How Much Does it Cost to Build a House?

A newly built home can be a better value than purchasing a resale home.

Have you dreamed of building your dream home but thought you couldn’t afford it? The cost to build a home depends upon the size of your home, the cost of the land it occupies, and also how many top-of-the-line features you choose.

  • In 2017, the average cost of a new home was $360,900. That’s according to the Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
  • The average size of a new home in December 2016 was 2,661 sq. ft., according to the National Association of Home Builders (NAHB).
  • Do the math and you’ll find it costs $136 per square foot to build a home in 2017.
  • Keep in mind that’s a national average. The cost in your market will depend on the cost of land, which varies widely from one area to another – and, to a lesser extent, the cost of labor locally. 

What’s the Difference in Cost to Build a Production or Custom Home? 

A production builder typically builds from a library of floor plan. Homebuyers can select their favorite colors, design styles and options and upgrades in key components of their home that include appliances, cabinets, countertops, faucets and plumbing fixtures, flooring and lighting. 

Do you want to design a new home from scratch — or make major changes to an existing floor plan? Do you want to have a nearly endless choice in the materials used to create your home? If the answer to either question is yes, you’re a candidate for a custom home. 

Not surprisingly, building a custom home costs more. Custom homebuyers often upgrade to premium appliances and top-of-the-line cabinets, flooring, lighting and plumbing fixtures. The cost to build a custom home typically starts at $200 per square foot. However, count on spending more if your new home will sit on expensive oceanfront land.

A true custom home also generally involves fees for an architect, and often the cost of a construction loan. Both production and custom builders typically pay for building permits, impact fees, site preparation, utility connections, sidewalks and driveways. A production builder usually includes those expenses in the price of a home; a custom builder may itemize them separately. 

All things being equal, it commonly costs 20 percent to 30 percent more for a custom home than for a new production home, according to Ed Hudson, director of Marketing Research for the Home Innovation Research Labs, a subsidiary of the National Association of Home Builders (NAHB).

For more information to help you determine if a custom or production builder is right for you, see our article here

Are New Homes More Expensive Than Resale?

The key to comparing new versus older home prices is to make sure you are comparing apples to apples, cautions Hudson.

“Comparing median prices is fine, but are the homes the same size? Do they have the same features? Newer homes typically are more spacious and have more modern features.”

Today, newly built homes typically include many standard features that are usually not available in older homes  larger closets, bigger master baths, and high-efficiency appliances. The latter cost a bit more up front but typically pay for themselves in energy savings. 

A new home with high-efficiency HVAC will live better, deliver higher indoor air quality, and cost less to operate and maintain  but it likely will cost more than a dated home of the same size.

Don’t Forget to Factor in After-Purchase Costs

Buying an older home is a gamble. You never really know what you’re going to get or how long the home’s roofing, appliances, fixtures, pumps, furnace or air conditioner will last. Immediate repairs or renovations may be needed.

“Products in a new home,” Hudson explains, “have less wear on them. An air conditioner typically needs to be replaced every 15 years, a roof every 20 or 30 years. With a new home, you’re buying more time before replacement of mechanicals and other big ticket items.”

When comparing a new home to an older home, it’s also important to look at these costs:

  • New homebuyers may wish to add additional landscaping, decks, fences, or window treatments. 
  • Resale home buyers should assess the remaining lifespan  and the cost to replace  expensive major components such as the roof, air conditioning, furnace or water heaters. 
  • Buyers of new or resale homes should also factor in the cost of homeowner association fees, taxes and homeowner’s insurance. 
  • These costs can be escrowed (added to your monthly home payment) or paid separately. In either case, don’t forget to add in these costs when determining your budget.

Is the Home Designed for the Way You Live Today? 

New homes tend to offer contemporary design aesthetics, such as open spaces, flex spaces, great rooms that flow into kitchens, volume ceilings, wider hallways, first-floor master suites, larger closets and dramatic architectural articulation that old homes can’t match. 

“New homes are more modern,” Hudson notes, “with open layouts that suit current lifestyles. Older homes, for example, tend to have eight-foot ceilings. With a new home, the first-floor ceiling usually is nine feet.”

Built with current technology and modern construction standards, today’s new homes meet the latest health and energy standards. They’re also engineered to perform with key systems designed to work together to increase comfort and decrease energy costs. 

Beneath the modern design that catches your eye, there’s also a wealth of building science at work in today’s new homes. Higher-performance windows, insulation, air infiltration and HVAC systems and techniques greatly increase energy efficiency and reduce home operating costs compared to older homes. You’ll also find low-flow plumbing fixtures, high-efficiency lighting products and Energy Star-rated appliances in many new homes.

Steps to Your New Home

Ready to build your dream home? You’ll find inspiring and informative articles, slideshows and videos on the Six Steps to Your New Home here on New Home Source. 

Have you already completed one of the steps below? Feel free to skip ahead to the next step  or to the topic you want to learn about next.

  • New Home 101  Discover the benefits and vocabulary of new homes.
  • Shopping for a New Home  Online and in the model home.
  • Buying and Financing  Buy, finance and insure your new home  including finding the right mortgage for your needs.
  • House Style  Discover the secrets of working with a production or custom builder to create your dream home.
  • Building Process  Understand the steps your builder will take  and how and when you’ll be involved  to build your home.
  • Settling In  The payoff  move in and enjoy the many features of the new home you helped to design  and take advantage of the amenities in your new home community.

Roy Diez is a freelance writer and marketing professional specializing in the architectural, building and construction industry. He is a former editor-in-chief of Professional Builder magazine.

Related Articles

Sign up for the Home of the Week

New Home 101
New eBook Available

Expert Advice on Buying & Building a New Home

The eBook will be delivered to your inbox. We will not share your email address.