When taking the first step toward becoming a homeowner, prospective purchasers are presented with a significant choice: Should they start from scratch and construct their own home, or should they buy an existing one? The response frequently relies on the customer’s desired characteristics, budget, and their financial situation. The National Association of Realtors estimates that the typical sales price of an existing single-family house in the United States was $358,000 in December 2021. This is a growth of 15.8 per cent when compared to the median sales price of the same property in December of the previous year.
The median sales price for new single-family houses was reported to be $377,700 by both the United States Census Bureau and the US Department of Housing & Urban Development during the same time period. It’s possible that the price discrepancy will prevent some potential purchasers from moving through with the purchase. For some people, the investment of time and money required to construct a brand-new house to its exact specifications may be worthwhile.
New single-family home prices are calculated on a per-square-foot basis
According to the findings of a survey conducted by HomeAdvisor, the price of constructing a brand-new home may range anywhere from $117,971 to $450,345, with the average cost being $284,158. This number might change depending on the location, kind of home, size of the property, and desired amenities or features in the home. The cost of new construction ranges between $100 and $200 per square foot on average, but the price can quickly escalate to $500 or more per square foot when extensions and modifications are included.
Costs Incurred Prior to Construction
Before the building can even begin, there is a great deal of legwork that must be done, including the acquisition of the necessary building permits, the creation of a house plan, the recruitment of workers, and the preparation of the land. It is reasonable to anticipate that pre-construction concerns will account for somewhere in the range of 10 to 25 per cent of the entire project expenditures.
Documentation, consisting of Plans, Permits, and Cost Estimates
To begin, you need to settle on a floor layout for the house. Whether you go with a tried-and-true plan from a company or builder that specialises in providing house plans or you hire an architect to design a one-of-a-kind custom home, it is important to keep in mind that the cost of the blueprints will increase proportionately with the amount of detail and customization included in them. The normal price range for house plans is between $2,000 and $8,000. The following stage, which follows the selection and purchase of your home plan, is to consult your builder or general contractor while holding the bid set in your hands.
The bid package provides your contractor with all of the necessary information, such as the floor plan, external photos or elevations of each side, and roof pitches, so that they can provide you with an estimate of the cost to build the structure. In order to acquire a comprehensive understanding of the design of your ideal house, your contractor will look over the drawings, ask questions, and take notes. Before commencing construction, you will need to get the necessary building permissions, and your contractor should be knowledgeable about these permits as well as the local building rules. A building permit will typically cost between $1,200 and $2,000, however, the price can range anywhere from either end of that spectrum. It’s possible that you’ll need additional permissions for things like basements, electrical work, HVAC systems, and plumbing.
Fees for Professional Services
Depending on the home plan that you select and the amenities that you want, it is probable that you may collaborate with many design specialists. Your general contractor, who is frequently the same person as your builder, will operate as the lead on your project, serve as your point of contact, and supervise the other experts working on your team. The fees charged by general contractors normally range between 10 and 20 per cent of the overall cost of the building project. This is also referred to as “cost-plus” in other instances. Prior to beginning work on a project, experienced contractors will lay out their payment plan along with their available alternatives in the first contract.
Typically, advance payment is provided, with the remainder of the payment due upon completion; however, payments may be made prior to the commencement of each subsequent building phase. According to HomeAdvisor, some of the other types of professionals that may be hired include architects (at a rate of $125–250 per hour), engineers (at a rate of $100–200 per hour), draftspersons (at a rate of $50–130 per hour), interior designers (at a rate of $50–200 per hour), and landscape architects (at a rate of $70–150 per hour).
Although it’s possible that you won’t require all of these services for your house, you should still keep in mind the possibility that you may, since they represent an additional expense that you should address with your contractor.
Purchasing Land and Preparing Individual Lots
Purchasing property and preparing the area where it will be built would most likely consume a sizeable portion of the total expenditure for the project. According to HomeAdvisor, the price of a lot can range anywhere from $3,000 to $150,000 depending on its dimensions, location, and other considerations. According to the findings of the survey titled “2019 Cost of Constructing a Home” conducted by the National Association of Home Builders (NAHB), homeowners may anticipate spending an average of $89,540 on a completed lot that is 22,094 square feet in size.
You will generally be able to find undeveloped lots in remote locations for a substantially lower price, but you may wind up spending more money to have utilities installed. An area is regarded to be an incomplete lot if it does not have any of the following: utilities, sewage lines, or cable lines. It is likely that you will be required to pay impact fees in order to connect to municipal sewers (ranging from $1,300 to $5,000), the city electric grid (ranging from $1,000 to $30,000), and city water lines (ranging from $1,000 to $5,000) in order to get ready to construct on the land.
Construction of Private Residences
The whole cost of building your new house may be broken down into three primary categories of expenditure: materials, labour, and administrative things (including the design work and permits detailed above).
Labour Expenses
The expenditures associated with labour are the third main item that must be taken into consideration. The scale of your project, the length of time you have to complete it, your location, and the availability of high-quality materials will all affect this. In addition to the charge for the general contractor, there will very certainly be additional costs incurred from the subcontractors. According to the data provided by HomeAdvisor, the price of hiring a framer may range anywhere from $7 to $16 per hour, and the total price of hiring roofers can be anywhere from $5,000 to $10,000.
In addition, the hourly rate for an electrician might range from $50 to $100, while the hourly rate for a plumber can range from $45 to $200. Which option—buying an existing house or building a new one—offers the better value? It is possible that the cost of building a new home will be up to $150,000 higher than the cost of purchasing an existing one, but this will depend on the location, the current market values, and the amenities that are desired. If you already own the property that you want to build on, that is going to be a key influence in the decision.
It is possible that the overall cost of constructing your home will be comparable to the purchase price of an existing home if the property on which you plan to build is already developed. The response to your inquiry is specific to both you and the circumstances of your purchase. If you consider yourself to be somewhat particular about the characteristics of your home and want to have some input into the process of creating it, the building can be an excellent option for you.
Your newly constructed home can fall into the same price range as the existing homes in the area that you are thinking of purchasing if you factor in taxes, the cost of living in the area, and the cost of the materials. Before making a final choice, it is important to consider all of your available possibilities and conduct your own study.