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If you’re looking for a place to call you, the idea of building a house has probably crossed your mind. Building a new home is generally more expensive and takes more time and effort, but it can also ensure that you will have a home ready to move in and customized to your liking.
Here’s what to consider if you’re deciding to buy or build a home:
Is it cheaper to buy or build a house?
It’s generally cheaper to buy an existing home than a new-build property, according to the National Association of Home Builders. The average cost to build a new home was $296,652 in 2019, but buying land and budgeting for price increases associated with the pandemic will push that price up.
When these costs are combined in 2021, the median price for a new single-family home was $477,800 in October, compared to just $377,300 for an existing home.
Of course, the actual cost of each type of home may look different to you depending on the location and what you are looking for.
The cost of buying a house
You probably already know that you need to save for down payment, closing costs, and cash reserves when getting a mortgage on an existing home — just as you would with a newly built property. But there are some additional costs you are likely to incur when buying a home:
| cost type | the expected cost |
|---|---|
| Homeowners insurance premium | $1,478 per year for a 10-year-old home |
| Real estate agent’s commission | 5% to 6% of the home’s selling price |
| Ongoing maintenance | 1% of the home value per year |
| Hardware | $1,889 |
| Property Taxes | Varies by location. It may be higher in a new built home because it is often worth more than resale properties. |
| Sources: National Association of Home Builders, RedFin, The Zebra | |
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house building cost
There are a lot of pieces that go into building a home, and your home designer or builder can help you create a budget. In addition to the costs that come with buying a home, you will need to budget for the following construction costs:
| cost type | rated range |
|---|---|
| land and work site | $5000 – $38000 |
| Enterprise work | $16,600 – $72,000 |
| framing | $16,600 – $95,000 |
| external work | $20,000 – $95,000 |
| major systems | $17,000 – $72,000 |
| Interior finishes | $42,000 – $167,000 |
| Source: HomeAdvisor | |
Pros and cons of building a house
You will have to consider whether the opportunity to build your dream home is worth the trade-offs. Some of the pros and cons of building a house include:
Pros of building a house
- Customization: Depending on availability and the builder’s options, you may be able to completely customize your home in the neighborhood of your choice.
- Maintenance work: Since everything is brand new, you likely won’t have to budget for major repair and maintenance projects until later. The builder may also cover the home under a construction guarantee.
- Energy costs: Newly built homes come with windows, doors, HVAC systems, and appliances designed to keep homes as energy efficient as possible. Using less energy lowers utility costs and lowers carbon emissions.
- Toxic substances: Some old homes were built with toxic materials such as asbestos, lead paint, and formaldehyde. It is likely that new constructions will not use this material.
- Contest: In a seller’s market, a home listing may attract multiple offers. But when you are building a house, you do not need to compete with other buyers once you buy the land.
Disadvantages of building a house
- cost: When you factor in the cost of land, building a home is usually more expensive than buying an existing one.
- an effort: Although you’re not the one picking up power tools, you can put a lot of work into making decisions while building the house.
- time: According to the US Census Bureau, it takes an average of 6.8 months to build a new single-family property. You will need to budget for alternative living costs during this time.
- Contractors: You will need to work with the general contractor along with various subcontractors throughout the home building process. This means that you may experience more delays and issues due to more people participating.
- Landscaping: If your newly built home doesn’t have landscaping, you’ll need to spend time and money getting the patio you want.
See also: Construction loans: what they are and how they work
The pros and cons of buying a home
Buying an existing home is the traditional approach because it saves you time and money. Some of the pros and cons of buying a home include:
Pros of buying a home
- Ease or convenience: Buying a ready-to-move-in home is a faster and more convenient process than building a home.
- time: Building a home takes an average of approximately seven months, while the timeline for purchasing an existing home is much shorter.
- Cheaper: Nationally, the cost of purchasing an existing property is generally less than the cost of building a new home. However, that may change based on where you are and what you’re looking for.
- Landscaping: Older homes usually come with mature landscaping, so you don’t have to spend time and money on new lawns and plants.
- More style options: Homes in older neighborhoods often have a variety of architecture styles and floor plans, and may come with a certain vintage charm.
Cons of buying a home
- Contest: The average listing home received four offers in early 2021. In a competitive market with low inventory, you’ll need to highlight your bid when buying a home.
- Ongoing reforms: The cost of ongoing repairs varies with each home, but professionals say it’s usually up to 1% of the home’s value annually. So a $200,000 home might cost $2,000 a year to maintain.
- Not energy efficient: An older home may come with outdated appliances and interior systems, so you’ll pay higher utility bills or pay to replace these features.
- You may get less for your money: Existing homes are usually smaller than new ones, which means they can cost more per square foot.
- May contain toxic substances: Some older homes are built with hazardous materials such as lead and asbestos, which can put your family at risk. If you are buying a resale home, it is a good idea to test these materials during a home inspection.
do not miss: How to buy a home: a step-by-step guide
Should you buy or build a home?
Since resale homes are generally cheaper and more convenient to move into, you may want to start your home search with existing properties. You can target desirable neighborhoods and spend a few weeks checking inventory there. These homes may not be in perfect condition or have exactly what you want—so plan to budget for renovations, new appliances, and ongoing repairs—but you may be willing to compromise if the price is right.
If you can’t find what you’re looking for, a new home might be a good bet. Check the construction costs in your area and the price of the available land. Building a new home is usually more expensive, but there is a reason for that. New homes come with new appliances, less maintenance, better energy-saving measures, and are usually larger than what you would find in an older home.
paying off: How do you know if you should buy a house
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