Is it cheaper to build or buy a house? Making the decision to purchase a home is by no means an easy one—especially with the financial gravity that accompanies owning real estate for the first time. Then there are decisions like choosing whether to start from scratch or find an existing property that fits your needs. And is it cheaper to build your own house, anyway? There are plenty of unexpected costs to be aware of when it comes to envisioning a dream home, so it’s important for first-time homebuyers to weigh all their options and learn from experts who work in the construction industry and real estate market day in and day out.
Narofsky Architecture principal Stuart Narofsky, a licensed architect and an American Institute of Architects fellow based in Long Island City, New York, has been designing and renovating homes for 40 years, and can offer insights into the cost of building a house versus buying. “I frequently consult clients on whether to purchase new, modify new or existing homes, or look for undeveloped property,” he says. “We evaluate many factors in determining the best route ahead: cost comparisons, timing, disruption to family, and property value evaluation.”
Average Cost of Building a Home
The cost to build a home can include similar factors as buying—especially when it comes to loans, construction costs, or paying professionals to help get your home ready for move-in. But what exactly is the average cost building your dream domicile? And when is it cheaper to build a house rather than updating an old one?
“This is difficult to answer with certainty for many reasons,” says Robert Carroll, owner and president of Carroll Construction, LLC out of Clinton, Louisiana. “The cost of a new home is extremely reliant on the region where the home is built, the organization that builds the home (custom, semi-custom, speculative, or production builder), local regulations, property values and the labor market.”
You will need to work with home builders and experts to ensure your new build is of the best quality and safety possible. According to Narofsky, the average cost of building a home varies greatly depending on the location, client desires and specifications, and complexity of the site and scope included in your investment. “In the last year we have seen new home construction run from $500 per foot to almost $1,000 per foot,” he says.
If finances are your main deciding factor, there are ways to work with your architect to make things more affordable. “If budget is a concern, your architect should be able to advise you on cost-saving measures,” says Marica McKeel, founder and principal of New York–based Studio MM Architect. “Such as efficient space planning, simplifying the structure, or using long-lasting durable materials that will reduce maintenance costs over the course of a home’s lifetime.”
Therefore, if you’re looking to live in a simple, compact, low-maintenance dwelling, building your own may well turn out cheaper.
Average Costs of Buying a Home
Of course, the sales price of a home is a huge deciding factor in whether or not to make a final decision to commit to buying a preexisting structure. Other financial obligations that come into play include working with realtors or a real estate agent, closing costs, the required down payment, and more.
According to Carroll, prices of existing homes depend on similar factors to those mentioned above, as well as the age of the home and the surrounding comparable properties. All factor into the total cost of a home. “Within just the state of Louisiana for example, there could be upwards of $100 per square foot of living area variation in the different markets,” he says.
He notes that buying an existing home will typically be the less expensive option, but there are, of course, other aspects to keep in mind—location being a critical one. “Purchase of a home varies greatly depending on the neighborhood,” Narofsky says. “For example, this year I have seen homes that require a tremendous amount of improvements and updates on one or two acres costing upwards of $3,000,000.”
Pros and Cons of Building a Home
“When building a new home you will be receiving a home that is generally lower maintenance, more energy efficient, and depending on the location, it could be subject to significant appreciation in the first few years,” Carroll says.
One of the benefits of this route, he says, is the ability to build a custom home that fits specific personal needs. To him, the cons are almost exclusively upfront costs. New-construction homes can be expensive—especially when increasing labor costs, supply chain difficulties, and waiting times for brand-new appliances or fixtures get factored in.
“When speaking to clients about building vs buying, the question I ask them is this: How comfortable are you with concepts vs tangible assets?” says Laetitia Wajnapel, owner of AD PRO Directory-listed studio Cinquième Gauche, based in Los Angeles, California. “Even when working with a team of trusted pros, there is a level of surrender and abstraction to a build that you just don't have to deal with when you buy an existing structure. That still stands even if you do a full reno of said structure.”
Philadelphia-based Mark Asher, an architect for Asher-Slaunwhite Architects, notes that one of the great benefits is that the new homeowner and developers are partners in designing a place unique to them. “The biggest mistake clients make in building is that they overbuild,” he says. “Build less, better.”
According to Narofsky, a great benefit to building your own home is not having to compromise on what you want, plus the ability to customize a floor plan. His cons include that the build can be very time-consuming, from beginning to end. The client has to be very involved in the process and willing to make hard decisions. There are additional costs that many people don’t think about—like renting another space to live in, or owning another home—during construction too.
McKeel sees similar patterns in her work, which aims to “demystify” the design process and make it more accessible. “Even though you may not have designed a home before, it’s worth remembering that your architect certainly has—and that they should be with you every step of the way,” she says.
Pros and Cons of Buying a Home
“When buying an existing home, you can almost flip the pros and cons for most homes to varying degrees,” says Carroll, who adds that the initial costs will be lower for those who opt to buy. “If you’re purchasing a home built in the last decade, you can enjoy some of the benefits of the recent code changes for energy efficiency and reduced maintenance,” he says. “The older the home, the more likely it is that you are purchasing a product that will have not just reduced efficiency and resilience, but…[potentially even] deficiencies that can be a threat to health, such as mold growth and lead paint.”
That latter can be costly to fix, which points to the extra cost of renovations that you wouldn’t have to worry about in owning a new house.
According to Asher, one of the benefits of buying is that the home is instantly available. Generally, you don’t have to wait on new construction, construction loans, building materials, or material costs. This can make a homeownership journey a lot less stressful, and will save on costs paying for accommodation while waiting.
McKeel has seen the same in her work, especially when clients choose to buy because it’s a more familiar choice. “It is undeniable that building a new home will take time, especially one that needs to be custom designed,” she says. “Depending on the scale of the project, our design process takes about five to nine months. Bidding and permitting can take as little as a month, but can also take as long as six months if your property requires any special approvals.”
Another con: Not being able to have an active say in the design process, which can greatly affect your overall satisfaction and feelings of personalization with your home.
Building vs. Buying a House
Answering the question “Is it cheaper to build or buy a house?” demands that a future homeowner weigh a variety of factors, especially around cost. Here are some factors that will have a big impact. Consider these points before you decide to buy or build.
For existing homes, maintenance generally costs more. “Older homes can be clad in materials that are less rot resistant, such as the old masonite siding,” Carroll says. “Fascias and eaves these days are more likely to be made of concrete products whereas the older home stock will be typically made of wood which is prone to rotting.”
You may have to take on neglected maintenance projects and upgrades that previous owners avoided. You may also choose to make stylistic changes to appearance-based things such as countertops, roofing, and interior finishes. These costs can add up pretty quickly.
For newer homes, Asher notes that maintenance can be avoided for many years, and that a lot of the appliances and systems will be under warranty for a while. “But owning a home is no different than a car,” Asher says. “It needs care, upkeep, insurance, and more.”
McKeel emphasizes the benefit of complete customization and maintenance. “On one hand, buying a home means that you will likely have established plantings and green spaces, but building a new home will allow you to influence what plants or features are in place,” McKeel says.
She also notes that it’s easier to add complex landscaping systems—like irrigation, water features, pools, and retaining walls—when you build a new home. “You can tie them into the design of the home’s mechanical or plumbing systems from the start,” she says—although these options will inevitably be costly.
“We advise budgeting between 1-10% of your home's value to build out, landscape and furnish your exterior spaces, depending upon the scale of what you're looking to do,” adds Kristin Monji, principal at New York-based Birch and Basil Design, also listed on the AD PRO Directory. “A lot of people budget for interior renovations but forget to budget enough for their exteriors.”
Existing homes can be generally less efficient depending on when they were built. “Anything built pre-2012 building code will be significantly less efficient than current housing stock as the 2009 to 2012 International Residential Code cycle made some of the most significant energy changes in recent years,” Carroll says. In this respect, building your own house will pay off in terms of lower energy bills in the long run.
For older homes, appreciation depends on the maintenance done on the home and that of the neighboring homes in the development, says Carroll. “Homes that are not maintained may still enjoy some appreciation though far less than homes that were kept in repair and that are located in developments with up-to-date and enforced homeowner association restrictions,” he says. New homes will typically appreciate four to six percent per year.
“For newer homes, if purchasing early in development, a homeowner can experience appreciation in short order if the development maintains a healthy sales cycle and the development appreciates as it sells out,” Carroll says.
According to Narofsky, owners should be aware of the commitment to maintain a home or property, which will shape its ultimate value. That means paying attention to long-term costs—like maintenance, energy use, and taxes.
“Many people still hold to the American dream of owning their own home,” he says. “It’s a great achievement for many to accomplish this and with a great return on satisfaction.”
Whether you decide to build a house from scratch, or buy a home to renovate or redecorate, visit the AD PRO Directory, our up-to-date, open-access list of AD-approved architects, interior designers, and landscape specialists that anyone in need of design services can search by profession and location to find the right professional for their next project.
