The home is the backdrop for life. So many of our memories are built, conversations had, meals shared, and experiences shaped within its walls. Clients who are considering their housing future see the importance of finding a place to call “home” and want to thoroughly weigh their options before they jump in. Although there are many factors to consider, a popular question is, “is it cheaper to build or buy a home?”
Unfortunately, there is not a clear cut answer to this question, as there are differing factors that will impact the answer for each client. It is generally believed that buying an existing home will be cheaper than building one from scratch, but that is not always the case. Here are some initial areas I would recommend beginning your cost comparison to figure out whether building or buying is the best option for you:
- Housing market. The state of the housing market in your area is one of the biggest factors in discerning whether building or buying will cost less. With inventory of existing homes being especially low currently, there is a good chance that the homes in your area are priced higher currently. In fact, according to the National Association of Home Builders 2019 Construction Cost survey, existing single-family homes were hitting the highest numbers they had ever seen, with the average cost of building an average single-family home over $150,000 less than buying. However, since vacant land and existing homes are both in high demand this year, it may take just a little time to do some cost comparisons and see what the numbers really are in your area.
- Material costs. When building a home, the overall cost is directly related to the price of building materials. As an example, the cost of lumber tripled between January and May of last year, and then fell a little bit again by the end of the year. These fluctuating costs can make it difficult to get a realistic cost estimate before you lay the first brick, especially if you are tied to a specific timeline. Make sure you are doing your figuring based on the most current numbers and take the overall trajectory of the market into consideration as well. All of these areas can make a big difference in your overall spending and can help you to discern whether it will be cheaper to build or buy.
- Permits, closing costs, taxes. The permits, taxes, insurance, closing costs, and other necessary paperwork will need to be factored into your cost comparisons, whether you build or buy. These are the costs that sometimes take clients by surprise, as they are easy to overlook when you are running numbers.
- DIY-ability. Whether you choose to build or buy, the final cost is also influenced by how much you are willing and able to do yourself! This is certainly something that changes person-to-person. If you have a knack for painting, carpentry, electrical wiring, or laying flooring, you may be able to save yourself some labor costs! “Doing it yourself” is not for everyone, though, and it may be worth the money to hire work out if it is not something you are confident in, or if it will cause extra stress in your life.
- Design preference. Finally, it is important to factor in how much of an influence you would like to have on the design and layout of your home. If you buy an existing home but need to make a lot of changes so that it fits your ideal, those costs should be factored into your initial purchase of the home. Remodeling tend to cost much more than initially quoted, unfortunately. In fact, I have heard it said that when remodeling, you should plan on it taking 50% longer and costing 50% more than originally planned. It may be less expensive to purchase a home and make changes slowly over time, or it may be more reasonable to build from the ground up and get everything the way you have pictured from the get-go. It all depends on what you are looking for in a home!
In the end, this decision will come down to assessing your own personal desires and needs with a little market research. I would be more than happy to assist you in weighing your options and offering advice as you begin “unlocking new doors” with a new pre-existing home or new land to build a new home upon.
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