How Much Does It Cost to Build a House?

Worker shows house design plans

Worker shows house design plans | iStock.com/ALotOfPeople

In your white picket fence daydreams, what does the house beyond the fence look like? Maybe it’s a colonial-style home like the one you grew up in, or perhaps it’s a modern design with chrome and silver finishes in every room. It might have three bedrooms with an office to boot, or be a sprawling mega-mansion fit for Hollywood’s elite.

If you’re fortunate, you might be able to find the house you’re looking for in a property search, either online or with a realtor. In other cases, you might decide that building your dream home from scratch is the best move. Though it can be much more time-intensive than purchasing an existing home, you also have the chance to choose everything according to your tastes, from the number of bedrooms to the type of fixtures in the bathroom and on the cabinets.

According to Realtor.com, around 1 million homeowners were expected to build their own houses in 2016. The average size of a new home built in 2015 was 2,467 square feet, U.S. Census numbers report, though the cost per square foot varied depending on the source. Realtor.com found the average to be around $103 per square foot, while a separate study from HomeAdvisor reported the average cost at $150 per square foot. Overall, that range equals an average new home cost between $290,000 and $305,000.

Of course, that’s just the average, and building your own home is one of the most variable expenses there is. Every decision you make affects the bottom line you’ll pay, so it’s important to know just how much home prices can change. HomeAdvisor reports that the average range was from $178,010 to $466,493 among HomeAdvisor members, with outliers as low as $23,000 and as high as $826,000. What’s behind those cost variables? We did some digging to find out.

To build a house, make a budget

stacks of 2x4 boards at a construction site

Contractor at a job site | iStock.com/dpproductions

As with every expense, especially the largest ones, it’s vital to have a working budget so you know how much you can afford. Starting with that number — and sticking to it — will help you determine the property you purchase, how large your house will be, and even which furniture you ultimately choose to fill your new residence.

No matter the size of the dream home you’re building, certain costs will likely stay the same. You can likely expect the shell of your house — which includes the walls, windows, doors, and roofing — to account for a third of your overall construction budget, Realtor.com reports. Interior finishes like cabinets, flooring, and countertops will probably eat up another third of your budget. Mechanical costs like hiring a plumber and electrician will likely be another 13% of your overall costs.

When building a home from the foundation up, we’re assuming that you’ll use professional contractors and architects to get the job done. That baselines assures that you follow the laws and permits in your area, as well as the codes necessary to ensure a safe and long-lasting home. However, you can choose to save money even at this step. HomeAdvisor points out that you can work with a developer and choose a home design already in their repertoire, which can save up to 15% of your costs versus paying an architect to create a completely custom home.

But that’s only the beginning of the cost variations. Here are other variables to consider.

1. Land and excavation

Bulldozer rests at empty lot

Bulldozer rests at empty lot | iStock.com/catherine_jones

If you’re building your home on your own, you’ll need to start with a plot of land. The cost per acre for an empty plot averages about $3,000 nationwide, Realtor.com reports. That itself won’t break the bank. However, keep in mind that costs vary immensely depending on your location. If you have your heart set on a premier neighborhood, school district, or city, you might have to pay more for that.

The real variable here, however, is the excavation to make the land building-ready. Bad soil, rocky ground, or other unseen issues can drive up the costs for leveling your property and pouring a proper foundation. If everything works out according to plan, you can still count on paying around $33,500 for the bulldozers to rip up the ground and lay some concrete.

2. Permits, inspections, and fees

"Approved" in large diagonal red text

Building permit | iStock.com/LittleRedDragon

Government regulations are abundant in real estate, particularly with new construction projects. In most cases you’ll want an experienced architect or contractor to deal with all the red tape, HomeAdvisor suggests, but you’ll still be on the hook for paying for the permits, the land assessments, and miscellaneous fees that come along with it.

According to the National Association of Home Builders, those regulations can cost about 24% of the overall construction price — an average of $84,671 on homes built in 2016. Regulation fees have always been expensive, but the NAHB points out that they have still increased by almost 30% since 2011, just five years ago. Make sure you get a clear picture of all the associated fees that go along with your new home up front, so you can budget accordingly.

As one final important touch, you’ll want to make sure you’re properly insured for the construction. Most contractors will have some type of insurance, but you’ll want to make sure it’s the appropriate level. You also might want to purchase liability insurance to protect yourself and the progress on your home. Insurance.com covers the basics you need to know.

3. The size and number of stories

structure of under construction home

Multi-level home | iStock.com/ jandrielombard

There’s a reason home values are broken down by overall cost, but also the cost per square foot. In most cases, the price of your home will grow or shrink based on how much house you actually want. A bigger home will obviously take more time to build — adding extra paychecks for your contractors. But it also means paying extra for flooring, more for paint, and additional ongoing energy costs to heat and cool a larger space over time.

In addition, adding extra stories automatically means a higher price tag, even if the square footage is similar to a ranch-style home down the street. Even basements and attic spaces can cost more to build, though HomeAdvisor points out that leaving them unfinished (instead of adding drywall or other finishing touches) can save on the initial costs. You can always go back and finish those spaces later, after you’ve had time to save up some extra money.

If you’re building a custom home, keep in mind that odd shapes or obscure designs can set your home apart, but will likely cost more. “For custom builds especially, the more corners a house has, the more it will ultimately cost,” HomeAdvisor experts warn.

4. Fixtures, appliances, and furniture

Beautiful master bathroom with shower

Bathroom fixtures can be expensive | iStock.com/hikesterson

When it comes to outfitting your home, there are always gradation of quality. If you’re set on choosing only the finest granite countertops, marble floors, and high-quality shower heads, you’re going to be paying a pretty penny. At some point, you might need to compromise on certain fixtures in order to meet your budget. After all, you’ll need to outfit your bathroom with a bathtub and shower, a vanity, and cabinets. Your kitchen will need all new appliances, too.

Bathrooms and kitchens are typically the most expensive rooms to remodel, so it shouldn’t be surprising that they’re the most expensive to build in the first place. As Realtor.com suggests, you might want to think twice before adding three bathrooms to your blueprint — perhaps two will do, to help you meet your target bottom line. Just remember that it may be harder to sell in the future, if there are only two bedrooms.

5. Ongoing costs

piggy bank wearing glasses

Just how much of your budget will go toward housing costs? | iStock.com

One major financial advantage of building a new home is that the pipes, foundation, and roof will be up to code and brand new. It should be many, many years until you need to invest serious money in repairs or feel the need to undergo any renovation projects. While you’ll still want to keep an emergency fund for unexpected problems, it’s likely you won’t need to use it.

However, there are plenty of other costs associated with a new home that you’ll continue to pay in the years to come. Energy bills and home insurance premiums will be a must, though these bills do tend to be less with new construction. More efficient materials keep energy bills in check, and new homes are a smaller risk to insurance companies in most cases.

However, homeowners with newly-constructed homes can expect to pay more in property taxes than if they had bought an older home down the street. It can be difficult to predict the property taxes ahead of time, but it’s important to incorporate an educated estimate in your overall budget for future years. The local assessor’s office will be able to provide an estimate, Bankrate suggests, but you’ll also need to find out if you’ll owe taxes to multiple entities.

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