Estimate cost of Building a home
The average sales price of a newly constructed house in January 2016 was 494, 000, according to the U.S. Department of Housing & Urban Development. Since this price range is well above the average price of an existing home, consumers seeking a newly constructed home often ask whether it would be cheaper to just build a house. Let’s take a look at the numbers in 2015.
Basic Costs to Build a House
Figures from a recent study by the National Association of Homebuilders (NAHB) help answer this question. They concluded that builders spent an average of $289, 415 to construct a 2, 800-square-foot house in 2015. This estimated figure represents the cost of building the home, and is broken down as follows:
|Site Work||$16, 092||Everything needed to get started building a home, including building permit fees, water and sewer inspection fees, architecture and engineering plans.|
|Foundations||$33, 447||Excavating for and building the foundation, including cost of concrete and other supporting materials to build retaining walls.|
|Framing||$55, 027||Framing of the entire home including roof and trusses, as well as timber, steel and other materials required.|
|Exterior Finishes||$43, 447||Everything from windows and doors to finishing exterior walls with paint or siding, including weatherproof and cosmetic finish for the roof.|
|Major Systems||$37, 843||All the plumbing and electrical except fixtures, as well as heating and cooling.|
|Interior Finishes||$85, 642||Insulation, drywall, painting, lighting, flooring, doors, mirrors, countertops, and cabinets. This expense also includes appliances, fireplaces, and fixtures for plumbing and electrical.|
|Exterior Amenities & Clean Up||$19, 567||Landscaping, decks, patios, porches and driveway, as well as overall site cleanup on completion.|
|Miscellaneous Costs||$1, 349||Estimated unforeseen costs.|
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The Fine Print Costs of Building a House
Even with this level of detail, it’s critical to note the costs above are strictly the costs to build a house, and exclude land acquisition and various vendor costs.
|Lot Cost||$85, 139||A lot with core utilities such as gas, water and electric already running to it. Also includes an estimate for financing the lot. The financing cost estimate is for a builder, not a consumer, which may be higher.|
|General Expenses||$26, 345||The builder cost to manage and pay for anything that’s not embedded into the list above. For a consumer, these costs will likely be higher because all support are individual vendors, even if they’re consolidated under one general contractor.|
|Additional Financing||$6, 285||An additional cost of financing that may not be captured in any other category above.|
|Marketing, Commissions, and Profits||$61, 135||A combination of $3, 739 estimated marketing cost the builder incurs; $15, 104 sales commissions paid to on-staff or outside real estate agents to sell the home; and $42, 292 for profit the builder estimates for its work. If you were building your own home with contractors as vendors, this last category would be embedded into their quotes.|
The Grand Total
What all of this means is that you can build a 2, 800-square-foot home for about $468, 318 if you hire and manage your vendors well.
This 2015 NAHB cost-to-build-a-house estimate is higher than the 2015 average new home sales price of $365, 700, so it boils down to whether you are up to the challenge and extra cost of managing a building project, or prefer to just buy a newly constructed home.
If owning a newly constructed home is your only goal, and there aren’t many new homes being built in your area, it may be worthwhile to build. There will be wide price disparities market-to-market and vendor-to-vendor, so consult building and real estate professionals for custom quotes to determine your best approach.