The last few years have been among the most challenging for home buyers. The pandemic blew up prices as demand for single-family homes grew. Today, inflated prices, high interest rates and few active listings continue to make finding and buying a house extremely difficult.
But what about building a house from the ground up? A study by StorageCafe looked at the costs of building a house compared to buying a newly built, roughly equivalent house in each of 46 U.S. states. Alaska, North Dakota, Rhode Island and Vermont were not included because data was not available.
The total cost to build was based on Oct. 20, 2022, land prices listed on Point2, a listing site, plus contractor costs drawn from 2021 U.S. census data (the latest available) with 8 percent added for inflation. The median lot size was determined from Point2 listings for new homes over the last five years. Finally, 10 percent was added for surveys, permits, and real estate agent and lawyer fees. The median list price was also based on Oct. 20, 2022, listings on Point2. All results were rounded to the nearest thousand.
Building was found to be cheaper than buying in 18 states. In Hawaii, the median-priced house was listed at $1,045,000, but the study found that building would cost only $551,000, about $494,000 less, the greatest savings discovered.
Building in California was found to save over $200,000, and in Colorado, over $100,000. In New York, where building from scratch was the least financially advantageous, new construction would cost $535,000 and buying $524,000. In 28 of the states studied, building wasn’t worth it.
The report should be considered carefully, as the cost of building a home exactly where you’d want to live may fall above or below the state median. The real wrench in the works for those who want to build are supply-chain issues, which have plagued contractors since the pandemic took hold. If you build, be prepared for delays.