Unfortunately, the answer to this question is not a simple yes or no. Many factors play into determining whether or not building a house is cheaper than buying. Ultimately, it depends on the type of build and how customized the buyer wants their home. Let’s break it down.
Three Build Categories
We believe new builds typically fall into one of three different categories.
The first being when you buy a production home from a national builder. This typically means that a national builder has a subdivision with 100 homes they are going to build that have 5 different floor plan options. Usually, with this type of build, there are around 10 other regions across the country where they are building the exact same floor plans. The next option would be to do a semi-custom build. This is the in-between option. You won’t have as much freedom as you would starting from scratch, but you will have a whole lot more creative freedom than the production builder. This brings us to the final construction option, build something custom, entirely on your own.
Now that we have a better understanding that not all new construction is the same or costs the same, let’s go back to comparing the cost of a new build to an existing home. Again, this comparison is going to depend an awful lot on what you want! For example, you may work downtown and are looking for a short commute into the city. This is going to limit your options of new construction a whole lot more than if you were further away from the city center. So, is building a house cheaper than buying? Let’s find out.
Existing home versus Production Build
So, if you look at a relatively comparable existing home, let’s say 5 years old, to a new build from a production builder, they are going to be pretty close in pricing. The pros and cons come down to a lot more than just pricing. When it comes to cost, there is not going to be a competitive advantage on either choice.
The advantage of the production build is that you will have a choice of the floor plan, the ability to move things around, some creative freedom, and it will be new. There is for sure a sense of pride that comes with a new house, maybe it is the smell! However, it could take up to 9 months to a year for it to be move-in ready. Builders are notorious for having a lot of challenges with delivering on time. In most cases, especially right now with supply and labor shortages, they are waiting on a handful of subcontractors to complete different steps of the manufacturing. If one contractor is delayed because of something as small as weather, it can push the project back weeks or months. This can make things complicated when you are looking to sell your existing home and buy your new home at the same time.
If you buy an existing house in a subdivision that is right next door to the production builder, you are going to find that the backyard and landscaping are matured. The basement is finished and there are blinds on every window. The house will be finished. This is sometimes another disadvantage of production builds. They are rarely delivered fully finished. In the end, you will have to decide for yourself what you think about the pros and cons.
Existing home versus Semi-Custom Build
With a semi-custom home, you are going to have more options and creative freedom than you would with a production build. This obviously is going to increase the cost. Most of the time, when compared to an existing home, a semi-custom build will cost more. However, you will get more precisely what you want in your home. So, again, it really comes down to what your preferences are.
Existing home versus Fully custom build
A complete custom home is going to cost the most amount of money for the buyer. However, you will get exactly what you want! It really all comes down to is putting your needs, wants, and budget first as a buyer.
Check out our search funnel to help narrow down your search list. Talk to a realtor. They most likely have seen it all. They will be able to help determine exactly what you are looking for.
Please do not hesitate to reach out to an agent on our team as soon as possible. We also offer up to 40 free classes a month to our agents and their clients. There are have in-person and/or virtual formats available. Check out our training calendar for the most up-to-date offerings. Be sure to check out this video with Lon Welsh for more details on what inspections are needed when you buy a house!