Building vs. buying a house: What's the best option?

You're preparing to buy a house, but you're not sure whether it's better to buy a home on the market or build your own. While both options have advantages and disadvantages, your choice will depend on your budget, when you need to move, how many decisions you want to make, and more. Read some of the pros and cons of buying vs building a home and then choose what's best for your family.

6 min to read

Is it cheaper to buy or build a house?

Historically, it has generally cost more to build than to buy a house. However, due to a booming real estate market, current estimates for the average cost to build a house in the U.S. is $392,000 from the National Association of Home Builders (NAHB), while the average price of an existing house in the U.S. in 2023 is $431,000. The average price of an existing house is down $37,000 from the previous year, according to the Federal Reserve Bank of St. Louis.

Of course, these numbers are national averages, which will not reflect what it might cost to build a home in your area. New Home Source estimates that building a new home could cost between $100 and $200 per square foot, however, your location impacts building costs in several, significant ways including:

  • Labor costs, which vary by region. For example, labor costs in California could be higher than in Ohio.
  • Land costs also vary widely depending on where you're buying property
  • Proximity to city water and sewage. If you're building close enough to a city to connect to city services, it could cost you less than if you must install a septic system and a well.
  • Sales tax rates vary throughout different municipalities
  • Building materials and supply chain issues will impact your project in different ways depending on where you are

However, building a new home typically tends to be more costly and takes longer. Consider how much house you can afford to buy as you're weighing your options.

Building a house

The advantages of building a house

  • Fewer repairs outside of routine maintenance. When you build a house from new construction, everything – including the roof, the HVAC system, and the appliances – is brand new. Unless the construction is faulty or an unforeseen event damages your home, you likely won't have to make any significant repairs or replace high-priced items for years.
  • You can customize it. You don't have to live with someone else's choices. You get to choose the floor plan, pick out the kitchen cabinets, and select the tile you want in the bathroom so your home will be exactly the way you want when you move in.
  • It can be more environmentally friendly. The materials builders use today are typically better for the environment and your health than what you may find in older homes. Plus, HVAC systems, appliances, and insulation are more efficient today and may help you save on energy use.
  • There's less competition. You won't get into a bidding war with other potential home buyers interested in purchasing the same property when you build a home.

What are the disadvantages of building a house?

  • You may pay more than you planned. You'll have an idea of the final price tag when you start building, but it's not unusual for additional expenses to pop up during construction. Your dream home could end up costing more than what you budgeted.
  • There are many decisions to make. Building a new home allows you to customize many of the details. But making all those decisions can be stressful.
  • You may have to wait. It could take several months from when the construction crew breaks ground until you can move into your new home, especially if you encounter bad weather during construction. Consider the possibility that you may encounter unforeseen delays or incur additional living expenses during this time.
  • There's no curb appeal. When the builders finish your house, they may put down topsoil and either grass seed or sod. But there may not be any large trees to provide shade, flowers to brighten the yard, or other types of landscaping you might find with an existing house.

Buying an existing house

The advantages of buying an existing house

  • It's usually faster. If you buy an existing house, you don't have to wait months for the builder to complete construction before you can move in.
  • There are fewer decisions to make. When you buy an existing home, the decisions about what type of granite to install, which appliances to choose from, and whether you want carpet or hardwood floors have already been made.
  • You might be able to negotiate. When you build a home, there's not much wiggle room on the price. But if you find an existing home you like that's been on the market for a while, you might be able to get the purchase price down.

Find out the best time to buy a house and how to buy homeowners insurance for the first time.

Disadvantages of buying an existing house

  • There's no customization. In most cases, the decisions have already been made when you buy an existing house. You may be able to make changes, but it may take additional time and money.
  • Repairs or improvements will likely need to occur sooner. Chances are, you won't have a brand-new roof, siding, HVAC system, or appliances when you move in. If you know you need to make some repairs or upgrades, be sure to factor the added expense into your budget and consider whether you'll need additional home insurance while renovating.
  • There could be competition. If you want to buy a home in a hot real estate market, you may find yourself competing with multiple buyers to get the house you want.

Comparing the costs of building vs. buying a home

When you build a house, you buy the land and building permits, hire an architect and a contractor. Then you buy lumber, skilled labor and materials, choose appliances, fixtures, paint colors, carpets and more. Whether the building project takes six or 12 months, you have to pay for a place to live while the house is under construction. While you'll get an estimate of the cost to build up front, there's always the possibility of cost overruns and delays with new construction.

When you buy an existing house, you pay for a down payment, home inspection, appraisal and closing costs, real estate agent commission, property taxes and homeowners insurance, which are not likely to go up unexpectedly.

Is it better to build or buy a house?

Both building new and buying an existing home have distinct advantages:

Pros of buildingPros of buying an existing home
Fewer repairsPros of buying an existing homeThe process is usually faster
Opportunity to customizePros of buying an existing homeNo decision fatigue
Energy efficienciesPros of buying an existing homeMore wiggle room to negotiate
No bidding warsPros of buying an existing homeExisting community
Modern conveniencesPros of buying an existing homeEstablished landscaping

There's no right answer for such a personal decision. You can develop a list of pros and cons based on how much home your budget can handle. If you admire old architecture, and you can appreciate the ambience and history of an existing house, or if you need a place to live immediately, then maybe buying a home is for you.

If you've been sketching floorplans and imagining your custom designed kitchen with a pot-filler above a six-burner stove, double oven, and you've got plenty of time and patience, then you'll want to build your dream house.

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