How Much Does It Cost to Build a House? An In-Depth Guide

Building a house can be an expensive undertaking. If you’re seriously considering it, you may have the resources to finance and see through a new build. The problem is that such a construction project has many moving parts, and you can easily overshoot your budget without foresight. So, how much does it cost to build a house? Learn the cost drivers to have a clearer idea of how much to build a house.

Factors That Influence Homebuilding Costs

Here are the drivers determining how much it would cost to build a house.

• Location: Lots in sought-after neighborhoods cost more due to high demand, but undeveloped parcels in remote areas incur greater site work-related expenses.
• Topography: Sloping land requires more engineering solutions to become viable for habitation and conducive to construction work.
• Project scope: The average cost to build a 1,500 sq. ft. house will almost always be higher than that of a tiny home because larger properties require more material and people to finish.
• Property design complexity: More ambitious architectural and demanding engineering designs drive up expenses, whereas simpler floor plans with uncomplicated features minimize them.
• Material abundance: Procurement difficulties can single-handedly inflate the cost of building a house, as supply chain disruptions and tariffs directly impact building material prices.
• Labor availability: Talent scarcity causes builders to pay more to lure the best workers, passing on the cost to you.
• Unforeseen events: Contingencies, such as product price underestimation, unanticipated shipment delays, and weather damage, may prompt you to spend more than you initially budgeted.

How Much Does It Cost to Build a House? A Detailed Breakdown

According to the Construction Cost survey published by the National Association of Home Builders (NAHB), it costs $428,215 to build a house, accounting for 64.4% of the average sales price of speculative single-family homes. This figure includes the material and labor costs.

Here’s a more detailed breakdown:

• Site work, including building permits: $32,719
• Foundations: $44,748
• Framing: $70,982
• Exterior finishes: $57,510
• Rough-ins of major systems: $82,319
• Interior finishes: $103,391
• Landscaping, outdoor structures, driveway and cleanup: $27,710
• Miscellaneous expenses: $8,835

The above figures included contingency-related costs, if there were any. Remodelers recommend setting aside 10% of your budget for unforeseen expenses to cover potential change orders, which is solid advice. Better yet, build a larger contingency fund to weather more financial surprises during construction.

Moreover, the average lot size of the properties was 2,647 sq. ft. If you divide the average construction cost by the average lot size, the average cost to build a house per square foot will be about $162.

The association admits that the survey’s sample size was too small to demonstrate meaningful geographic comparisons and its findings reflected the numbers reported only by a subset of NAHB members.

While the NAHB recommends taking these figures with a grain of salt, they serve as concrete data when calculating the cost of building a house, especially when estimating the average cost to build a 1,500 sq. ft. starter house or a 4,000 sq. ft luxury home.

An Owner-Built High-Performance House — A Case Study

In 2020-2021, Ian Schwandt — TDS Design Build Production Manager and a Certified Passive House Institute Tradesperson — embarked on a DIY new build on the corner of his family farm in southeast Wisconsin.

He and his wife, Sarah, aimed to complete this 2,750-square-foot custom high-performance home at $100 per square foot, finalizing the design and budget spreadsheet in August 2020. They secured a $250,000 construction loan that financed 80% of the property’s expected appraisal value at $312,500. The other $25,000 came from the family’s funds.

The couple was lucky to secure pre-COVID pricing on materials and local subcontractors. Ian was an experienced and versatile tradesperson, so he only needed to outsource tasks to building professionals to fill the gaps in his expertise. Sarah was also no stranger to home projects, allowing them to build their dream home mainly on sweat equity to minimize labor costs.

The pandemic drove up the costs of construction supplies in the second half of 2020 and the first half of 2021, prompting the spouses to value-engineer even the tiniest aspects of the project to realize their vision without going over budget. The husband and wife used the quarantine and lockdowns to refine the house’s design, creating multiple iterations until they crafted a version that ticked all the boxes.

Ultimately, the spouses spent $124.34 per square foot and 3,000 hours. Although the Schwandts didn’t meet their goal, accomplishing such a feat is worth commending because of the project’s scope.

Managing the Cost of Building a House

New home projects rarely cost as much as initially intended upon completion. Fortunately, stick framing isn’t the only viable method for building your dream home. Prefabrication options are excellent construction alternatives to minimize exposure to material price fluctuations due to supply chain disruption and save on labor.

Frequently Asked Questions

Here are the answers to the most common questions about homebuilding.

Is It Cheaper to Build a House or Buy a House?

Building a house can cost less than buying a spec home or a homeowner’s residence. Going the DIY route can minimize your labor costs if you know what you’re doing and can finish the job on schedule. However, construction mistakes can be costly. You may commit building code violations, requiring you to redo some aspects of the project and spend more on supplies.

Houses in neutral and cold real estate markets can be affordable. Their prices are negotiable, and highly motivated sellers are more willing to give a compelling discount for a sale. Shopping around as a cash buyer can give you more bargaining power.

What Is the Cost per Square Foot to Build a House?

According to NAHB’s Construction Cost survey, the average cost per square foot to build a house is roughly $162. This figure is based on the average construction cost to build a single-family home of $428,215 and average property size of 2,647 sq. ft. reported by the homebuilders that responded to the poll.

However, the cost per square foot can vary dramatically by location. Rising material prices, worker scarcity and unforeseen expenses can lead to a budget overrun.

What Is the Fastest Type of House to Build?

A modular tiny home is the fastest type of house to build. Prefabricated modules are more straightforward to assemble on-site than panels, speeding up completion time. The tiny home’s small size reduces assembly complications.

How much does it cost to build a tiny house? The most affordable tiny homes cost five digits and should be easier to finance.