Building a House? The Pros and Cons (2023)

Home Buying

8 Min Read | Feb 2, 2023

Building a House? The Pros and Cons (1)

By Ramsey Solutions

(Video) Buying vs Building A House (Pros & Cons)

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Everyone loves getting something brand-new—especially if it’s custom-made. The problem is, custom-made things tend to cost more and take longer to get—especially when it comes to houses.

(Video) Why I REGRET Buying A New Build House | Pros and Cons

That’s important to consider when you’re deciding whether you should buy or build a house. To help you make the best choice, we broke down the costs and pros and cons of building a house.

Let’s check them out!

Is It Cheaper to Buy or Build a House?

In 2019, the averagecost to build a housewas over $485,000.1Meanwhile, the average cost to buy an existing single-family home was just over $310,000.2 So choosing to buy a pre-existing house instead of building a new one would have saved you around $177,000!

Now, prices have gone up for both existing homes and new builds since 2019. But building a house is still more expensive than buying one.

Existing home prices are 15% higher in 2022 than last year.3 But building material costs have gone up 19%.4 And thanks to inflation, builders are also paying more for other things they need to build houses, like workers, fuel and marketing. All that to say, building a house is not cheaper than buying!

Building a House vs. Buying a House

Now, you’re probably wondering, Is it better to build or buy a house? Maybe the price tag is worth it . . . And you may be right! Or building a house may be a terrible idea for you. Whether building or buying a house is better for you really depends on your situation.

Find expert agents to help you buy your home.

Of course, it helps to weigh the pros and cons of building a house so you can decide if you want to go to all that effort or if you’d rather buy an existing home.

Pros of Building a House

To start off, let’s look at why building a house can be beneficial:

  • Customization –Building a house from the ground up lets you personalize it to suit your lifestyle and tastes—from the layout, cabinets and flooring to the sinks, lighting, and doorknobs! Even tract homes built within subdivisions allow for some customization in color choices, flooring and certain finishes.
  • Low to no competition ­–The 2022 real estate market is hot. In March, existing homes spent just 17 days on the market!5 With homes selling so quickly, you really have to compete to find the best existing home at the lowest price. But if you own land to build your home on, you obviously have zero competition!
  • Little maintenance –Since new homes must meet current building codes and have up-to-date technology, you probably won’t have to worry about big repairs or maintenance issues for the first few years—no leaky roofs or failing HVAC systems for you! Plus, you don’t have to worry about finding the last owner’s bad do-it-yourself repairs, because there wasn’t anyone before you.
  • Low energy costs –New homes often feature the latest energy-efficient systems and materials, which usually lead to lower energy bills—woo-hoo!
  • Newness –You get to start fresh as the first owner of your home and enjoy brand-spanking-new everything. That’s the dream, baby!

Cons of Building a House

Okay, we already know one disadvantage of building a house is that it costs more than buying an existing home. That isn’t so bad if you’re able to budget for it, but it can be a real showstopper for some people. Let’s consider the other cons of building a house too:

  • Long wait time – It takes an average of seven months to construct a new house—not counting the planning and approval stages.6 But closing on an existing house takes just 48 days.7 And keep in mind, you’ll have to pay to live someplace until your new home is ready—so if you’re building, you could get stuck paying your current rent or mortgage plus the construction costs for several months.
  • Hard to negotiate price – Most buyers go into a home purchase hoping to lower the price. While that’s super common in the resale market, usually there isn’t a lot of leeway on closing costs or purchase price with a newly built home—unless your real estate agent gets creative at the negotiating table. Still, you’ll probably get more bang for your buck with an existing home.
  • Noise and debris – If you build a house where other new homes are being built, you might have to deal with construction noise, traffic and glops of mud along your commute. Worse yet, you could end up with a roofing nail or a screw in your tire. Sure, things will eventually calm down as other homes get completed, but it’s something to think about if your tolerance for noise and messiness is on the low end.
  • Stress – When you build a house, you’ll have to purchase land, decide on a home design, and pick out flooring, fixtures, cabinets, countertops, interior trim, exterior trim, and on and on. You’ll have to do all of this and stay within your budget. Managing all the details that go into building a house takes time and effort. Don’t underestimate the stamina you’ll need to make sure it’s all done the right way.
  • Hidden costs – Those dollar signs you see on things like countertops, fixtures and appliances are just the tip of the price-berg. Upgrades and unforeseen problems can quickly drive up the price of your new home, and those costs may or may not be rolled into your contract price. Play it safe by budgeting to pay cash for those unexpected expenses. And don’t forget about post-move costs like landscaping and blinds—they’ll sneak up on you too.

Hopefully now you’re getting a better idea of whether you want to buy or build a house. Next up, we’ll talk about how to pay for it—no matter which way you decide to go!

Tips to Pay for a Newly Built Home or an Existing Home

Whether you build or buy, make sure you stick to a house you can actually afford. That means getting a house with a monthly payment that’s no more than 25% of your take-home pay—otherwise, you’d be house poor!

That 25% limit includes principal, interest, property taxes, homeowners insurance and, if your down payment is lower than 20%, private mortgage insurance (PMI). And don’t forget to budget for homeowners association (HOA) fees if your new home is in an HOA.

Want to see what home prices fit your budget? Try our free mortgage calculator. And for a mortgage you can pay off fast, talk to our RamseyTrusted friends at Churchill Mortgage about getting a 15-year fixed-rate conventional loan. (We only recommend these loans because any other type of mortgage will drown you in interest and fees and keep you in debt for decades.)

(Video) Barndominiums 101: Pros & Cons + Cost + Process Of Building A Barndominium Home

Should I Buy or Build a House?

Maybe you’re still on the fence about whether to buy or build a house. We get it—that’s a big decision, and you want to get it right!

If you’re a first-time home buyer, it’s usually better to go the cheaper route and buy an existing house. You’ll save money and get some homeownership experience before you take on the challenge of building a new house. It’ll also give you time to build equity (your home’s value minus how much you owe on it). When you sell your first home, you can use that equity to help pay to build your next home.

If you’re an experienced home buyer, then building a house could be a fun adventure for you! That is, as long as you can stay within that 25% limit and still handle all the other homeownership costs like maintenance and utilities.

Whether you buy or build, owning a house you can afford is an incredible way to build wealth!

Buy or Build With Confidence

The best way to choose whether you should buy or build a house is to talk it over with an experienced real estate agent. They’ll know where to find the best deals in long-standing neighborhoods or in up-and-coming communities. And they’ll help you decide if building a house or buying an existing home will suit your needs best.

If you want an agent who will do whatever it takes to help you find the perfect home or lot to build on, try our Endorsed Local Providers (ELP) program. These RamseyTrusted agents are top performers who share our mission to help you crush your financial goals.

Find the best real estate agents near you!

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About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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(Video) 5 Lies About Barndominiums


Is it financially smart to build a house? ›

Is It Cheaper to Buy or Build a House? In 2019, the average cost to build a house was over $485,000. Meanwhile, the average cost to buy an existing single-family home was just over $310,000. So choosing to buy a pre-existing house instead of building a new one would have saved you around $177,000!

Is it cheaper to build or buy a house? ›

In general, buying an existing home is cheaper. According to the National Association of Home Builders and the U.S. Census Bureau the median cost to buy a house today is $410,600 which is $28,800 less than building one.

Is it worth it to have a house built? ›

Is it cheaper to build or buy a house? As a rule of thumb, it's cheaper to buy a house than to build one. Building a new home costs $34,000 more, on average, than purchasing an existing home. The median cost of new construction was $449,000 in May 2022.

Is it better to buy land or house? ›

Plots of Land Have Higher Resale Value

This is one of the most critical points in the “is it better to invest in land or house” debate: land value rises with time, whereas the resale value of houses decreases drastically.

What saves money when building a house? ›

Value Engineering
  1. Reducing Square Footage. One way to dramatically reduce costs is to just reduce the square footage of the entire home. ...
  2. Choosing a Stock Design. ...
  3. Reducing Lineal Feet of Logs. ...
  4. Opt for a Simple Roof System. ...
  5. Use Drywall on Interior. ...
  6. More Modest Kitchen. ...
  7. Don't Take a Bath on Your Bath. ...
  8. Avoid Change Orders.

What type of house is cheapest to build? ›

Ranch Homes

A home with a simple and concise layout is the cheapest type of house to build. Ranch homes are typically single-story structures with attached garages. They're easy to find construction plans for and highly customizable, so you can find a home that fits your needs and budget.

Will construction costs go down in 2023? ›

The National Association of Home Builders (NAHB) reports that while housing costs have risen over the last ten years, cost increases should return to the national average of between 2 and 4 % in 2023.

Why not to buy new builds? ›

The cons of buying a new build

Premium price – Developers price new build properties at a premium, you will pay for the fact that everything is brand new. This means that new builds can lose their value more quickly than old houses, so when you come to sell, you may find that your house has depreciated in value.

Why buying a house is better than building? ›

Pros Of Buying An Existing Home

Less costly: In general, you'll likely find it cheaper overall to buy an existing home, but that also depends on the market. A home loan is less risky than a land loan, and typically comes with a lower down payment and better interest rate.

Are old houses built better? ›

Old homes have better-quality construction

Even the walls are likely different. In an older home they're probably built with plaster and lathe, making them structurally stronger than the drywall construction of modern homes. These older materials also provide a better sound barrier and insulation.

What is the most expensive thing when building a house? ›

The Foundation

Pouring a foundation is expensive; often it is one of the most expensive parts of building a home, usually over most of the items on this list. A larger home's foundation will be more expensive to pour. The type of foundation and the climate you're building in will also matter.

Is it smart to buy land and build later? ›

Perhaps there's a perfect property that comes up for sale and you don't want to lose it, so buying the land now and building later makes sense. From a financial perspective, it may be much more feasible to split up the investments and have time to rebuild your savings before being ready to build.

Should I build a house now or wait until 2023? ›

Interest rates and overall building costs are not forecasted to decrease into 2023, and could even continue rising. The market is volatile and world events are unpredictable, so it is likely that building sooner could save you money in the long run.

Is a 2 story house cheaper to build? ›

Two-story homes are more cost-efficient to build because they offer more space without adding more foundation or roof costs, so the cost per square foot is often less expensive.

Is it cheaper to build one story or two? ›

Per square foot, a one-story house is more costly to build than a two-story home. There is a larger footprint, meaning more foundation building and more roofing materials. And because the plumbing and heating/AC systems need to extend the length of the house, you'll need bigger (and costlier) systems.

How do you calculate the cost of building a house? ›

For example, if your new home is to be 2,000 square feet and your builder estimated that it would cost $350,000 to build, then your cost per square foot is 300,000 divided by 2,000, or $175.

Are Barndominiums cheaper? ›

Is It Cheaper to Build a House or Barndominium? It depends. The average cost of a barndominium in Texas is $70 to $95 a square foot to build vs. the cost of a house is around $115 - $145 per square foot.

Where is the least expensive place to build a house? ›

Cheapest Places To Build A House
  • Lehi, Utah.
  • Leland, North Carolina.
  • Windsor, Colorado.
  • Firestone, Colorado.
  • Erie, Colorado.
  • Queen Creek, Arizona.
  • Buckeye, Arizona.
  • Parkland, Florida.
Feb 16, 2023

When building a house what is first? ›

Step 1: Site prep. The crew clears the site of trees, large rocks, and debris to prepare the property for building. The footings are put in place. Concrete is poured for the foundation, and once it's cured, waterproofing is applied.

What do you build first when building a house? ›

Understand the process of building a house. The first step in the construction process is getting the land ready. This includes clearing the area, digging trenches and making sure utilities are installed. Your foundation will be made of poured concrete reinforced with steel rods.

What is the last thing done when building a house? ›

WHAT'S GOING ON AT THE JOB SITE. In general, work that happens at the end of a job is mostly around delicate finishes and fixtures that come in when everything else is finished: closet systems, light fixtures, final floor coating, carpets, window coverings.

Is construction going into recession? ›

CPA economics director Noble Francis said: “The construction industry has enjoyed a buoyant two years since the first national lockdown largely shuttered the industry back in Spring 2020 and activity still remains high for the moment. Overall, however, construction output is forecast to fall by 4.7% this year.

Are lumber prices still dropping? ›

The price per 1,000 board feet of lumber has dropped to pre-pandemic levels by the end of the first week of the new year. In March 2022, the price of lumber was around $1,460. On January 6, 2022, prices fell to $354. Consumers may not see the entirety of the drop reflected at retail home improvement stores immediately.

Are building costs falling? ›

The prices of many building materials reached a peak during the summer of 2022 and have steadily fallen since. The reasons why building material prices have fallen are the diminishing of supply chain disruptions and weakening demand (as expected) as forecasts for economic development in many countries are lowered.

What I wish I knew when building a house? ›

10 Things I Wish I Knew Before Building A Home
  1. Research the builder. ...
  2. Stick to your guns. ...
  3. Dark Laminate Wood is unforgiving in every way. ...
  4. You need extra closets/storage space. ...
  5. Don't be the first one in the neighborhood. ...
  6. Get a regular front door. ...
  7. Get bedrooms on one level. ...
  8. The extra space is tempting.
Jun 18, 2019

What not to do when building a house? ›

Top 10 Mistakes to Avoid When Building a Home
  1. Choosing the Wrong New Home Builder. The biggest mistake you can make is choosing the wrong new home builder. ...
  2. Picking the Wrong Homesite. ...
  3. Not Doing Your Research. ...
  4. Not Being Realistic. ...
  5. Moving Too Fast. ...
  6. Choosing the Wrong Materials. ...
  7. Skimping on Details. ...
  8. Not Staying Organized.

What not to forget when building a house? ›

This list of 10 small things that get forgotten when building a house will help you check even the smallest boxes off your list:
  1. Light Switches and Power Outlets. ...
  2. Kitchen Cabinet Lighting. ...
  3. Television Location. ...
  4. Shower Head Height. ...
  5. Recessed Bathroom Storage. ...
  6. Internet & Electronics. ...
  7. Kitchen Cabinet Features. ...
  8. Outdoor Conveniences.

Why do lenders not like new builds? ›

Mortgage lender criteria is stricter for new builds

This is because lenders see these mortgages as riskier, due to the possibility that the value of the property may fall in its early years.

Why do people not like new build homes? ›

Quality and Snags – New builds often get a bad press with stories of poor quality making the headlines. Even with the best new build home, you can still expect snags like doors getting stuck on new carpets or a loose tile.

How long will new build houses last? ›

This is largely debated within the construction industry as it is really dependant on the materials that are used, the quality of the workmanship and the maintenance that is required and followed through on. On average, the generally expected and acceptable lifespan of a home should last at least 60 years.

What is the best time to build a house? ›

Among all the seasons, spring is usually the optimum time to start construction on a new house due to faster timelines, better weather conditions, optimal windows of opportunity for landscape installation, and fewer delays in the building process.

Is it harder to buy land than a house? ›

Getting a land loan is more difficult than obtaining a traditional mortgage because buying land isn't as straightforward as buying a home.

What are the three advantages of building a house? ›

Read on to discover some of the many advantages of building your own home which may just convince you that building is the right move for you.
  • It's Built with You in Mind. ...
  • You Can Take Advantage of Stamp Duty Savings. ...
  • There's Less Maintenance. ...
  • You Can Be Sure of the Quality. ...
  • You Can Make It Energy Efficient.
Nov 23, 2020

What is the average lifespan of a house? ›

The average lifespan of a newly constructed house is 70–100 years. Factors such as weak housing materials and damaging weather exposure can shorten a home's lifespan. Routine repair and maintenance can improve the longevity of a home.

At what age should you buy a house? ›

The best age to buy is when you can comfortably afford the payments, tackle any unexpected repairs, and live in the home long enough to cover the costs of buying and selling a home. Legally, you must be at least 18 in most states to buy a home.

Is it worth buying a 100 year old house? ›

It can be perfectly safe to buy a 100 year old house. On the surface, there's absolutely nothing wrong with buying a 100-year-old home. Still, you should be wary of structural issues and other problems associated with aged houses, such as lead paint and pest problems.

How much money is needed to build a house? ›

The current construction cost to build a house in Bangalore is Rs 1500 to Rs 2400 / sq ft.

Will 2023 be a good time to build a house? ›

Based on what we're seeing, our team of experts here at Heartland Builders thinks that 2023 will be a good time to build your custom forever home, despite rising costs and interest rates.

Do people who build houses make a lot of money? ›

Yes, it can be very profitable if you make a wise investment and have a solid plan in place before purchasing. But buying raw land and building a home on it yourself has additional risks compared to purchasing a building that's already been constructed.

What are among the disadvantages of building your own home? ›

Expect to pay more for almost everything, starting with lumber. Labor shortages will likely also make wages go up, so expect that to be reflected in your costs. More time and stress: Building a home will not happen quickly. It will be a much longer process than simply buying a home and moving in.

What is the most expensive part of building a house? ›

Framing. Perhaps the most expensive part when it comes to building a home is the framing, which consists of wooden beams that make up the home's skeleton. Forbes states that high-quality lumber averages about $33,000 for a home in the United States. Metal stud framing systems begin around $20,000.

Are lumber prices expected to drop in 2023? ›

Prediction 2: Lumber demand will drop again 2023

This follows consumption dropping by an estimated 1.6% (0.8 BBF) in 2022, which was driven by a sudden weakening in new residential construction activity in the second half of the year and a major correction in do-it-yourself (DIY) lumber demand.

Will it be cheaper to build in 2023? ›

You may be able to expect the housing market to be a bit more favorable to homebuyers in 2023, but the cost to build a new home won't necessarily feel more affordable.

Will building prices come down 2023? ›

We expect 2023 to be the year of knock down rebuild. Land prices are so high and it's so hard to get good blocks of land given the short supply. Those who own a block of land, we are likely to see more starts in that market than previously,” he said.

Who gets paid the most when building a house? ›

The highest paid occupation in construction is Chief Executive Officers (CEO) with half of CEOs making over $162,390 per year. Lawyers working in construction are next on the list with the median wages of $152,650.

Can a builder Be A Millionaire? ›

Some of the builders that make it past the five-year mark go on to become multi-millionaires. Others continue on the hamster wheel constantly chasing cashflow. As it turns out, there are quite a few traits that the successful builders share, and it isn't just the amount of money they've made.

What should you not do when building a house? ›

Top 10 Mistakes to Avoid When Building a Home
  1. Choosing the Wrong New Home Builder. The biggest mistake you can make is choosing the wrong new home builder. ...
  2. Picking the Wrong Homesite. ...
  3. Not Doing Your Research. ...
  4. Not Being Realistic. ...
  5. Moving Too Fast. ...
  6. Choosing the Wrong Materials. ...
  7. Skimping on Details. ...
  8. Not Staying Organized.

What are the risks of building a house? ›

Common risks include:
  • Safety hazards that lead to worker accidents and injuries.
  • Managing change orders.
  • Incomplete drawings and poorly defined scope.
  • Unknown site conditions.
  • Poorly written contracts.
  • Unexpected increases in material costs.
  • Labor shortages.
  • Damage or theft to equipment and tools.
Jun 4, 2020

What are two negative aspects of building a new home? ›

Drawbacks of Buying a New Construction Home
  • Higher costs that may not appreciate in the future.
  • You need to wait to move in for construction to complete.
  • Fewer options for the location of your new home.
  • Property taxes can be much higher initially in new communities.
  • Landscaping is undeveloped and could take years to grow.
Feb 16, 2022


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