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Is It Cheaper To Build Or Buy A House? What You Need To Know

April 10, 2024 8-minute read

Author: Victoria Araj


Suppose you’re ready to buy a house but you’re on the fence trying to decide between building a house and buying an existing house. In a seller’s market, it’s reasonable to consider building your own house rather than fighting it out for an existing home. That said, if time is a factor, you may be better off buying an existing house.

Another major factor to consider is the cost of building a house versus buying a house. Is it cheaper to build or buy a house?

To help you decide which option makes more sense for you, let’s break down the costs of building a house and buying a house. We’ll also explore the advantages and drawbacks of each.

Is It Cheaper To Buy Or Build A House?

The median sales price of new houses sold – houses built for the homeowner and then financed through a mortgage – in January 2024 was $420,700, while the average sales price was $534,300, according to U.S. Census Bureau figures.

The median sales price of an existing home as of January 2024 was $379,100. That’s a 5.1% increase from January 2023. To fairly compare the cost of an existing home versus building your own, consider:

  • The cost of renovations that may be needed to make an existing home livable
  • The higher maintenance costs you’ll likely face with an existing home

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The Cost Of Building A House Vs. Buying

Is it cheaper to buy land and build a house rather than buying an existing house? With so many variables to consider, it’s a bit of a toss-up as to which option is more budget-friendly. The actual cost could vary drastically depending on your location and the type of build you want to complete. If you’re looking to buy a home, some costs of homeownership will stand out.

Let’s take a closer look at the costs associated with both options.

Costs Of Buying A House

If you’re looking to buy an existing home, there are some costs to consider:

  • Maintenance of older elements: If your home has older features, such as an older roof or gutters, you should expect more maintenance and repairs.
  • Less efficient major appliances: Older appliances are typically less energy efficient. Plus, you may not have a home warranty that covers these older items.
  • HOA fees: Depending on where it’s located, an existing home may come with a homeowners association (HOA) and the attendant fees.

Costs Of Building A Home

If you’re thinking of building a new home, you’re probably wondering if building a house is cheaper than buying. The answer to that question will depend on factors that will be unique to the home you want to build.

The bulk of the cost to build a home is typically tied to:

  • Building materials and construction costs: With a new-construction home, the materials you need to build will add up quickly.
  • Multiple loans: You may need to take out two loans – a construction loan and a land loan – to fund the construction of your new home.
  • New major appliances: You won’t have older appliances to live with for now. Instead, you’ll have to purchase new appliances when you move in.
  • Permits and utilities: It can be expensive to add connections for basic utilities. Plus, the permitting process for new builds can be expensive.
  • Excavation: The land you buy may have drainage or foundation issues that can cost a lot to resolve before building.
  • Preparing the landscape: You may have purchased an idyllic site for your dream home, but preparing a lot for building is an expensive proposition. Construction will require removal of a great deal of the existing landscape, and you’ll need to consider the cost of planting trees later on your currently wooded lot.

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Buying An Existing Home: At A Glance

Now that we’ve covered the cost of building a house versus buying, let’s take a closer look at each of these options individually to help you get a better sense of whether building or buying is right for you.



Most often being move-in ready

The potential for a seller’s market, which can make home buying stressful

Generally being less costly

Compromise on home style possibly being necessary

Home renovation options

Possible maintenance issues

Established landscaping

The potential to be less energy efficient than a newer home

Possible room for negotiation

The potential for hazardous materials

Building Vs. Buying A House: Is Buying Better?

When looking to move into a new home, many people first consider the option of buying a home. Of course, buying an existing house comes with some advantages and disadvantages, as does building a house.

We’ll lay out the facts about both options so you can come to a decision based on what matters most to you.

Pros Of Buying An Existing Home

Below are the upsides you should be aware of when buying an existing home.

Move-In Condition

If you’re hoping to move quickly, buying an existing home is probably your best option. Construction projects will require some time to complete, and that’s the same whether you’re building a home or buying a fixer-upper.

Fewer Risk Factors

In general, you’ll likely find it cheaper to buy an existing home, but market conditions always affect home prices. A home loan is less risky than a land loan and typically comes with a lower minimum down payment and a better interest rate.

Home Renovation Options

Purchasing a home rather than building one doesn’t mean you’re necessarily going to be stuck with a home feature or two that fails to meet your needs. You can make upgrades and customizations to the home when you have the time and money, creating a house that’s your ideal abode or somewhere close to it.

Established Landscaping

An existing home will likely have some landscaping, eliminating that expense. If you like mature shade trees and rhododendrons for days, you might want to stick to buying a home over building one. It could take years for new landscaping to match the beauty of mature plantings.

The Room To Negotiate

There’s not much negotiation you can do when you build a home. When you’re purchasing an existing home, however, you have the opportunity to negotiate with the seller on a different home price. If it’s a buyer’s market, you’re likely to have some real negotiating power.

Cons Of Buying An Existing Home

Of course, buying a home also has some drawbacks, which we’ll discuss next.

House-Buying Stress

Searching for the right home can be time-consuming and stressful. Depending on when you buy, the real estate market could belong to the sellers, who could field multiple clean offers above asking price within days of listing their home. In that case, buyers could face high prices, bidding wars and multiple rejected offers.

It’s not necessarily going to be easier to buy than to build. If you do choose to buy an existing home, working with a good real estate agent can help make the process easier and quicker.

The Need To Compromise On Home Style

Finding a home you like and that reflects your tastes can be tough even when you have a wide variety of choices. When there are few homes for sale versus the demand for homes, you’re unlikely to find many options that meet all of your desires.

Possible Maintenance Issues

With older appliances, plumbing and electrical systems, you may run into major maintenance issues sooner rather than later. One possible solution? Consider a home warranty. With a home warranty, you know exactly how much to budget for home repairs and who to call if a problem arises.

Less Energy Efficiency

Older homes are more likely to be less energy efficient, which can lead to higher energy costs. You’ll likely not be able to achieve the same energy efficiency you could get with a new, sustainable home, but you can take various steps to reduce your older home’s carbon footprint.

The Potential For Hazardous Materials

An older home may present health hazards from years back, and it’s possible the owner may not even be aware of them. Homes built prior to the 1970s, for example, might contain lead paint. If you have children, you’ll want to take this into consideration before buying an existing home.

Building A New Home, At A Glance



Complete customization

More expensive financing

Less competition

Unexpected costs and delays

Less ongoing maintenance

Build time

Newer materials

More effort

Better energy efficiency

Potentially being further from urban areas

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Building Vs. Buying A House: Is Building Better?

As with buying a home, building a home will come with advantages and disadvantages.

Pros Of Building A New Home

Now it’s time to explore a few benefits of building a home.

Complete Customization

If you have a dream floor plan in mind in a particular location, then building a home will give you the control you’re seeking. You can make the decisions when building the home, so it will reflect your tastes accordingly.

Less Competition

Once you buy the land, you won’t have to deal with any competition for your dream home. However, you’ll be competing against other home builders – and paying more – for limited construction supplies and labor.

Less Ongoing Maintenance

A newer home can mean fewer maintenance costs on the horizon. Generally, new home construction comes with a builder’s warranty for major systems. New appliances will likewise come with guarantees.

Newer Materials

When you have a new house built, you’ll be getting modern materials for your home. You won’t have to worry about potentially dangerous materials such as asbestos or lead paint in a brand-new home.

Better Energy Efficiency

Newer homes are built with energy efficiency in mind. If you’re concerned about your environmental impact, you can make choices throughout the build to prioritize green architecture and sustainability in your home.

Cons Of Building A New Home

Now it’s time to break down a few drawbacks associated with building a house.

More Expensive Financing

Due to the lack of collateral, land loans may be harder to obtain, and they often come with a higher down payment and a higher interest rate to offset the risk to the lender. Next, you’ll need a construction loan to finance the actual building.

Finally, you’ll get a traditional mortgage on the house once construction is complete, using the house as security for the loan.

Unexpected Costs And Delays

While multiple strategies are available to make building a house more affordable, the costs can add up quickly. Although you may receive an estimate of the costs upfront, it’s not unusual for unexpected costs to crop up throughout the project. Delays and cost overruns are typically expected.

Be prepared to pay more for almost everything, starting with lumber. Labor shortages will likely also make wages go up, so expect those to be reflected in your costs.

Build Time

Building a home won’t happen quickly. It will typically be a much longer process than buying a home and moving in. In the end, you should have exactly the home you specified, but the process could be very time-consuming and stressful.

More Effort

Building a home requires a more hands-on approach. You’ll have to make countless decisions along the way and work with a variety of people to create the home of your dreams. You’ll have to approve all specifications and review contracts on top of managing the financial aspects of the build.

The Potential To Be Further From Urban Areas

If you want to be close to downtown, it may be hard to find a lot to build on. In some areas, all the suitable lots have already been turned into homes. You may have to be a further distance away from built-up, urban areas if you choose to build your own home, which could be a negative for some prospective builders.

The Bottom Line: Should You Build Or Buy A House?

Building a new-construction home may be the only way to make your dreams of all custom features and total satisfaction a reality, but it involves a more expensive and time-consuming process than purchasing a house that’s already been built. Buying a home can help you move forward quickly – which can come in handy if you’re pressed for time – but you won’t have the option to customize your home.

Interested in buying or still undecided about the building process? Start your mortgage application online to see what you can afford and the kind of loans you might qualify for.

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.