New Home Construction: How Much Does It Cost to Build a House?

If you’d rather spend the money to make sure you have the home from your dreams, building your own home can be a smarter solution. From the layout and flooring to the cabinets, paint colors and doorknobs, you’ll have a say in just about every big and small detail of your house.

Of course, it’s natural to wonder, how much does it cost to build a house? After all, even if you want a home that you and your family can truly enjoy, you want to make sure you can afford it.

How Much Does It Cost To Build A House?

The cost to build a house varies widely depending on the type of house and where it will be located. According to the U.S. Census Bureau, the median sales price of new houses sold in March 2022 was $436,700 and the average sales price was $523,900.

If you’re thinking about building a house as an alternative to buying a house, building your own custom home is likely not cheaper or quicker.

Here are a few factors that could affect the cost of building a house:

• Homebuilder profits: The homebuilder is in business to make money. You can expect them to increase some of their costs so they can profit.
• Energy policies: These days, most new homes must adhere to strict energy policies and building codes, which in turn make them more costly.
• Land cost: When you build a house, you have to buy the perfect plot of land first. If you’re hoping to build in a high-demand area, the plot of land will likely come with a hefty price tag.
• New materials: New homes must be built with new materials — inflation causes these costs to go up each year.
• Hidden costs: There are a number of hidden costs that come with new builds that you may not think of such as window coverings, landscaping, driveways, fences and custom finishes.

The Costs Of Building A House By Stage Of Construction

When it comes to understanding how much it costs to build a house, you’ll want to think about the price at each stage of construction. That way, it can help you budget carefully as you’re progressing on building the home of your dreams.

You’ll notice in the table below that average prices can vary wildly. That’s because it depends on the types of materials you use, the size of your house, and labor costs.

Land: $5,000 – $38,000

Building a home starts by picking the plot of land you want your home to sit on – it’s not about making a decision based on the views. You’ll want to consider other factors like potential environmental issues such as contaminants in the soil, zoning costs, and whether you’ll need to add in water lines.

For instance, lots in urban areas tend to have most of what you need – you can hook into sewers, water lines and the electric grid. Rural areas may not, so you could find that these lots cost less, though you’ll need to determine how you’ll access utilities.

There’s also the costs of clearing and preparing the land – heavily forested areas can cost more than lightly forested land because of the work it takes to clear it.

Design And Architectural Services: $2,000 – $20,000+

HomeGuide estimates that architect costs vary widely, from $2,000 to over $80,000 for more complicated drawings. Simple home plans can be accessed online or cost less for architects to draw, while more elaborate home ideas require more time to design. One benefit of working with an architect is that they can include environmental features that can save homeowners on the costs of utilities down the road.

Costs can also vary depending on if you want more services such as help with design.

Financing Costs: Varies

Financing the building of a house will involve getting different loans – a land loan, a construction loan, or a home loan. What you get will depend on how you decide to build your home. For instance, if you want to purchase the land and aren’t sure when you’ll proceed with building the home, then a land loan makes sense. However, if you want to build your home right away, you can consider a construction loan – a short-term loan to finance the building of the home, which you’ll then need to get a mortgage for afterward.

Since each loan has different interest rates and fees, it’s best to do your own research to see what the fees are, and what repayment terms are available to you.

Permits And Compliance: $1,200 – $2,000

After purchasing your plot of land, your contractor can start working, but not until they get the proper permits. Getting a building permit is essentially an official document that authorizes you to start construction on your property.

There are a different number of building permits you’ll need, and compliance requirements and associated fees will vary depending on your municipality.

In addition to a building permit, other common ones you'll need to get include the basement, electrical, HVAC, and plumbing permits – each averaging a few hundred dollars.

Foundation: $16,600 – $72,000

The type of foundation you choose will affect the price you’ll pay per square foot – options include crawl space, slab, and a basement foundation. In most cases, the basement is the priciest option, whereas slab is the most budget-friendly. Of course, the size of your foundation will also affect how much you’ll ultimately end up paying.

Framing: $16,600 – $95,000

Framing the home is also an important part of your budget, as it’ll become the “bones” of your house. Costs tend to be less for simpler homes, whereas larger and more complex designs will probably cost at the higher end of the above range. The price of lumber will also affect how much you’ll pay – if there are supply shortages or increased demand (or both), then the cost for framing will increase, even if labor remains the same.

Exterior: $20,000 – $95,000

Exterior costs include installing different features such as roofing, walls, windows and doors. It could also include landscaping, driveways, patios and walkways.

One of the major driving costs will be the materials you choose. For instance, installing a shingle roof will most likely cost less than a metal roof – same goes for if you decide to install double pane windows versus smart windows. Or, if you’ve designed an intricate landscaping plan with stone walkways and a large patio, it’ll probably cost more compared to a home with a simpler design.

Major Systems: $17,000 – $72,000

The type and size of your major systems will affect the final cost you’ll pay. Most of what you'll end up getting for your major systems will include electrical, HVAC and plumbing. Since these systems are a major component of ensuring your home is in pristine, functional condition, you’ll want to hire a reputable contractor. Installing these systems tends to be labor-intensive, so this part of the home building process can take a major dent in your budget.

Interior Finishes: $42,000 – $167,000

Interior finishes are about more than just choosing countertops that you want in your kitchen – it’s about all the aesthetics in your home, from the walls to the floors, to any customizations you want to make. The higher costs tend to be due to the homeowner’s preference for more upgraded or luxury finishes. For instance, marble floors tend to cost more than laminate floors, built-in bookshelves will cost more than if you were to have just drywall installed instead.

The Costs Of Building A House By Square Footage

Most cost estimates are calculated according to the cost per square foot. These costs can vary depending on the design of the house – ranch homes are one story, whereas colonial-style homes, for instance, have two stories which could affect the size – material prices, and the cost of labor.

Material Prices

Materials are a major cost factor to any home building project. When material shortages and high demand occur – such as what we’ve seen in the past few years due to the supply chain disruption – materials end up being more costly. It’s also harder to predict when materials will become available, which can also cause delays in construction.

Here are some materials that can have a major impact on your budget:

• Lumber
• Concrete
• Roofing
• Siding
• Drywall
• Flooring

Labor Costs

The construction industry often experiences skilled labor shortages, which can heavily impact the labor costs of your home building project. Aside from that, labor costs can vary wildly depending on the size of your home, the general contractor’s ability to hire labor at a reasonable price, the design of your home, and their ability to negotiate for materials.

For instance, your general contractor will need to hire subcontractors that each specialize in certain areas of home building. You may end up paying more if your general contractor has to hire electricians who are currently hiring at above average rates to keep your project timeline moving along.

Labor costs will also depend on what you want done before construction happens. For instance, if you purchase a heavily forested plot of land, you’ll most likely pay more in labor to clear it out – think hiring an excavation contractor – and a land surveyor to ensure the property lines are assessed properly. Another cost to consider is getting the right hookups to water and electricity if they’re not already available on your lot.

The Costs Of Building A House By State

Another major factor when it comes to the cost to build a house is where you live. Keep in mind that these are average numbers by state – certain cities or counties within these states can have far higher costs.

The Most Expensive States To Build

How To Reduce The Cost Of Building A Home

Despite rising costs, there are budget-friendly measures you can take if you’re thinking of building a home to make it more affordable.

Be Your Own Contractor

Yes, using a homebuilder is convenient. They take care of everything for you. However, you’ll pay much less if you can oversee professionals you hire or do some of your own work instead of relying on someone else to do it.

Before taking the plunge and building a home, do your research and learn about the options available. You may come across a more affordable design plan you never thought of or DIY building tips that will save you money.

If you have the time and are willing to do some of the legwork yourself, being your own contractor can be a great money-saving hack.

Build Up Not Out

Since excavation and foundation work is usually the most expensive part of building a home, simplify your home’s design. Opt for a traditional rectangular box and a two-story house instead of an unconventional dome-shaped, one-story house with equal square footage.

Factor In Future Costs

The cost of being a homeowner doesn’t end with building the house. You’ll want to think about other costs, such as utilities and upkeep in mind to make the overall cost of homeownership more affordable.

For instance, considering energy-efficient fixtures can save you on energy costs, and they often come with rebates and tax credits. Or, if you create a drought-friendly landscape, then you can save money from having to water plants and lawn as often.

The Bottom Line: The Results Can Make The Costs Worthwhile

The costs of building a home vary widely depending on a variety of factors, like the size of the home, whether you do some of the work yourself, the types of materials used, and your location.

However, the effort is worth it if you know you’ve created the home of your dreams and you and your family can enjoy it for years to come.

If you believe buying an existing home makes more financial sense for your family, Rocket Mortgage^® can help. Contact us today to connect to a Home Loan Expert and learn about the right loan for your unique situation. You can also check out our home buying resources for other considerations.