If you’ve searched the market and determined there’s no existing home that meets your needs, you may start to wonder: How much does it cost to build a house? It’s a reasonable question considering price is among the most important factors in any real estate investment decision. “There’s historically been a high preference for new homes, and that was the default choice, because existing inventory just wasn’t there,” says Alec Hartman, founder and CEO of homebuilding company Welcome Homes. As more homes became available, it became more common to purchase an existing property. However, this trend may be changing. According to the National Association of Home Builders, the sale of newly built homes is on the rise as of May 2023. Still, the home building process can be a daunting task, though with proper research and planning, owning your dream home is a possibility. In this guide from AD, we break down everything you need to know about home building costs.
Cost to build a house by square footage
According to HomeAdvisor, a network and marketplace made up of construction professionals, the national average range to build a home in the United States is currently between $110,757 and $480,868. “That number is based on the average home being 1,500 to 2,200 square feet,” Manny Angelo Varas, founder and CEO of Miami-based homebuilding firm MV Group USA.
Generally, many home builders look at the price of a home not on the total cost, but on the cost per square foot. This can help contextualize the wide range of potential prices. “You’re almost always looking at triple-digit prices per square foot,” Hartman says. “I haven’t really seen less than that.”
Varas considers prices based on two phases. “Phase one is effectively your structure,” he explains. “This includes mechanical, electrical plumbing, impact windows, roofing, framing, and drywall. So that is your required cost in order to get into what you would consider a white vanilla box.” Generally, he says most homes cost on average around $150 to $200 per square foot. From there, he recommends considering costs for phase two, which includes all finishes such as flooring, cabinetry, landscaping, plumbing fixtures, or lighting. “Say I have a 2,000-square-foot area that needs tile that costs $2 a square foot, that’s $4,000. Then you take that and add it to phase one costs to understand your total price per square foot with the additional costs for those finishes,” he says.
When thinking about both phases together, Hartman proposes the following numbers as averages to consider. For a starter home without many bells and whistles, an average price per square foot could be in the low hundreds, though a more realistic estimate would be somewhere between $200 and $250 per square foot. For mid-market homes, homebuyers should expect to pay between $300 and $400 per square foot, and anything that’s more than $400 per square foot would be considered an upper-market, luxury property.
Cost to build a house by state
The average cost of a custom home can also vary widely between states. “It will always be different in different areas,” Hartman says. “The cost of labor changes, what the county or state requires is different, the supply chain is different, there’s different insulation requirements. It varies quite a lot.” According to NASDAQ, Mississippi is the least expensive state to build in, where a new build costs $287,670 on average, or $137 per square foot. On the other hand, Hawaii is the most expensive state to build in, with a new home costing $431,364 on average, or $205 per square foot.
Cost to build a house by region
Like with states, a new home builder may also want to consider the region in which they’re planning to put down roots. According to Money it can be more cost-effective to build a home in the West and South Atlantic, where prices in the existing housing market are high. In regions such as the Midwest where prices are generally lower, it’s often more cost-effective to buy something that already exists.
