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

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

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.