How much does it cost to build a house?
May 11, 2023 8 min read
Searching for a new home can be a fun and exciting process. But in a competitive housing market, you might wonder if it’s worth building your dream home instead.
Designing a custom home can be an appealing prospect. But just how much does home construction cost? And can it actually be cheaper to build a house than to buy an existing one?
- The cost to build a house is determined by a range of factors, including square footage, customizations and location.
- The average cost to build a house in 2023 is about $100-$155 per square foot, according to HomeGuide.
- Materials account for roughly 50% of the overall cost to build a home.
- Land, permits, plumbing and electrical installations, and interior and exterior finishes are just a few factors that might contribute to the cost.
Average cost to build a house
The average cost to build a home in the U.S. in 2023 is around $248,000, according to HomeGuide.
Of course, the price can vary widely depending on a number of factors, including the home’s:
- Square footage
HomeGuide estimates that the typical range for building a new house falls between about $178,000 and $416,000.
Average building cost per square foot
It goes without saying that the size of your desired home will be one of the biggest factors in determining the overall cost to build it. HomeGuide estimates the average cost to build a house is about $100-$155 per square foot, with the cost of materials averaging $50 per square foot.
To put that in perspective, the average size of a new home is about 2,200 square feet, according to HomeAdvisor.
Given that estimate, here’s a breakdown of how much you might expect to pay on average to build a house, depending on its size, according to HomeAdvisor:
|Total square footage||Average cost to build|
|800-1,000 square feet||$80,000-$200,000|
|1,000-1,500 square feet||$100,000-$300,000|
|1,500-2,000 square feet||$150,000-$400,000|
|2,000-2,500 square feet||$200,000-$500,000|
|2,500-3,000 square feet||$250,000-$600,000|
|3,000-4,000 square feet||$300,000-$800,000|
|4,000-5,000 square feet||$400,000-$1,000,000|
Average cost to build a tiny house
The prices above reflect average costs for traditional homes. Tiny homes—homes that typically fall under 500 square feet in size—can cost significantly less. According to HomeGuide, the average tiny home cost is between $25,000-$35,000.
Homebuilding cost breakdown
The sections below break down the building process, including the major phases of a build and the costs associated with them. These estimates might be helpful to use as a general guideline.
But it’s important to keep in mind that the cost of a new home’s construction may fluctuate based on factors like the real estate market, cost of labor, cost of materials and more. Materials, which are included in each category below, are typically the highest costs associated with building a home. They could account for approximately 50% of the total price.
Below are some of the average costs during the phases of construction:
|Construction phase||Average cost|
The cost of land could vary greatly depending on the size of your lot, its location and how much work needs to be done before building can begin. According to HomeGuide, the cost of a plot of land could be as low as $5,000 or more than $2,000,000 when all these variables are taken into consideration. The median lot price in 2022 was $55,000, according to the National Association of Home Builders.
Preconstruction costs can include everything from permit fees to the price of construction plans. You may also need to pay for preliminary inspections of water and sewer systems.
But it’s important to remember that the cost of house plans will vary widely depending on how customized your home is. HomeGuide estimates that, in 2023, the average cost of a building permit alone is around $400 to $4,000.
Foundation costs include everything from excavating the site to pouring the concrete to building retaining walls. Excavation typically costs around $3,000, and foundation work is roughly $9,260, according to HomeGuide.
Once the foundation is finished, it’s time to start building the frame of your new home. Framing costs can include the labor and materials used to construct not only the walls of the house but also the roof, trusses and sheathing. According to HomeGuide, the average cost of framing for a 2,776-square-foot house is approximately $42,900.
The exterior finishes of your home can include wall finishing, shingles and roofing, as well as windows and exterior doors. The total cost may be driven higher or lower depending on how many entrances you have to your home and whether you have any extensive masonry work involved in your design. HomeGuide estimates that exterior finishes could cost about $35,000.
Major home systems
Installing major systems in your home can be a costly part of building your own house. As with most items, the size of your house will play a significant role in determining how much these systems will cost, in addition to the type of system you choose.
Heating, ventilation and air conditioning (HVAC) unit installations are included in this category, as are plumbing and electrical installations. And if you opt to install solar panels on your home, that cost can be included here as well. The total costs for major systems could be around $34,000, according to HomeGuide.
Interior finishes are typically one of the largest costs associated with building your own home. According to HomeGuide, that averages around $71,000.
Interior finishes can include interior drywall, insulation, cabinets, countertops, plumbing fixtures, lighting fixtures, flooring, appliances and interior doors. They also include painting, which HomeGuide estimates at about $4.50 per square foot—or $9,000 for a 2,000 square foot house.
This category includes additions like driveways, patios, decks and landscaping. Each outdoor feature can cost thousands of dollars. Any additional outdoor features, such as pools, need to be factored into a budget too. Depending on the type of features and size of the property, outdoor features can cost between $600 and over $100,000, according to HomeGuide.
Financing a dream house can be a major step in the building process. And while a traditional mortgage may be hard to get for a home being built, there are other resources to consider.
A construction loan is a short-term loan for financing the construction of a residential property. Construction loans usually last one year and often feature higher interest rates than traditional mortgages. They also typically require a down payment of 20% or more. Two types of construction loans to consider when building your home are:
- Construction-to-permanent: This type of construction loan is converted to a mortgage when construction is completed and occupants move in. That means there’s only one closing, which can reduce fees.
- Construction-only: A construction-only loan funds the building of a property, but the borrower has to pay back the loan in full when it reaches maturity—usually after one year or less. Construction-only loan funds are distributed incrementally to fund the current phase of the project, so you pay interest on the money drawn.
If construction loans aren’t an option—or borrowers want financing for unexpected expenses along the way—a personal loan, home equity loan or home equity line of credit (HELOC) may be worth considering. Keep in mind, they may not fully finance the entire build of a new home. And home equity loans and home equity lines of credit are usually tied to the amount of equity homeowners have for their existing house.
Does it cost more to build a house or buy a house?
The simple answer? It depends. One way to compare the cost of a new build against an older home is to look at the price per square foot. That can give you a good place to start.
But between the material costs, land costs and labor involved in a new construction home, the budget can grow quickly. Designing a brand-new home with top-of-the-line custom finishes could quickly overtake the cost of buying a similarly sized home that’s older and boasts fewer state-of-the-art upgrades.
On the other hand, older homes might require more upkeep and maintenance than would brand-new homes, despite the initial lower purchase price. And unless you love every single interior finish, you may spend time updating an older home to fit your specifications.
Homebuilding costs in a nutshell
Whether building a new home or buying an existing one, a good credit score can help prospective homebuyers qualify for better mortgage terms and interest rates. It can also help to know what questions to ask when you’re buying a house.
If you’re considering buying a home, you can check on your credit with CreditWise from Capital One. With CreditWise, you can keep tabs on your VantageScore® 3.0 credit score and TransUnion® credit report. CreditWise is free and available whether you’re a Capital One cardholder or not. And using it won’t hurt your credit score.