Good research, smart planning and serious discipline is all it takes to build the house of your dreams.
Owning the house of your dreams is perhaps placed on the highest pedestal of human desires. And as fun, as it sounds, actually building one, involves a plethora of questions, planning, and implementations. One such question is- whether to build a new one from scratch or buy an existing one.
The current environment of ultra-low rates of interest can encourage one to go in for purchasing an existing house. However, that can involve making down payments and repaying a debt or mortgage over a long period with no assurance of the current tax regime being the same. However, building your own house also comes with greater hassles compared to a quick purchase of an existing one.
While it is simple to get an exact idea of the range of prices for purchasing an existing house, it is far more complex to calculate the cost of building a house because of the numerous purchase decisions that have to be made. It is therefore prudent to get a fair picture of how much does it cost to build your own house and how you can actually do it.
What is the average cost of building a house?
The average cost to build a house can start from about $248,000, which is equivalent to $100-$155 per square foot. On average, it can cost anything between $201,000 and $310,000 for building a new house of 2,000 square feet.
It is also estimated that a 3-bedroom house can be built at a cost of between $248,000 and $310,000 on average, while the cost to build a 4-bedroom house can be between $388,000 and $465,000. And building a smaller 2-bedroom house can cost between $93,000 and $155,000.
The price, however, depends on a number of factors including the region or city where you want to live, the square footage you are comfortable with, whether the design is modern or custom as well as the materials used to build.
How much does it cost to build a house in 2021?
Under certain circumstances, it can actually be less costly to build your own home than to purchase one. The average cost to build a new home in 2021 is $297,953, according to HomeAdvisor. The cost is a bit higher, according to the U.S. Census Bureau, at an average of $397,800 while the figure according to the National Association of Home Builders (NAHB) is higher, at $485,128.
Cost by Square-footage
1,500 sq. ft.: $187,500
2,000 sq. ft.: $250,000
2,500 sq. ft.: $312,500
3,000 sq. ft.: $375,000
4,000 sq. ft.: $500,000
Components for Building a house
Land– includes costs for clearing and grading for construction in addition to the cost of the land.
Size– the larger the house the higher the cost.
Number of Stories– there is some cost savings in terms of designing, building, and developing two or more stories.
Pools, Decks, Fencing, & Landscaping– costs can escalate if you decide to have add-ons such as a deck, an in-ground pool, and or landscaping. Costs of fencing can range from $10 to $30 per foot depending on your choice of erecting a picket fence or go for the more expensive vinyl fencing.
Finishes & Fixtures– higher quality of fixtures and finishes will increase the overall cost, for example, if you choose to add high-end granite countertops or hardwood flooring the ultimate costs will increase.
Type of Roof– on average, the cost of installing a new roof can be about $7,200 while high-end solar roofs can cost you more than $40,000.
Appliances– Similarly, high-end appliances such as those for wiring or plumbing, can significantly add to your costs.
Specific Average Costs for Building a House
Material Costs– about $50 per square foot or between 41.5 percent and 51 percent of the build cost. For example, the material cost would be about $140,000 for a two-story 2,776 square foot house. The costs include framing, foundation, roofing, siding, interior, and exterior doors, windows, insulation, paint, flooring, electrical, plumbing fixtures, etc. (varies depending on building materials used)
Labour Costs– on average, about 39 percent of the total build cost is accounted for by labor costs which are equivalent to about $34 per square foot. Labor costs can also include architects’ fees, master electricians’ fees, and bricklayers’ charges.
Major Systems Installation Costs– the average costs can be about $34,000 and will include rough-in plumbing, electrical work, and HVAC systems.
Interior Finishing– interior furnishings typically costs double that of exterior finishes and generally account for about $71,000 of the house building cost. This topic covers everything that is used to make the interior of the house beautiful as well as useable and can include flooring, tiles, insulation, kitchen cabinets, appliances, fireplace, etc.
Is it cheaper to buy a house or build one?
According to the National Association of Realtors, the median sales price of an existing home reached a historic high of $329,100 in March 2021. At the same time, the average cost to build a new home in 2021 is $297,953, according to HomeAdvisor, $397,800 according to the U.S. Census Bureau, and $485,128 according to the National Association of Home Builders (NAHB).
If the above figures are confusing due to the varying price ranges for building a new house as suggested by various bodies, the following considerations can help you to arrive at a decision.
Customization and timeline for moving in are factors that have to be considered while making a choice. People looking to settle down in a specific area or region because of job or schooling proximity would want to purchase an existing house quickly while those with some time at hand can endeavor to build it.
Pros of building your own house include getting the exact customization and eliminate the need for renovations while the cons are an extended time for moving in, more decisions to make, contractor challenges, possible cost overruns, etc.
The pros for buying a house include fast move-in time and higher bargaining power, while the cons can be using older appliances and infrastructure and additional expenses for renovation or customization.
How to save for a house?
As has been seen in this article, an average earning individual or a household would need to plan a savings regime to finance the dream of owning a house. Here is how you can do it.
- Set the timeline when you want to move into the new house
- Set a budget based on the region or locality you want to live in, the size of the house, facilities, and décor you want, etc. along with the timeline chosen as rates can vary with time.
- Determine the down payment required if you’re purchasing an existing house
- Make planned savings, preferably direct debit from your account, so that you do not feel the pinch of having to arrange for a large amount in one go
Additional steps if you’re planning to build your own house
- Do a cost breakdown with the immediate costs being accounted for first such as land purchasing, registration and license, and permission costs.
- Open a dedicated account for the savings
- Invest any additional money you receive at any point in time
- Save less for retirement for the time being
- Cut down on luxuries
- If possible trim routine expenses
- Look out for opportunities for earning more
- Get control over any existing debt