States Where It Can Be Cheaper to Build a House Than to Buy One
Could it be cheaper to build a home in your state? It's not an easy project, but in a number of states, it could cost less, and you get a custom home.
Feb 23, 2023 - 18:30
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Could it be cheaper to build a home in your state? It's not an easy project, but in a number of states, it could cost less, and you get a custom home.
Anyone looking to buy a home these days might well be frustrated with high prices, rising mortgage rates, low inventory and competition from other buyers.
Experts believe there is a nationwide housing shortage of between 2 million to nearly 6 million newly-built homes, according to USA Today, and supply is expected to remain short for some time to come.
It could lead some to wonder if it would be quicker and cheaper to build a home instead of buying one ready-made. It’s not an easy project by any means. You’d need to buy land, secure permits, hire architects and builders.
The average cost to build a 2,000 square-foot house in the U.S. is about $300,000, not including the cost of land, according to Forbes. It’s highest in Alaska, Hawaii, and California--over $400,000. In the Northeast it averages $155 per square foot, according to Bankrate, in the West, $131 per square foot, in the Midwest, $109 per square foot and the South averages $100 per square foot. At $100 a square foot, a 2,000 square-foot house would cost about $200,000.
But these are rough numbers. You have to account for a range of costs, depending on location.
You’ll likely need a construction loan. These loans tend to be short-term, higher-interest loans, typically one year in duration, according to Bankrate, and often require 20% down, at least. The property must be built and a certificate of occupancy issued within the year.
That raises the prospect of delays, which can be caused by anything from weather to problems with getting permits. Other common reasons for delays include a disorganized builder, difficulty getting materials, homeowner selection delays, and scope changes.
It’s a lot to take on, but in some states, it could be cheaper to build than to buy a house. To find the difference between buying and building a home in each U.S. state, StorageCafe, a national storage-space search site, surveyed land prices per median lot size nationwide and determined the regional costs of making a contract with home builders, adjusted for 8% inflation. They then added 10% for administrative costs to these combined factors. Finally, they compared the totals with median house prices.
Data wasn't available for Alaska, North Dakota, Rhode Island and Vermont, and Washington D.C. and Puerto Rico were also not considered.
Here how building vs. buying looks in the other 46 states: