As building material costs rise, homebuyers are wondering what to do: Build new, or purchase an existing home? The decision often comes down to finances.
The median price for a pre-owned home in May 2021 was $356,600, according to a news release from the National Association of Realtors; the Census Bureau reported the median sales prices of new homes for the same period was $374,400. So where does that extra $20,000 or so come from in new builds? Here’s a breakdown.
Cost per Square Foot of a New Single-Family Home
|Region||Average Cost per sq. ft.||Average Home Cost|
Source: U.S. Census Bureau
These averages can give you a rough estimate in devising a budget, but the final tally will fluctuate according to these factors:
- Regional labor costs
- Cost of the land
- Building materials – standard or top of the line
- Square foot size of your home
Cost per Square Foot to Build a Custom Home
In comparison, the price for building a custom home can be as high as $550 per square foot, depending on what you want. Upgraded interior finishing can easily tip the scales toward the million-dollar mark overall.
Different aspects of building a custom home are going to cut more into the overall budget. Here’s a loose outline from HomeGuide that shows how much of the budget different factors can cost:
|Site Work||7 Percent|
|Major Systems (electric, plumbing, etc.)||14 Percent|
|Interior Finishes||29 Percent|
|Final Steps||7 Percent|
Those with expensive tastes will quickly notice how the interior finishing percentages can swell, carving out a larger slice of total costs. As you design your new home, review the costs of adding molding, granite countertops, high-end faucets, and top-of-the-line appliances with your builder—before you buy.
A more cost-effective route is to purchase a home the builder has already designed. These do allow some flexibility to ensure the home fits your needs, and even if you toss in a few upgrades, the grand total won’t rise through the stratosphere.
Should You Hire an Architect for a Custom Home?
There is no hard and fast rule that states you must retain an architect to design your custom-build home, and they can add a significant expense to the overall budget (fees range from $60 to $125 per hour). For a cost-friendlier option, you can purchase a custom home plan pre-designed, and then have an architect weigh in to ensure it meets local building codes.
Be Sure to Plan Ahead
Whether you’re going with a production home or a custom home, make sure to establish a realistic budget with your builder and stick to it. Don’t be enticed by nicer looking designs to add to your home if it puts you way out of budget; having a plan ahead of time will save you a lot of money and stress.