Undoubtedly, as home prices increase, many would-be purchasers are considering alternatives, like building their own home from scratch rather than buying. But would constructing your own house really make sense right now? Let me allow you to share some insights and get a better perspective little by little and get a better decision on whether you should buy or just build your next house. Whether you’re an investor, or enjoying the perks of following your dream home for your family or yourself, you should find out!
Build for $449,200 VS Buying an Existing Home for $414,200.
There is an average cost difference of $34 000 between building a new home and purchasing an existing one. As of May 2022, the median cost of new construction was $449 200. This is according to the most recent data available from the NAHB and the U.S Census Bureau, the median cost to purchase an existing home was $ 414 200. In addition to the upfront costs of construction, you also need to consider the extra time involved in building a new home.
Building a new home requires more time and effort than purchasing an existing home. Is that all? I can be determined to do all of them and build my dream home- well that’s easier said than done. To build a new home, one must; purchase a lot, excavations, permits, inspections, and not to mention the costs associated with the process of building a home: Foundation, concrete, excavation, framing, exterior finishes such as flooring, countertops, drywall, appliances, and other amenities. Aside from these and most importantly the labor cost that had skyrocketed since the beginning of the pandemic and global inflation.
HOW DOES BUILDING COST VARY?
by Richard Uzelac
You can build a basic home for approximately $200 to $500 per square foot of living space, depending on location. This can vary greatly based on the home builder, the cost of materials, and when you are planning to construct it. The first factor to take into consideration is the cost of construction.
If you want the best of everything, then you can expect to spend $ 500 per square foot or much more. If you can do some of the construction work yourself, you might be able to save a lot of money. Moreover, data shows that people who already own a lot are able to drastically reduce their construction costs. But sure that depends on the amount you purchased the lot for. Plus there are still things to consider like landscaping, and outdoor structures: Decks, Driveways, etc.
It is true that some construction projects are completed on time and on budget. However, 5% to 10% of construction projects tend to go over budget. So you should build in a contingency of 5% or 10% to cover unexpected costs that may occur during construction. There are a number of key home systems that need to be added to the new home. Plumbing, electricity, and HVAC are three of the most common systems. Labor costs for plumbers and electricians also have to be considered.
AVERAGE COST TO BUY A HOUSE
A home’s price will vary by state, just as construction costs do. Indeed there can be enormous differences within regions by country, city, and neighborhood. The Federal Reserve hammered both sides of the housing market in 2022 and 2023 by increasing mortgage interest rates. This has pushed many people out of the market, and helped to increase building costs.
Another factor to consider is how fast home prices are going up where you want to buy or build. The CoreLogic report for June 022 stated that home sales prices nationwide had increased year over year by 20.9 percent in April 2022 compared with April 2021. That’s an annualized figure, so in April 2022, home prices were 20.9% higher than they were in April 2021. Also, no states reported a decline in home values.
Benefits of Owning a Brand New Home
After reading this far, you must think that you should just buy a brand new house and think you can’t afford it or it’s not worth every building in today’s market. However, one strategy is to put some of your down payment savings towards buying a lot now. Then you can wait until you can afford to build your dream home and take a stride in building a brand new home.
Savings on Home Warranties
In addition, there are a number of financial benefits to owning a brand-new home. As an example, you’re less likely to have a deal with an unplanned upgrade or costly renovation if you own a new home.
In today's Marketing, is buying or building cheaper? By Richard Uzelac
The Answer: It’s all up to you and what you want to do.
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