Is It Cheaper To Build Or Buy A House (in 2023)

If you are currently looking to move into a new home, you are all too aware of the competitive and unpredictable state of today’s housing market. Buying a home in 2023 is incredibly expensive, stressful and can be difficult. Buyers are often outbid, and find themselves searching a real estate market with limited inventory. Naturally, it makes sense to consider building your own home rather than continuing in the housing market rat race. But when it comes to building versus buying a home, which is cheaper?

On average, it is cheaper to buy a home rather than build it. The median home price in 2022 was $414,200 versus $449,000 to build a similar home in the same year. There are, however, many variables that significantly alter building costs. These include the price of materials, how much building you do yourself, whether or not you own land, as well as where you plan to live.

Buying a home can be stressful, but it is also exciting. It marks the start of a new chapter and it is the chance to start to build a new future. The key is deciding whether you want to go the route of searching for a perfect dream home, or building the one you already have in your head. Both options come with pros and cons, and the costs are variable.

In this article, we break down the average costs and consider the variables to help you decide whether building or buying is the cheaper and better option for you.

The big question is whether it is cheaper to build a home or buy a home in this current wild real estate market. Just like with all complicated questions, the answer is — it depends. First, there are the national averages to consider. According to data compiled by the U.S. census and the National Association of Home Builders, the medium cost to buy a home was just over $414,000, while the cost to build one was almost $35,000 more, at $449,000.

While these numbers suggest that buying a house is definitely the cheaper route, this is not such a cut and dry matter. For one, that is the national average and the median price. This means that this takes into consideration the most expensive and the cheapest properties, and this number rests in the middle.

Building and buying a home is a unique endeavor to each person. Depending on your wants and needs, it could be cheaper to build than buy, or vice versa. The best way to get a firm grasp on which is best and cheapest for you, we need to look deeper at the variables that affect these home-building and purchasing costs.

Where you are buying a home or building one has a huge impact on which is cheaper. As a general rule of thumb, areas with vast amounts of land available tend to be great and affordable places to build. Areas where land is coveted (think urban areas and beachfront property) tend to be wildly expensive when it comes to land prices.

Take this into consideration. The best way to get to know whether it is cheaper to build or buy in your area is to scope out land prices and get some quotes from contractors. While these quotes are not usually exact, they will give you a ballpark on cost.

Another major factor to consider is whether or not you already own land, or whether you are embarking on this process. The reason this is important is because buying land comes with its own set of challenges. There are often land inspections, certificates and plenty of red tape to work through.

If you were thinking buying land will save you on lots of the fees associated with purchasing a home, this might not always be true. If, however, you already have land, then building a home is suddenly much cheaper.

The scope of your project is also a major factor. If you are building a modest eco-friendly home with your savings, then building is by far the better option. If, however, you are building your expensive, vast, dream home, then you will likely take out some major loans.

Interest rates are still climbing in 2023, and this makes taking out loans more costly. If you have more money saved, you might be able to do a lot yourself and decrease your borrowing amount. You don’t have this freedom with buying a home.

If, however, you have to borrow 80 to 90% regardless, then you are best going with whichever option ends up being less costly overall in your area.

The type of home and materials used can also have a major impact. Obviously when you purchase a home, you are locked into whatever type of materials the home has. If you build, on the other hand, you have more freedom.

This also means you might be able to find some cheap or free building materials. One of the most expensive costs associated with home building are the raw materials themselves. Believe it or not, there are several ways to find cheap or free building materials.

If you are willing to hunt for cheap materials, you might be able to shave some significant costs off building a home.

Another major cost with building a home is labor. That’s assuming you are hiring out for all the labor. But if you are a DIY-spirited individual, then you might be able to shrink your costs and negotiate with your contractor. From purchasing materials, to digging holes to finishing the home’s interior, there are all sorts of ways you can save money on home building.

Conversely, you can also save by building an existing home for well-below market value when it requires lots of work. The DIY factor works in both regards, but if you are a skilled builder, then building might save you more.

If you are in the market for a new place to live in 2023, you might feel a bit discouraged. There is still limited inventory, even with the skyrocketing interest rates.

This might have you wondering if building a home might be the cheaper option. On average, it is still cheaper to buy a home versus building one.

There are, however, variables. If you are able to find cheaper materials, do work yourself and purchase affordable land, then building is cheaper.

Keep in mind, however, that building takes time, and prices could continue to go up. Buying a home, however, locks you into a price right away.