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Is building a house cheaper than buying one?
It’s a question everyone trying to decide whether to buy a home or rent an apartment has asked themselves. Unfortunately, there isn’t any end-all, be-all answer, especially since land prices, material costs, and builder availability varies state to state. With a little research, you can determine whether buying or building is right for you!
We’ll walk you through the steps you need to take in order to determine whether buying or building is the cheaper option.
Buying or Building a House in 2019
Determine the Cost of Buying a House
The first step in determining whether it’s cheaper to buy or build a house is to figure out the median home listing price in your desired area. Realtor.com has a useful tool for doing just that!
For this example, we smashed our hand on the number pad to get a zip code. We ended up with 45371, otherwise known as Tipp City, Ohio. At the time of writing, the median home listing price is just shy of $250,000. While that’s fine and dandy, we need to focus on the cost per square foot.
Builders focus on their cost per square foot, not necessarily the median home price in the area. In Tipp City, the median listing home price per square foot comes out to $117.
That’s great and all, but it’s just half of what we need to figure out.
Determine the Cost of Building a House
Figuring out how much it costs to build a home is a little trickier. According to a study by the National Association of Home Builders, the cost per square foot to build a home ran around $103 as of 2015.
There’s no doubt construction prices have shifted in the past four years, so that number doesn’t really help us. As far as our research goes, there’s no definite number from an official source regarding what it costs to build a home.
Home Advisor has a great breakdown of where your money’s going when you choose to build a home. According to their research and homeowner-provided costs, the average cost per square foot to build a home runs around $150.
That’s a pretty significant jump from $103 just four years ago! Now that we have both cost per square foot amounts, we can determine whether buying or building a home is the cheaper option.
Related: New to home ownership? Check out these tips to get started!
Buy or Build a Home?
By comparing the cost per square foot of buying and building a home, we can determine the cheaper choice. Keep in mind we’re using Tipp City, Ohio as a random city of reference, so these numbers may not be the same for your area! It’s always worth it to contact a local builder to get an exact cost per square foot.
Buying a home: $117 per square foot
Building a home (average): $150 per square foot
With these numbers alone, we can determine that buying an existing home is approximately 22% cheaper than building a new home in Tipp City.
Other Factors to Consider
There are a handful of other factors to consider before deciding whether to buy or build a home. The three main variables we’ll focus on are square footage, appliances, and additional features.
It should be obvious more square footage will increase the price of homes, regardless of whether you choose to buy or build. In most cases, a 20-year-old 2,000-sq ft. home, for example, will cost more than a brand new 1,200-sq ft. home.
If there’s one thing many new homeowners fail to take into account, it’s the quality of appliances. Would you rather have a name brand product built to last, like this Whirlpool microwave, or a knockoff with sketchy reviews?
In order to get additional features, like an outdoor pool or kitchen, you’ll have to custom build your home. Either of those two features will increase the cost of building a home by a significant amount. Adding in extra features can increase your home’s maintenance costs too!
Buying or Building a House
Regardless of whether you buy an existing home or build a brand new one, becoming a homeowner is a major undertaking. While it’s important to consider the cost of the home itself (as well as square footage), there are other factors to consider as well. Unlike apartments where landlords handle maintenance and repairs, homeowners are responsible for everything.
Before you decide to buy or build a house, make sure you have some money put away for any unexpected expenses. No one wants to lose their dream home due to a thousand-dollar setback!
Of course, if you’re serious about building a home, it’s worth getting a rough estimate from a builder in your area. After all, if you aren’t comfortable in an existing home, there aren’t many other options available to you!
Need some help determining whether to buy or build your next home? Maybe we can help! Leave a comment or follow us on Facebook!