How Much Does It Cost to Build Your House?

Building a house may offer the customization you want, but be aware of the design, finish and labor costs that add up.

U.S. News & World Report

How Much Does It Cost to Build a House?

Track homes completed and incomplete on a construction site.

Building your home may be a more affordable option than buying an existing property, depending on where you live and your preferences for the house.(Getty Images)

The purchase of a home marks a lifetime achievement, a testament to the American Dream. The building of one, though, might exemplify the pursuit of the American Dream even more with the added personal expression involved in home design.

“With a brand-new home, you can get it exactly the way you want it,” says Anthony Wilder of Anthony Wilder Design/Build Inc., based in Cabin John, Maryland.

Alluring aesthetically, building a home may also be a savvy financial decision. With housing inventory again tightening and stock aging across the country, new construction homes appeal to buyers perturbed by the lack of options on the existing real estate market.

How Much Does Building a House Cost?

According to the U.S. Census Bureau, in July, the latest month for which data is available, $313,000 marked the median sale price of newly constructed homes, which stood some $30,000 above that of existing residences. That $313,000 could serve as a gauge for construction costs that are otherwise hard to calculate due to their dependence on a slew of variables.

In its latest survey on how much a new home costs, the National Association of Home Builders states that, on average, almost 56% of the final house price stems from construction expenses and another 21% reflects the cost of the finished lot. Those shares, however, are from 2017, when the report came out, but are on par with the numbers released in 2011 and 2009.

The NAHB queried over 4,000 builders from across the country on the costs of the typical single-family home they constructed in 2017. Given that only a handful of them provided “usable responses” and that the cost of labor, materials and land widely differs across the nation, the NAHB survey is only a broad snapshot.

Moreover, it does not discriminate between the types of homes. Custom houses, built to a client's druthers, for example, are much more expensive than homes in planned developments, where builders follow several design plans with little room for personalization.

How to Estimate Home Construction Costs

There exist several methodologies to estimate total construction costs. One way is to utilize the house’s square footage as a basis for expenses. Paul Emrath, vice president of surveys and housing policy research at NAHB, however, cautions that a price per square foot, which is often used for pre-existing homes, could mislead as economies of scale might distort the measure for new residences.

“Using cost per square foot can be useful as long as you've got a cost per square foot estimate that comes from a (comparable) home of about the same size,” Emrath says.

Tracking the costs of individual items – windows, timber and appliances, for example – is another, somewhat overwhelming method to assess costs. Yet another is to focus on major construction phases, which lenders use to pay out funds for further work if a construction loan finances the project. This is the method most builders rely on and the NAHB employs in its surveys.

Here are the factors that contribute to the total cost to build a home:

  • Architecture and design.
  • Permits and surveys.
  • Lot.
  • Foundation.
  • Framing and exterior finishes.
  • Major systems.
  • Interior finishes.
  • Finishing touches.

Architecture and Design

For custom homes, an architect fulfills a crucial role in creating a layout – a process that may take months and several thousand dollars. It may sound long and pricey, but an architect’s services usually exceed those of a builder or a general contractor when it comes to creating the blueprint of a house.

“It's very costly to modify (when already building) versus during the design phase,” says Jim Rill, founder and principal of Rill Architects in Bethesda, Maryland.

Permits and Surveys

Before any construction work may begin, a number of permits need to be secured. Building, electrical and plumbing are the major ones. Depending on the available utilities, some neighborhoods may also require gas and septic permits, among others. Moreover, any demolition of existing structures also calls for the appropriate authorization. Aside from permits, which come with post-work inspections, projects require surveys to ensure the envisioned design follows local building codes and restrictions. As a result, upfront costs can reach thousands of dollars.

Lot

Unless you already own vacant land, the purchase of a lot may be a substantial expense. Still, the cost of land widely varies across the U.S. Generally, the closer the lot is to a city’s downtown, the smaller and costlier it is. It is also harder to construct on. Further complicating the process and potentially ballooning its cost, are basement excavations and lot design for proper drainage, as well as the removal of trees.

Foundation

The cost of the foundation depends on the materials used. Poured concrete, for instance, commands specialized equipment that makes it pricier than cinder blocks. Prefabricated foundations, which are built off site and then assembled after delivery, are another option that Wilder describes as sound and convenient, but expensive. Because of their modern design, which lacks footings or rebar-and-concrete blocks that thwart settling but obstruct the flow of water, pre-fab foundations tend to be drier than others. Regardless of their type, however, all foundations have to be sealed to prevent waterproof damage.

In 2017, NAHB pinned the cost of a concrete foundation at nearly $26,000 or almost 11% of the overall construction expense.

Framing and Exterior Finishes

At the framing stage, a house assumes its outer shell; walls begin to trace the layout, while a roof encloses it. Here, the kind of materials that cloak the walls and roof after sheathing, or the installation of panel surfaces, impacts the cost. Bricks and stone typically boast a higher price tag than lap siding, for instance.

The exterior of other homes in the neighborhood may have an influence on materials used for your house. This is a trend Emrath has seen unfold at various degrees across the country, where homeowners associations and lawmakers strive to preserve a “neighborhood character.”

Marking some of the priciest work on a new house, the NAHB estimates the cost of framing at a little over $41,000, and that of exterior finishes at about $33,000.

Major Systems

Plumbing, electrical and HVAC comprise the primary systems in a home, which demand specialized contractors. While not obligatory, they should succumb to independent inspections before walls cover the wiring and pipes, so that any potentially costly mishaps are identified and corrected.

In its survey, the NAHB gauges the installation of each system at about $11,000.

Interior Finishes

Turning a house into a home, the interior finishes range from wall paint to furniture. Today, Rill sees an increasing horde of clients drawn to smart-home features and upscale appliances.

“You could spend $35,000 alone on equipment for your kitchen (or just) on kitchen cabinets,” he says. “There (are) so many options and opportunities to spend money.”

Traditionally expensive to outfit, kitchens and bathrooms present two of the largest tickets on the interior-completion budget. Altogether, the latter could reach nearly $70,000, according to the NAHB.

Finishing Touches

Once a house is structurally complete, the land around it undergoes a transformation. After construction cleanup, a driveway emerges. So does landscaping, which may need to adhere to HOA guidelines. Decks and patios also materialize at this last phase of the project, which the NAHB puts at nearly $17,000.

Ultimately, estimating construction costs is a grueling effort with little susceptibility to nationwide generalizations. Individual preferences – from the number of floors to the grade of finishes – skew any calculations, while the state of local markets further complicates that exercise.

To best evaluate how much it would cost to build your home, research local suppliers and builders and work with them to grasp costs in your area and for the kind of house you want – be it custom, pre-fab or tract.

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