Housing inventory reached a record low in the United States in 2022. Several factors (including the COVID-19 pandemic, investment buyers, and high construction costs) have limited the number of available homes. If you have been looking to buy a house in the past year, you might have been affected by this shortage.
This begs the question: is it possible to build a house instead? Would it be better – and even more economical – to build instead of buy? There are some cases where building your dream home is a better idea than trying to buy it. Learn about the cheapest way to build a house and how to draft a financial plan for your future abode.
Is it cheaper to build a house or buy one?
In most cases, it is cheaper to buy an existing house instead of building a new one. As of Q4 2022, the median home sale price in the United States was $467,700. However, building still costs more. Most experts estimate that it costs between $150 to $500 per square foot to build a house. For a 2,000-square-foot home, you can expect to pay between $300,000 and $1 million depending on the materials, location, and labor where you are building.
Home building costs have increased dramatically over the past year. Materials and labor shortages have driven up prices and it costs $84,700 more to build a house in 2022 compared to 2021.
Regional prices will have a big impact on the cost to build a house. You could pay millions of dollars to build your dream home in Seattle or San Francisco, with both land prices and labor rates running high. Conversely, you could save money by moving to less populated areas. Not only will you save on materials and labor, but you might be able to afford a bigger piece of property as well.
Follow these steps to estimate your home cost and determine whether building is right for you. Even if you follow all of the tips for the cheapest way to build a house, you might still pay more (or at least the same amount) than if you bought an existing property.
Consider Your Goals for the House
Before you start the construction process, think about why you want to build a house. Are you looking for a cheap solution to find property in a competitive market? Or are you looking for a dream home that you will live in for several years – if not decades?
Your plans for your house will affect how you invest in it. Start with your roof. A basic asphalt roof can last between 15-20 years. A slate, copper, or tile roof can last more than 50 years. It costs about $8,000 to replace a roof on average.
If you are planning to live in this house for a few years before moving, you might be satisfied choosing the basic asphalt option. However, if you want to live in this house for the long term, it might be better to invest in durable roofing materials. These materials cost more upfront but come with peace of mind that you won’t have to pay for a roof replacement for half a century.
There are plenty of ways to save money if you are looking for the cheapest way to build a house. However, the cheapest option isn’t always the best choice for the long term.
Purchase Cost-Effective Land
As you research the cheapest way to build a house, you will realize that every part of the construction process has pros and cons – with different costs for each option. One of the best examples of this is the price of land. Land values will vary depending on the location, parcel size, and features (like a gorgeous mountain view or lake access); however, prices will also depend on the existing amenities.
Land is given a label depending on how developed it is – or how ready it is for home construction. There are three types of land you can purchase with different levels of development:
- Raw land: there are very few amenities associated with this land – if any. There are no roads to the property, electric hookups, sewer or septic systems, or water connections. All of these elements will need to be added before you can build your house.
- Unimproved land: there are some amenities already established on this land. There might be a paved road that connects the land to a larger highway. There might be electrical hookups because of other homes nearby. However, this land still needs some infrastructure improvements before you are ready to build on it.
- Improved land: this land is ready for you to build on. It has all of the essential elements for water, electricity, internet connections, and sewage.
Raw land is the cheapest to buy. However, you will need to pay to make improvements before you are ready to construct your house. This takes time, money, and effort to work with contractors. Improved land is the most expensive, but you might save a lot of stress by choosing this option. Evaluate the cost of different land types as you shop for your parcel.
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Identify How Much You Can Build Yourself
Budgeting the cost to build a house isn’t easy because there are so many moving factors. Every part of the building process comes with two costs: materials and labor. For example, your plumber will charge for the cost of the water heater, pipes, faucets, drains, and other elements that are essential for your house. They will also charge an hourly rate for their work or a flat fee for the whole project.
If you hire a general contractor to take over the home build, you will pay for the materials, the labor costs for the construction team, and the labor costs for the contractor to manage the home project.
Essentially, you pay these people to save yourself time and stress. By hiring professional contractors, you can rest assured knowing your foundation, plumbing, electricity, and other home elements are installed by qualified individuals. By hiring a general contractor, you don’t have to manage these teams and instead receive a fully-built house. If you want to save money when building a house, you need to take on more of the work yourself.
The cheapest way to construct a house is to be your own builder. Labor accounts for 40% of your total home-building costs. The more people you need to hire to complete specific tasks, the more your building fees will grow.
Evaluate what you can and cannot do on your own. While painting and landscaping are exhausting projects to complete, you can save a lot of money by doing this work yourself. However, you will need to hire trained and certified experts to handle your HVAC, septic, electric, and other essential home systems.
Explore Modular Homes
Another option for finding the cheapest way to build a house is to consider modular homes. Modular homes (or pre-fabricated homes) are constructed in a factory and then delivered to your land. More than 90% of the house is built off-site and the assembly is completed once all of the modular pieces are ready.
Modular homes are not trailers, tiny homes, or poorly constructed homes. They have the same quality levels as any stick-built house that you can assemble on-site. They also have the same resale and appreciation levels as any other homes on the market.
Consider working with a modular home company to design the best house for your needs. You might be able to save money by working with an organization that specializes in large-scale home construction. If you are worried about having a property that is tailored to your needs, know that you can make as many improvements and adjustments to your home as you want once it’s built.
Plan for Secondary Costs
On average, it takes between seven and eight months to build a house. This timeline can take much longer if there is a labor shortage in your area, if materials are hard to find, or if external factors prevent your team from working. For example, if you are building during a rainy summer, work could come to a grinding halt anytime there is a storm.
As you budget for your building costs, consider secondary expenses. Where will you live when your home is under construction? Will you need to keep renting a place or will you move around in temporary housing? If you are staying in a hotel, you might have higher food costs because you can’t cook at home. Other aspects of your life, like your commute and school costs for your kids, could be impacted during the building process.
Building a house is a great way to learn about personal finance. Make sure you account for these secondary factors so you don’t spend more than you need to before your home is built.
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Develop a Financing Strategy
Once you have a plan for your home building costs, you can move forward with securing financing. The cheapest way to build a house is with cash. If you can buy your land with cash and pay your contractors out of pocket, you can save thousands of dollars on your home costs.
Most buyers and builders can’t afford to pay for their properties with cash, which means they need to secure financing. Take your time searching for the right lender and improving your financial health (debt-to-income ratio, credit score, etc.) because even slight changes to your interest rates can affect how much your home build project costs.
Studies show a one percent increase in interest rates can raise your monthly payment by $100. That might not seem like much up front, but $100 over 12 months and a 30-year mortgage adds up. These long-term costs can make building much more expensive than buying – and you will have to recoup these costs when you decide to sell your house.
It is possible to get an FHA construction loan if you want to build a house. If you plan to live in a rural area, you might qualify for a USDA loan. These programs are designed to provide favorable interest rates to qualified groups.
Evaluating your financing options is nowhere near as exciting as picking out backsplash designs or choosing your bathroom layout. However, you can save a lot in the building process by finding the right loans.
Talk to a Realtor About Your Options
Building a house is a complex undertaking. While you will enjoy living in your dream home, the financial and time costs that come with building aren’t for everyone. Even if you take steps to follow the cheapest way to build a house, you could encounter unexpected expenses.
Talk to a Realtor about your options and what the market in your area is like. They might be able to help you find a house that you can remodel into your dream home instead of building from scratch. They can also help you evaluate different land parcels if you are ready to build.
To find a Realtor, turn to UpNest, which is owned by parent company Realtor.com. The UpNest platform allows you to evaluate multiple agents in your area so you can compare reviews, commission rates, previous sales, and more.
Our network agents have been carefully vetted and often offer competitive, lower-than-average commission rates to UpNest customers. There is no obligation to sign up with one of our network Realtors and the service is free to use. Try UpNest today and let us help you.
What is the cheapest type of house to build?
In general, ranch-style homes are the cheapest houses to build. Their shapes are usually a simple block so there won’t be any extra costs for custom bump-outs. Builders also don’t have to worry about constructing multiple stories when designing these properties.
Is a two-story house cheaper to build?
It is typically cheaper to build up than to build out. You’ll gain the same square footage in your home but you will be able to work with a foundation, roof, and parcel of land. This can cut your costs significantly.
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The cheapest way to build a home is to design a simple box. Sticking to a square or rectangular floor plan makes the building and design simple. Generally speaking, building up is cheaper than building a sprawling one-story home, so you may want to consider planning for a multiple-story home if you need more space.What is the cheapest you can build a small house for? ›
Prices will vary greatly based on the size and design of the tiny house you want to build, but you can estimate an average of $150 per square foot. If you want to go really tiny, like a 200-square-foot house, you might pay as little as $30,000, while a 600-square-foot tiny home could cost $90,000 or more.Is it cheaper to buy a house or build it? ›
As a rule of thumb, it's cheaper to buy a house than to build one. Building a new home costs $34,000 more, on average, than purchasing an existing home. The median cost of new construction was $449,000 in May 2022.Is it cheaper to build up or out? ›
In general, building up tends to be less costly than building out. When you factor in things like digging and pouring a new foundation, building out typically carries a higher price tag (though this isn't always true, and certainly depends on the size of the room and its purpose).What is the most expensive part of building a house? ›
Perhaps the most expensive part when it comes to building a home is the framing, which consists of wooden beams that make up the home's skeleton. Forbes states that high-quality lumber averages about $33,000 for a home in the United States. Metal stud framing systems begin around $20,000.What state has the cheapest houses per square foot? ›
West Virginia is the cheapest state to buy a house in as it has the lowest median list prices for homes as well as the cheapest sales price per square foot. Property taxes in the state are also some of the lowest in America.Is concrete more expensive than wood? ›
Are Concrete Floors Less Expensive Than Wood? Because material costs for polished concrete floors are six to eight times lower than that of high-quality hardwood floors, polished concrete is significantly less expensive than wood in new residential construction.What is the smallest lot to build a house? ›
In most homes the yard is the extension of a house.
The minimum plot size is regulated to be at least 320 square feet. Since the house needs to have a square footage of 120, this means you have 200 square feet left to build your outdoor space.
Keep the Walls and Roof Simple
The simplest design — and also the cheapest — to build is a box with a straight roof. That means to avoid any protrusions or nooks and crannies in the walls of the house as those add design and construction costs.
While the average cost to build a house was $285,956 in 2022, most homeowners spend $111,892 – $460,414 to build their homes. Even though you can get a general idea of what you may pay, it's important to keep in mind that there are numerous factors that will impact the cost to build.
- Longer timeline: While an existing home is often move-in ready, a new build can take several months to complete. ...
- Limited flexibility in price negotiation: While you can save money if you build your own home, you will not have as much negotiation in the price.
On average it can take approximately 6 months to complete the build of a house. However, it can be as little as 4 months or potentially more than 12 months. For a pre-designed house, you are looking at roughly 4-6 months, while custom designs can take longer at an expected 10-16 months.Is it cheaper to build up or out on a Barndominium? ›
Are Barndominiums Cheaper to Build Than Houses. “While barndominiums are less expensive to build than traditional homes, they still need the same features if you're going to live there,” Carson says, stressing that there's no cheapest way to build a barndominium.Is it cheaper to build a 1 story house? ›
A single-story home is more cost-effective to design, but it will cost more to build than a two-story home. To make things more complicated, they'll likely cost less to heat and cool over the years. Crunch the numbers and choose the home design that fits your budget.Is it less expensive to build a two story home? ›
More Cost Effective to Build
Did you know? It is more cost-effective to build a two story home than a one story home. Typically, it costs less per square foot to construct because two story home plans offer smaller blueprints.
Ranch homes are the most popular home style in the U.S. They're another rectangular-shaped house, though they come in “T” or “L” shapes, too. A home with a simple and concise layout is the cheapest type of house to build. Ranch homes are typically single-story structures with attached garages.
- Reducing Square Footage. One way to dramatically reduce costs is to just reduce the square footage of the entire home. ...
- Choosing a Stock Design. ...
- Reducing Lineal Feet of Logs. ...
- Opt for a Simple Roof System. ...
- Use Drywall on Interior. ...
- More Modest Kitchen. ...
- Don't Take a Bath on Your Bath. ...
- Avoid Change Orders.
Building a house adds costs for land purchase, the permitting process, and multiple inspections. The farther your plan strays from a standard model, the more costly it will be. Buildable lots in urban areas can be prohibitively expensive.What is the cheapest and safest state to live in? ›
- Mississippi. Coming in as the cheapest state to live in in the United States is Mississippi with a cost of living index score of 83.3. ...
- Kansas. ...
- Alabama. ...
- Oklahoma. ...
- Georgia. ...
- Tennessee. ...
- Missouri. ...
- Hot Springs, Arkansas. Photo: istockphoto.com. ...
- Mohave County, Arizona. Photo: istockphoto.com. ...
- Kanosh, Utah. Photo: Flickr.com via Garrett. ...
- Valencia County, New Mexico. Photo: istockphoto.com. ...
- Fort Hancock, Texas. ...
- Royalton, Kentucky. ...
- Edwards, Missouri. ...
- Sun Valley, Arizona.
Hawaii and California are the LEAST affordable places to live in the U.S as incomes fail to keep up with soaring property prices.Is it cheaper to build a house out of cinder blocks or wood? ›
Concrete homes are also a good investment. While Concrete houses can cost more to build than wood-frame houses; once constructed, a concrete house quickly recoups the initial costs with lower utility and upkeep costs.Is it cheaper to build a deck or concrete? ›
It's cheaper to build a concrete patio in terms of both the initial cost to lay a concrete patio, as well as its cost of maintenance over time. A concrete patio costs only $4 per square foot, while a deck costs roughly $6 per square foot for lower-cost pressure treated lumber.Is it cheaper to concrete or slab? ›
Although installing concrete pavers technically costs more money than pouring concrete slabs, the truth is that poured concrete slabs come with higher costs overall when you take into account the repairs they require over their lifespan.How long would it take to build a small house? ›
The style of your home will also influence construction time. Custom-built homes average around nine months, while personalized production plans average near seven months. Because the floor plans used by production builders have been built many times before, there are generally fewer delays.What size house can you build on a 5000 sq ft lot? ›
An FAR of 3:1 means that for every square foot of Buildable Area, an owner may build up to three square feet of Floor Area. What is the Floor Area Ratio (FAR)? In an R1 zoned lot with a Lot Size of 5,000 square feet, the Total Development Potential for a one-story Single Family Dwelling is 2,600 square feet.What is the smallest legal house size? ›
Most states have adopted building and zoning codes from the International Residential Code (IRC). The IRC codes require that all homes must be built on a minimum of 320 square feet. The minimum square footage for a house is 120 square feet, and at least one room must be habitable.What is the quickest house to build? ›
- Pole Barn Construction. A pole barn home is built on-site without it being on a foundation. ...
- Modular Construction. ...
- 3D Printing. ...
- Constructing a Home That Uses Only Wireless Technology. ...
- Insulated Concrete Form Building. ...
- PEX Pipe.
California. Unsurprisingly, California is considered the most-friendly tiny home state. California's state legislation focuses heavily on climate change and minimizing their carbon footprint, this means tiny homes fit right in.What is the best small house size? ›
For some people, 2500 square feet (232 square meters) is the perfect amount, and for others, they just need 200 square feet (19 square meters) to be happy. Although there are different sizes of small homes, a tiny house is considered one of the most popular alternatives for an individual or a small family of two.
If your budget is under $300,000
You can get up to 3,000 square feet of construction with this budget. You could choose to build a three-bedroom house, or you could bump up the high-end appliances and finishes on a two-bedroom home. Another option is a modular home, a type of living space that comes pre-assembled.
Most notable is their forecast for Material Cost Index (MCI). In 2022, the MCI showed an 18.6% increase, this index is forecasted at 1.3% for 2023. The overall Building Cost Index is forecasted at 3.8% in 2023.Is it smarter to build or buy a house? ›
In general, you'll likely find it cheaper overall to buy an existing home, but that also depends on the market. A home loan is less risky than a land loan, and typically comes with a lower down payment and better interest rate.What are the pros and cons of building a Barndominium? ›
Pros of barndominiums include a cheaper cost, fully customizable space, and lower maintenance. They're also highly durable with lots of extra room and are a more eco-friendly housing option. Meanwhile, cons include higher upfront costs, difficulties finding financing, and not all cities allow them.How long to frame a house after slab? ›
Depending on the circumstances, the average build time to frame a house is anywhere from one week to several months to complete the job. By understanding how long it typically takes to frame a house, you can better plan for your project and avoid unnecessary delays.What takes the longest when building a house? ›
- Cabinets. Whether supplied by a manufacturer or custom built – typically take 6-10 weeks from the time an order is placed to delivery. ...
- Counter tops. Counter tops cannot be templated (measured) until after base cabinets are installed. ...
- Shower Doors.
What to know before you break ground. In a perfect world, depending on the site and zoning classification, it typically takes from three to six months to build a house.Why are barndominiums so cheap? ›
Modern barndominiums have fewer labor costs due to the design of their structures. They usually feature exterior panels with custom designs that lock easily. The costs are cheaper when you compare it to brick and mortar.How big is a 40x60 barndominium? ›
40×60 BARNDOMINIUM METAL BUILDING – 2,400 SQUARE FOOT OF CUSTOMIZABLE SPACE. Our 40×60 barndominium steel buildings provide 2,400 square feet of interior space that can be customized to your specifications.How much do most barndominiums cost to build? ›
A barndominium typical costs between $112,800 and $540,000 to build, with homeowners across the country paying a national average cost of $265,000.
Perhaps the most expensive part when it comes to building a home is the framing, which consists of wooden beams that make up the home's skeleton. Forbes states that high-quality lumber averages about $33,000 for a home in the United States. Metal stud framing systems begin around $20,000.Is building a house from scratch cheaper than buying? ›
As a rule of thumb, it's cheaper to buy a house than to build one. Building a new home costs $34,000 more, on average, than purchasing an existing home. The median cost of new construction was $449,000 in May 2022.Why is it cheaper to build up than out? ›
Building outwards increases the footprint of the home and will require more excavation to dig up the yard. Maneuvering around power lines and sewer lines could add to your costs as well.What are the disadvantages of a one story house? ›
Drawbacks of a one-story house:
The big drawback of a one-story home is the same as its advantage in some ways: Everything is on the same floor, including your kitchen and bedrooms. That can mean less privacy and fewer opportunities to separate a cozy sleeping environment from, say, a bustling kitchen or family room.
Disadvantages of Two Story Homes
A stairway can eat up 100 square feet of living space and add to the cost. Lack of variety in ceiling height. Ceiling (and attic) heights are typically lower than single-floor homes of equal square footage and can lack varied heights room-to-room.
PRO – Less expensive per square foot – 2 Stories with owner's suites up are usually less expensive than ranches and 2 stories with owner's suites on the main. This is because those plans both need a larger foundation, so they require more concrete, more roofing and larger homesites.Is it cheaper to build a house in NC? ›
North Carolina can be an affordable place to build a house, largely due to the state's low labor costs. Depending on the market, the average costs can range between $118 and $150 per square foot. In contrast, California averages about $203 per square foot, and New Jersey averages $188 per square foot.Is it cheaper to build a house in Illinois? ›
The study shows the total building costs of a new property would cost about $461,000, while the median single-family home list price was $295,000. With a median land price per acre of $91,000 and a median lot size of 0.25 acres, it would cost around $23,000 for land and $396,000 for construction in Illinois.Is building a house cheaper than buying in Florida? ›
Overall, the average cost of homes for sale in Florida is $406,988, with an average price per square foot of around $207. Therefore, it's currently more expensive on average to buy an existing home in Florida than it is to build a house.How much does it cost to build a 2 000 sq ft house in NC? ›
It costs about $200 to $315 per square foot to build a house in North Carolina. So, you would have to spend $400,000 to $630,000 to build a 2,000-square-foot home in North Carolina. These costs will vary depending on the exact location, property types, labor costs, material costs, etc.
|Size||Cost to Build (Modular)||Cost to Build (Stick-Built)|
|2,000 sq.ft.||$200K - $500K||$320K - $1.1M|
|2,100 sq.ft.||$210K - $525K||$336K - $1.155M|
|2,500 sq.ft.||$250K - $625K||$400K - $1.375M|
|2,600 sq.ft.||$260K - $650K||$416K - $1.43M|
Carolina Post Frame Barndominiums is the nation's leading provider of barndominium construction plans and blueprints. We provide you the ability to have everything you need to hire a local contractor and build one of our 'viral' barndominiums anywhere across the country.How much would it cost to drywall a $1500 sq ft house? ›
|Average Cost to Drywall a House by House Size|
|Cost to Drywall a 1000 sq ft House||Total Cost|
|Average x 4140||$9,150|
|High x 4700||$14,800|
|Cost to Drywall a 1500 sq ft House|
It's the opposite, in fact: In general, building a new home tends to cost more than buying an existing one. According to a 2022 report from HomeAdvisor, builders can expect to spend about 5 percent to 10 percent more per square foot than buyers.Is 1500 sq ft a big house? ›
How big is 1,500 square feet, really? It's about the size of three two-car garages. You usually get three bedrooms, enough to stretch out for an office and a guest room or to care for your small family.How much does it cost to build a $3000 sq ft house in Florida? ›
|Home Size||Average Price Range|
|1,500 sq. ft.||$220,000|
|2,000 sq. ft.||$294,000|
|2,500 sq. ft.||$367,000|
|3,000 sq. ft.||$441,000|
How much does it cost to build a 4 bedroom house? The average price to build a house in Florida with four bedrooms is between $388,000 and $465,000. This range is higher than the average Florida construction costs due the fact that four-bedroom houses are typically newer than those with three or fewer bedrooms.