If you’re in the market for a home, the thought of building your own house may have crossed your mind. Not only does building your own home take you out of the rat race of bidding for a home in a seller’s market, but you get the luxury of building your dream house to spec.
Building a home comes with a multitude of costs, including labor, materials, and land. The costs of all of these elements have risen over the past year along with everything else, and a solution to supply chain holdups will take time.
Let’s dive into the expenses of new construction prepandemic and what they might look like today.
Average Cost of Building a House
According to the National Association of Home Builders (NAHB), the average construction cost of a new home was $114 per square foot in 2019.
Based on inflationary pressures from material costs, labor shortages, and supply chain backlogs, input costs for new residential construction rose 1.1% in 2020 and 19.4% in 2021.
Applying those two years of inflationary impacts on the 2019 average cost cited by the NAHB, it may cost as much as $138 per square foot to construct the average new home in 2022. (Of course figures can vary greatly because of the complex web of materials, land, and labor costs, as well as your property’s location, geography, and zoning regulations.)
We’ve calculated the following average costs of new home construction in various square footage measurements below. The numbers apply both the 2019 survey results as well as the inflation-adjusted estimates based on overall price increases in 2020 and 2021.
|Square Footage||2019 Survey Figures||2022 Inflationary Estimate|
Typical Costs Associated With Building a Home
The lion’s share of your home building expenses will consist of land, labor, and materials, and depending on market conditions when you decide to build a home, these costs can vary widely. Building a home can take several months and cost hundreds of thousands of dollars. In most cases, these expenses aren’t paid out in one lump sum, and you’ll find yourself having to budget over several months.
If you’re thinking of building a house and want to figure out how to properly allocate your funding over the life of the construction project, it’s a good idea to split the home construction project into individual segments. For ease of understanding, we’ve split construction costs into three phases:
• Preparation costs
• Construction costs
• Post-construction costs
For each phase, we’ve broken down the individual component costs and listed their average expenses based on both the NAHB 2019 home building costs survey and today’s inflation-adjusted estimates.
Preconstruction costs include the land, the initial costs to assemble a team for the construction project, and fees for permits and reviews that must be completed before you’re approved to proceed.
This phase can take several weeks to months. The timing will usually depend on the time to obtain all zoning and permit approvals as well as the availability of contractors.
Purchasing the Land
Purchasing the land and getting the site ready for construction will generally run you $89,500, according to most recent data obtained from the NAHB. That is for an average plot size of 22,100 square feet. Applying the 2020-2021 inflationary pressures to this figure, the average finished lot price today could be as much as $108,000.
Note that buying land itself is one thing. Clearing the land, laying the foundation, and prepping it for construction make up a large portion of your land expense. Placing the foundation itself can make up 35% of your completed land cost.
Water & Sewer Inspection
The average cost of a water and sewer pipe inspection was $4,320, according to the NAHB’s most recent survey. Applying the inflationary impact of the past two years, this could cost you $5,210 or more today. It’s likely that pipe inspection costs have not grown much since 2019.
Local ordinances will require professional inspections of water and sewer lines before you break ground. Not only is this mandatory, but it’s also a good idea to ensure that everything is in good working order to avoid costly future problems with your water and sewer lines.
Architect and Engineer Home Planning Fees
Depending on market conditions, average house planning fees can range from $4,335 to $5,232, according to our estimates and data obtained from the NAHB. House planning fees include the costs of hiring professional architects, engineers, and contractors to draw up blueprints for your home, manage your construction project, and ensure that correct subcontractors are hired for construction.
Note that these fees can vary widely depending on the complexity of your intended home and the local market. Homebuyers interested in smaller or simpler home plans can cut costs by buying predesigned blueprints or considering a prefabricated home.
Getting Permits & Approvals
The cost of obtaining building permits and approvals varies widely but averages from $8,951 to $10,804, depending on your municipality. These costs can be further split into fees for building permits and local charges for impact fees. Here are the average estimates, according to NAHB data and our calculations:
• Building permit cost: $5,086 to $6,139+
• Local impact fees: $3,865 to $4,665+
Getting the proper permits and zoning approvals is usually one of the most time-consuming parts of the home building process. Working with your construction team to obtain these permits as early as possible will help to avoid delays.
Construction costs encompass all the expenses of breaking ground, constructing the framework, and erecting the structure, as well as paying for all the materials and labor.
Erecting the structure and ensuring that all of the utilities are hooked up can take months, depending on how complex your home plan is. To mitigate the possibility of delays, most home construction projects begin in the spring and (ideally) plan to wrap up before the end of fall.
Excavating and Laying the Foundation
According to the NAHB’s latest data, the costs of excavating land and laying the foundation average $34,850. Based on our inflation calculations, this average rounds out to $42,068 today.
Excavation costs include clearing the land and laying the foundation, as well as the concrete for retaining walls and necessary backfills. These costs can vary substantially depending on how large the base of your structure will be, whether or not you choose to install a basement, and how suitable the site is for digging and construction.
Putting Up the Frame
The average cost of framing your new home construction is $51,589, according to 2019 survey data from the NAHB. When adjusted for inflation, this costs about $62,275 in 2022.
The frame of your home makes up its skeletal structure and is vital to its structural integrity. The costs cited include all labor and material required to frame, add trusses, sheathe, and install a roof. These costs will vary widely based on the size of the property, choice of materials, and the market costs for obtaining the materials.
Prices for lumber jumped to all-time highs in May 2021, with costs skyrocketing over 288% year-over-year. While prices have subsided since then, it shows that market conditions beyond your control can have a major impact on your construction costs.
The average cost of installing an electrical system in a new home costs $13,798, according to survey data obtained from the NAHB. In 2022, this converts to around $16,656, based on inflation adjustments.
This includes the cost of hiring licensed electricians, having them wire your home to code, and ensuring that your electrical system is properly connected to the local power grid. The cost depends on your area, the power needs of your home, and whether you choose to install any bells and whistles like backup generators or solar panels.
The average cost of installing a plumbing system in a new home costs $14,745, according to the most recent data from the NAHB. When accounting for inflation, the figure is $17,800 today.
Licensed plumbers will install piping throughout your home and connect it to the public water and sewer system. Like the rest of your construction expenses, your plumbing expenses will vary depending on the size of your property, how many water hookups you’ll need, and the water capacity of the system you choose to install.
Installing HVAC System
Installing a new heating, ventilation, and cooling (HVAC) system in your home cost around $14,111, according to the 2019 NAHB data. Today, that figure will likely be closer to $17,035 thanks to inflationary impacts.
The cost of a system that can adequately heat your house during the winter and cool it during the summer can vary widely.
Installing the Insulation, Drywall, and Flooring
Insulation, drywall, and flooring can add up to $27,816 to $33,577 or more, based on the NAHB’s most recent surveys and inflation adjustments. These costs break down as follows:
• Insulation: $5,184 to $6,258+
• Drywall: $10,634 to $12,837+
• Flooring: $11,998 to $14,483+
Proper insulation of your home will go a long way toward ensuring that it retains heat in the winter and stays cool in the summer. Installing drywall and flooring gives shape to your home and a canvas with which you can begin to paint.
Expect costs for all three services to fluctuate with the size and location of your home. While drywall costs remain fairly consistent, insulation and flooring costs can vary by geography. If you choose to go with tiles and hardwood flooring in sections of your home, expect to pay a premium for it, especially when compared with linoleum or vinyl.
The installation of a brand-new roof costs an average of $9,954, according to the most recent survey data from the NAHB, while inflation adjustments bring the figure closer to $12,015 today.
Cheaper substances like rubber membrane and rolled roofing fall within the range of the figures above, but shingles and slate materials take more effort to install and can easily double the cited figures.
Doors, Windows, and Finishing the Exterior
Getting the doors and windows mounted and putting finishing touches on the exterior will run you an average of $31,066 to $37,500. We’ve broken down these costs as follows.
Installing all doors, windows, and garage doors can cost an average of $11,747, according to the NAHB’s latest survey, or $14,180 after applying inflation assumptions. Finishing the exterior with house siding and paint will run you around $19,319 to $23,320.
• Doors and windows: $11,747 to $14,180
• Exterior siding and finish: $19,319 to $23,320
Single-pane windows and doors with cheap weather stripping are more likely to leak cold air in the winter, contributing to higher heating bills. Expect to pay extra for solid timber doors, double-paned windows, and high-tech garage door systems.
Now that you’ve got your structure in place, it’s time to install the cosmetic finishes that will make your home shine. This includes paint, appliances, lighting, and home fixtures.
This stage is your chance to brand your home with a personality of its own.
Kitchen, Bathroom, & Light Fixtures
According to the NAHB, home fixtures — all lighting, sinks, shower basins, and toilets — can average $7,545. Applying the inflationary estimates, the figure is closer to $9,108 today.
These expenses can vary based on the size of your home, how many bathrooms and kitchen implements you intend to add, and the quality and materials of your chosen fixtures.
The labor and paint required to finish the interior of a new home costs an average of $8,254, according to the NAHB’s most recent survey data. The cost to paint a house interior may be $9,963 today, after inflation adjustments.
Higher-quality paint is usually thicker and lasts longer than cheaper brands. If your house is particularly large, with vaulted ceilings that are particularly hard to reach, expect to pay more for labor and paint.
Countertops and Cabinets
Costs of countertops and cabinets vary widely depending on materials, quality, and finish, but run an average of $13,540, according to the NAHB’s 2019 data. The average is probably closer to $16,345 today.
Expect to pay up for premium options like granite countertops and kitchen islands when compared with basic materials like wood, concrete, and composite.
Appliances like cooking ranges, refrigerators, and washing machines can cost $4,710 for most new homes. Recent cost inflation may hike that amount to $5,685 or more.
Refrigerators can cost as little as $500 for a basic unit to over $3,000 for top-of-the-line stainless steel models; recent supply chain issues haven’t made these costs any easier to bear. The installation of these machines is fairly straightforward, so expect most of the costs to be for the appliances themselves.
Landscaping work for a brand-new home costs an average of $6,506, according to the NAHB, or $7,854 when applying inflation adjustments.
These costs will need to be paid if you don’t want your property to sit on top of a dirt patch. Ground will need to be moved and your lawn will need to be properly seeded to ensure that it comes in green and even in the spring. These costs can be higher still if you want to add flower beds, new trees, or hedgerows.
Putting in a new driveway can cost about $8,056, based on NAHB survey results and inflation estimates. This expense can vary substantially depending on the size of your driveway and whether you opt for gravel or paved. A gravel driveway may cost one-third of what a fully paved driveway costs.
Add-ons such as fences, detached garages, and swimming pools can substantially increase costs to the home. On a national basis, the average cost of additional structures is $4,280, after adjusting for inflation.
While the figure can be fairly modest for, say, a porch, expect it to rise dramatically if you opt for something more ambitious like putting in a pool or building an outdoor kitchen.
Other Factors That Can Affect the Cost of Building a House
There are a number of additional factors you’ll want to keep in mind when building a home, as they may influence your input costs and long-term home value. They include your chosen area, the size of the house, and market temperature and trends.
Real Estate Trends
These are market-driven trends that you have little to no control over as a homebuyer. They include mortgage rates, the balance between home supply and demand in your area, and the general direction of home prices near you.
Overall, rising mortgage rates tend to hurt demand, as higher rates increase borrowing costs for prospective homebuyers. Your borrowing costs could rise as well if your home building project gets delayed.
Demand and home prices in your area will affect land values as well as the potential growth in your home’s value after you complete construction. Rising home values may drive up the expense of your home building project, and indirectly drive up land costs in your area.
Living Expenses and Emergency Costs
According to the U.S. Census Bureau, an owner-built home can take nearly 12 months to complete. While you’ll likely have budgeted your home building costs over that period, make sure to factor in your living expenses as well.
You’ll need to ensure you’ve budgeted enough to feed and house your family for months, with money to spare, should the build be delayed. Construction projects can be delayed for any number of reasons; uncooperative weather is a common one.
In some instances, things like spikes in fuel costs and construction materials can cause unexpected budget increases, particularly if you’re planning on building in a particularly remote area. Getting work crews and building materials out there can cost time and money; expect to be billed for that time.
If you’re hoping to buy and sell at the same time, that takes strategy and timing.
Explore SoFi’s Home Financing Options
Building a home is the ultimate way to get what you want in a dream home. SoFi does not issue construction loans but does offer construction to permanent financing when the property is complete.
SoFi has home loan options like fixed-rate mortgages and refinances sure to pique — and build — your interest, as well as fixed-rate, no-fee unsecured personal loans up to $100,000.
A SoFi partnership with Spring EQ also may allow you to tap existing home equity to use toward building a new house.
Is it cheaper to build or buy a house?
Generally speaking, given today’s supply crunch for home building materials, it’s usually cheaper to buy an existing home in an affordable community than purchase a plot of land and build a home from scratch.
But when considering whether to buy or build a house, dozens of factors come into play, including the market for land, labor, and home sales in your area. It’s a good idea to conduct extensive research on local market conditions before opting to build a home from the ground up.
Building a home does offer some benefits over buying an existing property. For one, it affords you the freedom to build a structure that fits your tastes and budget. It also allows you to avoid any hidden costs or housing impairments that come with older structures.
What’s the lowest possible amount I can use to build a house?
This depends on the location you choose and the cost of labor and materials in your area. A small home possibly could be built for $100,000, not including the land.
Modular, or prefabricated homes, with modules assembled at a factory and delivered to the home site, may run about 15% less than site-built homes, but because they equal comparable stick-built homes in quality, they usually start at well over $100,000.
Most cities classify tiny houses as recreational vehicles, not meant to be lived in full time.
Is it possible to get a loan to build a house?
Yes, some mortgage lenders offer construction loans for building a house. However, the underwriting and approval process for these loans will be more extensive than a mortgage loan for a preexisting home. The required down payment is usually about 20%, and the rate is variable and typically higher than traditional mortgage rates.
New-construction home loans are usually structured as short-term loans — typically 12 to 18 months — that either convert to a permanent mortgage or require you to apply for a standard mortgage upon completion of your home. It’s a good idea to discuss your options with a mortgage lender that specializes in construction loans.
Some home builders also may be able to use an unsecured personal loan or existing home equity to fund some or all of the new construction.
Your creditworthiness, income, and debt help determine approval for all of the above products.
The topic of mortgages can be a bit complicated. A home loan help center might come in handy.
Photo credit: iStock/Bouillante
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.