying a newly-constructed single-family home would be $170 per square foot in 2021.
As of January 2022, the median sales price was $423,300, which suggests a cost of $180 per square foot in 2022. The larger the square footage of your home, the more it will cost.
Break-Down of Home Building Costs
|1||Land||$5,000 - $150,000|
|2||Site Work||$2,000 - $6,000|
|3||Floor Plan||$2,000 - $5,000|
|4||Foundation||$5,000 - $25,000|
|5||Framing||$20,000 - $50,000|
|6||Exterior||$30,000 - $55,000|
|7||Systems Installation||$30,000 - $75,000|
|8||Interiors||$50,000 - $150,000|
|9||Additional Costs||$2,000 - $20,000|
One of the first steps is to find a plot of land that can best fit your new home! The price can depend on several factors such as the size of the land and the location, therefore, there is a wide range and can be more specific to your budget. If you choose to finance your land purchase, you can estimate your land loan payments to see if it fits in your budget. It is best advised to use a real estate agent who can help you find the perfect plot for the right price. They can help negotiate the price and ensure the plot is not damaged or sub-standard.
Once the plot of land has been purchased it has to be prepared for construction. Sitework can include getting building permits, clearing of structures, and inspections. If the land already has access to utility lines that will save some cost, otherwise, the cost of adding lines can become expensive depending on how far the utilities are to the land. The most expensive cost that can result is the inspection of water and sewage facilities which is essential for a home. If structures are already present on the land, the cost of clearing can increase. The government also charges a fee, known as the impact fee, which is the maintenance cost of parks and surrounding public amenities.
Now you can get creative in your home design, with the layout of the rooms, bathrooms, kitchen, etc. If the plan is extremely complicated, it is essential that you hire an architect who can plan out the entire house based on your needs and requirements. An architect will cost around $5,000. If you know exactly what you want, you can hire a draftsperson for $1,700. It is crucial that you are clear on what you want and the individual drawing up the plans is clear because it is extremely expensive to change the plans midway.
Foundation is when the real construction begins! This is when the builders break ground on your new home. It requires heavy machinery, manpower, and expertise to ensure the foundation of the home is secure.
There are three different types of foundation that can be made – slab, crawl, and basement. All three have different levels of work and costs. Slab is the cheapest, and as the name suggests, the house rests on a concrete slab. Crawl space involves lifting the home high enough so that there is enough space to crawl underneath. Basement involves creating a full room underneath the house which is the costliest. Slabs can cost $5,000 and fully finished basements can go up to $50,000.You can calculate how much concrete you will need and the cost of concrete by using a concrete calculator.
This is the process of building the outer structure of the house and it is one of the most important expensive aspects of the home building process. It involves the use of a lot of wood, concrete, and steel to make the structure. The building of the triangular structure of the roof can add close to $4,000 to your total costs. Following the initial build, the whole house goes through a sheathing process where boards are to cover the frame and roof. If you decide to use steel to make the structure stronger, this can also increase costs. The larger the size of the home, the larger the roof will be. The roof’s pitch will also affect the roof area and the amount of materials needed. You can estimate the cost of a roof and materials needed by using a roofing calculator.
This is an expensive item as it involves covering the periphery of the home which requires a substantial amount of material. The exterior also supports the roof of the home and protects the home in adverse weather conditions. Other items like doorways, windows, and a garage are also built as part of the exterior of the home. It can get expensive depending on the size and material used.
These systems include the HVAC system ($2,000 - $15,000), plumbing throughout the house ($1,500 - $20,000), and electricity ($10,000 - $30,000). This is an important and intricate task and therefore, should be done correctly and by contractors with the risk expertise. Any mistakes here can lead to large costs in the future as some of these system’s components will not be easily accessible.
The interiors of the house are the most expensive step of the process so get ready to spend a major portion of your budget! It is also catered to your needs and wants; do you want marble floors? Designer fittings? Modern technology? There is a list of basic expenses:
- Cabinets and counters: $15,000
- Doors and glass panels: $10,000
- Drywall: $10,000
- Flooring: $5,000 - $10,000
- Painting: $2,000 - $7,000
- Insulation: $5,000
- Appliances: $5,000
- Plumbing fixtures: $3,000
- Lighting: $3,000
- Fireplace: $2,000
There are a few additional expenses, such as landscaping ($6,000), driveway ($5,000), and if you want a patio or deck ($3,000). At this stage, you can go green and add solar panels onto your roof, or you might choose to use solar shingles instead of ordinary shingles.
How much profit do home builders make?
In the 2020 National Association of Home Builders (NAHB) construction cost survey, the average profit that a home builder makes off of the sale price of a home is 9.1%. For example, if they sold a home for $500,000, then $45,500 of that would be their profit. For home builders, the largest cost would be construction costs, which makes up over 60% of the average home sales price. 18.5% of the sales price can be accounted for in the cost of the finished land lot, 4.9% in overhead, 3.7% for sales commission, 1.7% for financing costs, and 1% for marketing.
|Breakdown||% of Sales Price|
Factors Affecting the Cost of Building a Home
There are 3 main factors that change the cost of building your home dramatically:
- Location: The decision to build your new home in one region vs another will play a very large role in the total costs of building a home. The most expensive region to build a home is in the west and the southernmost areas of the country. Each city, state, and region also has its own land rules and regulations which must be followed.
- Design Vs Developed: If you choose to design your own home from scratch such as the floor plan and layout, it will be more expensive than a developed version. In developed houses, the contractors create a variety of homes with different layouts allowing you to choose the one that best favors your needs. You give up some flexibility for reduced costs.
- Personal Taste & Budget: Once the location and type of home build are determined, the next factor is personal tastes and budget. This factor is completely based on you and your budget, you can choose to spend more on fittings, a finished basement, and an extra room, or you can also choose to save cash and get a standard fitting and an unfinished basement. This is solely based on how you want to design the home and what your budget allows you to spend.
Average Contract Price per Square Foot for New Construction Homes (2020)
|Region||$ per Square Feet|
Process of Building a House
Now that you are aware of all the costs involved and the factors that will impact the entire project, what exactly is the process of building a home?
- Needs & Requirements: This is an important step, you need to determine what exactly it is that you are looking for, the style of the home, layout, and type. Building a house can be an expensive and time-consuming process so it is essential to know exactly what you need. The choice between cost, time, and flexibility will also play a role. If you want to save funds, you can choose a developed option where you have less flexibility. The size of the home will also impact costs.
- Budget Planning: Create a master budget using estimates for costs that you do not know and for all the proposed expenses. This will help ensure you do not spend beyond your savings and planned expenses. Be sure to keep some cushion as costs are likely to be higher than estimates. You should also consider what kind of loan you can get if you need to finance your project. There are many construction loans available for various projects. Some government loans, including FHA construction loans and VA construction loans, are also available to eligible borrowers.
- Purchase the Land: Find the best vacant plot of land in the location you are looking to settle down for the future. Ensure it meets your needs like nearby schools, amenities, and public transport, etc.
- Hire Professionals: If it’s a home that you will design from the layout to the exterior, it will be essential to hire a general contractor who can manage all the other entities that will be involved. You will also need an architect or draftsperson to help you with the plans or at least review them. Make sure you pick good businesses and individuals as poor contractors can result in additional costs in the future, exceeding the savings from hiring them in the first place.
- Develop Plans: If you choose to purchase a developed home, there will be less planning involved, however, if it’s a designed home then you will need to spend time with the architect to help plan and verify your ideas.
- Organize Paperwork: You will need several permits to undergo this major project, along with several inspections.
- Purchase Insurance: If anything goes wrong during the project, you will be financially secure.
- Construction: Several contractors will be involved in the success of building your new home. It can take 3 to 6 months to complete your home depending on weather, quality of service, and regulations.
- New Home: The new home will be ready for a final inspection and it will be ready for you!
Can you afford to build a house?
Building your own home is an important and costly project, the biggest factor to consider is the cost of building the home. Apart from the costs, you need to take the time and effort out to ensure everything is done accurately and to your needs.
An easy check is to see if you can afford to purchase a house by using our home affordability calculator to determine the range which you can afford. Although purchasing a home and building a home is very different in terms of costs, it can provide a range that you can afford to spend on building a home. It is essential to do research on the housing market in your area to see whether it is better to buy or build. If you have the time to spare and want to live in a home that you designed and created, it will be worth the costs.
There are several construction loans available to finance this type of project. Once the construction is completed the loan can be converted into a conventional mortgage.
Building a House FAQ
Is it cheaper to build or buy a house?
It’s currently cheaper to build a house compared to buying a house. In January 2022, the median sales price of a newly-built home in the U.S. was $423,300 according to the US Census and HUD. In comparison, the median cost of a contractor-built home that started construction in 2020 was $298,500. That means that the typical home would be $125,800 cheaper if it was built through contractors in 2020 rather than purchasing a newly-completed home from a builder in 2022.
What land lot size is used to build a home?
There’s no set land lot size that is needed to build a home. Contractor-built homes are often located on land lots that are larger than what new single-family homes would be built on. In 2020, the median lot size of a new single-family home was 8,690 square feet. Breaking it down into categories, the median lot size of new construction homes built for sale was 7,997 square feet, the median lot size for a contractor-built home was 43,788 square feet, and for owner-built homes where the owner was also the contractor (owner-built homes) was 42,805 square feet.
|Built for Sale||Contractor-Built||Owner-Built|
|Median Lot Size||7,997 sq. ft.||43,788 sq. ft.||42,805 sq. ft.|
|Average Lot Size||13,904 sq. ft.||144,093 sq. ft.||151,473 sq. ft.|
Land can be a significant expense if you’re looking to build a home in certain areas of the country, and especially in urban metro areas. Homes that are built for sale are most often found in urban areas, while homes built by contractors or by owners have slightly higher numbers in rural areas. For example, in 2017, 95% of homes that were built for sale were located in a metropolitan area. Only 77% of contractor-built homes and 76% of owner-built homes were within a metropolitan area. Rural areas often have lower land prices, making it cheaper to build a home.
|Built for Sale||Contractor-Built||Owner-Built|
Financing for Home Construction
In 2020, the most common way to finance new home construction is through conventional loans. This also includes construction loans. 76% of contractor-built homes used conventional financing, 2% used FHA-insured loans, 2% used VA guaranteed loans, and 20% used cash.
|Conventional Financing||FHA Loans||VA Loans||Cash|
The type of financing used also varies based on geographic regions. For example, 30% of contractor-built homes in the Northeast are paid for in full using cash, while only 10% of Midwest contractor-built homes are paid using cash.
The type of financing used and the cost of the home also has a similar pattern. Homes that are paid for in cash have a higher average cost, which suggests that those looking to build a home and have enough cash to finance construction will be able to build a larger and more expensive home. The average cost of a cash-financed home is $388,900, compared to $234,300 for someone looking to build a home using a FHA loan.
|Conventional Financing||FHA Loans||VA Loans||Cash|