Building a new house is an expensive undertaking. Gathering as much information as possible before committing to a contract is an essential part of home building.
New home construction in the USA averages between $138,937.00 and $531,394.00. The median average is $323,026.00 or around $150.00 per square foot of finished area–not including land costs. A new home is the biggest investment most people make during their lifetime. Here are details of where most of that money goes and suggestions about reducing some costs.
Location
One of the biggest housing cost variables is location. The national average cost of a building lot is $6.70 per square foot but it varies greatly depending on what state you live in. At the low end are states like Mississippi and West Virginia where prices are $2.00 or $3.00 per square foot. Wyoming and Michigan land costs about $10.00 per square foot. Rhode Island land costs $16.00 per square foot.
So, buying a 10,000 square foot lot varies considerably.
- Mississippi. $20,000.00
- Michigan. $100,000.00
- Rhode Island. $160,000.00
For reference, a 10,000 square foot lot is approximately 67 feet wide x 150 feet deep.
House Cost Breakdown
Building costs can be split into eight broad categories. All of the costs below are national averages. Building costs vary from state to state–just like land costs.
Land Costs
The average cost of a building lot is $6.70 per square foot. According to the National Association of Home Builders (NAHB), the average lot size is just over 15,000 square feet–making land costs around $100,500.00 for an unserviced lot. Additional costs include:
- Clearing and Grading. $1000.00 – $5000.00 to prepare the lot for building.
- Services. Hooking up to municipal water, sewer, and power can cost up to $20,000.00. Water wells and septic tanks can double the cost.
- Surveying. Surveys that define your property boundaries usually cost up to $1000.00.
Preconstruction Costs
Plans, permits, surveys, and inspections are relatively small costs but they do add up.
- Blueprints. Custom house designing can cost over 5% of the total house cost. Buying plans from the builder or stock plans from an architect is much cheaper. You can still make changes before construction begins.
- Building Permits. Building permits may cost as little as $30.00 but are usually between $500.00 and $2000.00 depending on location and house size.
- Site Survey. This survey stakes out the location of the house on the property. The surveyors make sure the house will be located legally on the lot and account for the topography. Costs can run into the hundreds of dollars.
- Inspections. Depending on the location of the house, inspections have to be carried out at certain times during construction for the project to proceed. Some jurisdictions have in-house inspectors whose services are paid for during the permitting process. Some use private inspection services that are usually paid on a per-visit basis. A final inspection is usually required before the local jurisdiction provides an occupancy permit.
Excavation and Foundation
Excavation usually costs between $1500.00 and $5000.00 depending on the site conditions. Foundations cost between $4.00 and $7.00 per square foot of the footprint of the house. (Foundations for two-story houses do not cost more even though the house contains more finished square feet.)
Framing Costs
Framing the house usually costs between $20,000.00 and $50,000.00 depending on size, design intricacies, ease of access, etc. Obviously, larger houses cost more.
House roofs cost $5000.00 to $15,000.00 depending on material choice–asphalt to metal.
Exterior Finishing Costs
Sealing and finishing a home’s exterior is not as costly as framing, but can add significantly depending on your choice of materials.
- Doors. Exterior doors cost between $500.00 and $2500.00. Very fancy doors with expensive glass and sidelights can easily cost more than $10,000.00 each.
- Windows. Usually cost between $300.00 and $1500.00 each.
- Siding. $3.00 – $6.00 per square foot of covered wall area for vinyl and stucco. Fiber cement siding is about $10.00 per square foot of covered wall area.
Interior Systems
Homeowners see very little of the inside-the-wall systems that make homes comfortable, run smoothly, and convenient.
- Electrical. Rough-in costs between $4.00 and $9.50 per square foot not including fixtures.
- Plumbing. Rough-in costs about $4.50 per square foot not including fixtures.
- HVAC. $5000.00 to $9000.00
Interior Finishing Costs
Interior finishing costs between $50,000.00 and $150,000.00 per square foot of finished floor area and it includes:
- Insulation.
- Drywall.
- Flooring.
- Cabinets and Countertops.
- Baseboards and Casing.
- Painting.
High-end flooring, kitchens, and fixtures (lights, faucets, or sinks) all increase costs.
Landscaping, Decks, and Patios
Landscaping can cost as little as $1500.00 for grass and an inexpensive sidewalk. Or thousands for professionally designed and installed landscaping.
Decks and patios cost between $10.00 and $30.00 per square foot depending on the material used for the construction. Composite decking costs more than wood and poured concrete is more expensive than concrete blocks.
Fencing is usually not included in the cost of building a house. You need to have extra money to have one installed–even if it is a DIY project.
Total Construction Costs
The actual average cost of construction is $153.00 per square foot. When land costs and builder’s fees are included the average cost increases to $203.00 per square foot of finished area.
General Contractors vs Project Managers
Builder’s fees charged by general contractors and project managers include:
- Profit.
- Overhead.
- Marketing.
- Sales Commission.
General contractors usually charge between 10% and 20% of the total construction cost of the house. Based on the average construction cost of $323,026.00, you pay between $32,000.00 and $64,000.00 for their services. They control the entire project–often providing their own staff for some of the work. They hire all of the subcontractors–most of whom they have worked with before and trust to perform the jobs competently.
Many general contractors quote completely finished home packages–start to finish all included. Some even own lots that they include in the total price.
Project managers or construction managers usually charge between 5% and 15% of the total construction cost–$16,000.00 to $48,000.00 on the cost of an average project. They do not get involved in the actual construction but recommend subcontractors they trust and ensure the project runs smoothly.
Unexpected Expenses
Building a home always involves unanticipated expenses. Budget at least 10% more than the actual building cost to cover surprises.
- Living Expenses. The average house takes six to seven months to complete–sometimes up to a year. You have to live somewhere during that period. If you sold your old house, you will likely be paying rent.
- Change Orders. Contractors hate changes during construction and charge accordingly. “Let’s make that closet two feet bigger” is easy to say. Re-framing it can cost hundreds extra. Deciding you don’t want a door that is already on site could cost thousands. A few changes during construction can cost a lot of money. Make sure you know how much before making your decisions.
- Supply Chain Disruptions. Things like your flooring or countertops may have been discontinued or will take months to arrive. Choosing another product will invariably cost more.
- Labor Shortages. 70% of construction companies are having trouble recruiting skilled labor. You may have to pay more or wait longer to have competent subcontractors work on your home. Delays always cost extra.
- Outdoor Finishing. Landscaping, fencing, and extra sidewalks are usually not included in construction quotes. You will have to pay extra for them or make sure they are included in your quote.
- Site Cleanup. Basic site cleanup–interior and exterior–is included in the general contractor’s quote but you might still be left with some dust inside, leftover building materials, and a pile of dirt left behind. Be prepared to pay up to $0.50 per square foot for a final cleanup or to do the job yourself.
Can You Save Money Being Your Own General Contractor?
You can save money by building your own house–but probably not as much as you think. Unless you have contacts that you trust, finding subcontractors and scheduling can be daunting. (Most contractors will tell you that scheduling is the hardest part of their job.) As a one-time customer, you do not get the best prices from subcontractors and suppliers. They provide better and quicker service to repeat customers.
Saving money depends on what you can do on the project. If you are a siding installer, roofer, framer, or finishing carpenter with all the equipment you need, stick to that. Most jurisdictions require that licensed plumbers, electricians, and HVAC contractors do the installations. Inspections are also required.
How You Can Save Money Building a House
You can hire a general contractor or project manager and still save on the cost of building a new house. Consider using some of these ideas that can save you thousands of dollars.
- Take Your Time. Time spent planning and researching pays off in cost savings and a smoother project. Interview builders. Check out available land. Talk to relatives, friends, co-workers, real estate agents, inspectors, planning departments, etc. before making the final decision.
- Buy Serviced Land. Buying a serviced lot can save you up to $30,000.00.
- Buy Stock Plans. Custom plans drawn by an architect can cost over $20,000.00. Stock plans that you can make some changes to usually cost less than $5000.00–a large saving.
- Decide On Your Budget. Decide how much you want to spend and stick to it. It is way too easy to add $30,000.00 to new house costs. Motion-operated faucets are only $500.00 more. That flooring is only $3500.00 more. And on and on. Small extras add up to thousands quickly. Restrain yourself or have a rule to eliminate something to balance the budget.
- Choose a Reputable Contractor. Interview at least three contractors. Ask for the names and addresses of customers. Talk to as many people as possible before signing a contract. Read and understand the contract.
- Build High. A 3000 square foot two-story house costs less than a 3000 square foot bungalow. You save money on excavating, concrete, and materials.
- To DIY Or Not. Have your contract include any DIY projects you want to undertake. Know what you don’t know. Only commit to something you can do well and in a timely manner. Much of construction works on a linear timeline. One task has to be completed before another can begin. For instance: If you are installing fiberglass batts in the walls and it takes three weeks instead of three days, your drywall contractor will move on to the next job and it may be tough to get him back when you are finally ready.
- Visit the Site Regularly. It is your money. You have every right to visit the job site. Once or twice a week is usually sufficient. Talk to your contractor regularly. Solve problems while they are small. Contractors are not comfortable having someone looking over their shoulders and offering advice. If something bothers you, take it up with the general contractor or project manager.
Should You Build New Or Buy Existing?
Building a new house is almost always more expensive than buying an existing house. The average figures below show a difference of $146,556.00.
Building a new house allows you to design and build exactly what you want and/or need in a home. Everything is new. Your maintenance should be minimal for at least 10 – 15 years–the average lifespan of appliances, hot water tanks, and roofs. Floors and paint should also last at least that long. Your return on investment (ROI) is higher on a newer home.
The not-so-good parts of building a new house include higher cost, higher taxes, more expensive mortgage, and longer wait time to move-in date.
Some of the advantages of buying an existing house include lower cost, lower taxes, and mortgage, quick move-in, and mature landscaping, and an established community.
The not-so-good parts of buying an existing home include accepting the existing design and floor plan, costly maintenance that requires attention, landscaping that needs work, and annoying small problems like leaking taps, squeaking floors, ill-fitting or substandard windows and doors that have to be dealt with.
You may buy an existing house and plan to renovate it. The average cost of renovating an existing home is $52,000.00. Depending on the scope of work the cost can quickly exceed $100,000.00 but that is still less expensive than building a new house.
