Is It Cheaper to Build or Buy a House?

Buying a home is a major investment. You want to put your money into a house that’s going to meet the needs of you and your family. However, if that house isn’t available, you may consider building a home. Is it cheaper to build or buy a house? What are the pros and cons of building versus buying a house? We’ll answer these questions and more below. If you’re looking for your personal questions to be answered for your own situation, you may need to speak with a financial advisor.

According to data from HomeAdvisor, it costs $109,466 – $459,981 to build a house in 2023, with an average of $284,723.50. The average national home price has hovered between $390,000 and $405,000 in the past year, for those who are buying.

So, that makes it cheaper on average to build a house, right? Not exactly. There’s one key cost that’s not factored into this cost of building a house: land. If you already own the land you’re building on, that’s not something to worry about. However, if you need to buy the land, you could be paying anywhere from a few thousand per acre to tens of thousands for the lot.

On top of buying the land, you also need to pay to have it developed for your home. Excavation can cost a few thousand dollars on average but can go up in price if the land is hard to clear. For example, it could get costly if the land is full of hard bedrock or heavily wooded. You’ll also need to make sure the land is zoned for residential use, that it’s accessible from a road and that utilities run out of it.

With all of the costs to buy and develop land, buying an already built house on its own parcel is often cheaper than building a house from scratch. The right decision, though, often depends on what you want and what you can afford.

Pros and Cons of Building a Home

Even if building a home is more costly than buying a home, there are still many reasons you may want to do it. There are a lot of factors you need to consider before deciding to build. Let’s get into some of the major reasons for and against building a home.

Pro: You Can Build the Home You Want

One of the big reasons people build instead of buying a home is that it allows them to build a version of their dream house. When you build, you have more flexibility to get what you want, versus having to decide between what’s on the market.

Con: Financing Your Home Build

Getting a mortgage for a home builder is not as simple as getting one for an existing home. For one, you’ll have to buy the land. You can get a land loan, but the most common way is to buy in cash. Next, you’ll have to finance the construction. You can do this with a standalone construction loan or use a construction-to-mortgage conversion loan. Just know that when financing a build, there are more hoops to jump through. The better your credit history and income, the easier it will be.

Be prepared to wait, often for more than a year.

Pro/Con: Finding Land and Hiring a Team

Part of building a home is choosing all of the details. And the details are legion. Some folks relish the opportunity to put their stamp on a residence; others find the process exhausting. If you find a location you love and connect with a quality architect and contractors, the experience can be great. However, if you compromise on the location and have a subpar time with the architect and contractors, things can turn sour. Make sure that, with whomever you hire, you get references and properly vet them.

Pros and Cons of Buying a Home

After reading about the complexities of building a home, you may realize that buying a home is better for you. Here are a few reasons for and against buying an already-built home.

Pro: The Process Is Straightforward

Many more people buy homes than build homes. That means more real estate agents and mortgage lenders specialize in buying over the building. The process is streamlined. You get an agent, apply for a mortgage, have an offer accepted, close on the house and move in. With building, it’s more complex and the process takes much longer.

Con: You’re Subject to What’s Available on the Market

If the home you want to move into isn’t for sale, you either have to wait or compromise. For most people buying a home, they have a timeline and they have non-negotiables. If you’re touring house after house and aren’t finding one that’s right, you may reconsider building a home.

Pro/Con: Already Built Homes Are Closer to Urban Centers

Most land available for sale is in rural areas. If this is part of your dream, building may be an appealing option. However, if you want to live close to amenities, you’re likely going to need to buy an existing home. Established homes typically have surrounding communities, meaning nearby entertainment, grocery stores, jobs and schools.

The Bottom Line

Is it cheaper to build or buy a house? Generally, it’s cheaper to buy a comparably sized existing house. There are many positives to building a house, but it’s usually the more expensive route. You’ll need to buy land and pay for development and construction. Homes that are built already are properly zoned, have access to roads and utilities and often come with surrounding communities.

Home Building and Buying Tips

Whether you want to build or buy, a financial advisor can help you get the job done. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whether you’re building or buying, you’ll need cash to fund the purchase. Setting a budget with SmartAsset’s budget tool can get you on track.
You need to account for closing costs when planning for a mortgage. SmartAsset’s closing cost calculator can help.