As home prices continue to reach all-time highs and inventories remain limited, many Americans are considering building a home from scratch as an attractive alternative to buying. However, with construction costs on the rise as well, the question remains: is building a home really cheaper?
To help navigate the residential market, a recent study analyzed the costs associated with both buying and building a home in each US state. The study surveyed land prices per median lot size nationwide, determined the (8% inflation-adjusted) regional costs of making a contract with home builders, and added 10% for administrative costs to these combined factors. Finally, the totals were compared with median house prices.
The study found that Western and South-Atlantic states are the best places to build instead of buy, with California offering savings of no less than $200,000 on average, and states such as Colorado, Utah, and those close to Washington DC offering around half that amount. Hawaii also proved to be a great place for builders to save money.
Meanwhile, in the Midwest, South, and Northeast, lower house prices tend to make purchasing a home more attractive, though Florida and Massachusetts favor building.
States around DC offer some of the greatest savings for building a home, knocking a fifth of the price of a new home. In Virginia, savings hovering around $95,000 can be made by building instead of buying a home, with a median homebuilding cost of around $361,000 compared to a median house listing price of approximately $458,000. Maryland offers similar numbers of $365,000 and $460,000, and Delaware offers savings of around $96,000, despite having the third-highest residential land price in the nation at $176,000 per acre.
The study’s results provide valuable insight for those considering building a home and looking for ways to save money in the process.