How Much Does It Cost to Build a House?

Get insights into the expenses involved in building your dream home. Read for clarity on budgeting for your house construction.

Real Estate
October 6, 2023
How Much Does It Cost to Build a House?

Planning on building your dream home? Whether you’ve been imagining it for years or are fed up with not-quite-right property viewings, opting for construction can provide the opportunity to personalize every aspect of a new home. 

Building does, however, come with a more complex price tag than buying a home on the market. Nationwide, the average cost of new house construction is $137 per square foot (not including the land cost), though that figure jumps up wildly if you opt for luxury, size, or a high-priced location.

The first steps are to answer “how much does it cost to build a house” based on your specifications, timeframe, and location and consider how to access equity to build your dream home.

Understanding Construction Costs

Let’s take a look at the common categories for building a new home and how to budget for a house build. If you’re planning to install a basement bowling alley or gold-plated bidets, you’ll need to add a “rich follies” category, but this list will work for most of us during the home building process. 

#1 Living Accommodations

Do you need to budget for off-site living while building a house? If you’re moving to a new location or selling your current home prior to the build (and don’t have a handy in-law to crash with), you may want to consider a home rental or other arrangement under your construction budget. 

The amount of time it takes to build varies, but most experts recommend planning for a minimum of seven months.2

#2 Land

Construction budgets often refer to the build itself without including the cost of the land parcel, so keep that in mind when you see average new home construction costs for particular states or cities. 

If you’re looking at land further out from the centralized systems of a town, city, or suburban environment, be sure to consider: 

  • Soil quality testing
  • Well systems, water quality, and availability testing
  • Septic systems
  • Energy supply systems

#3 House Design

You need the pen before the hammer—construction requires a detailed house plan and blueprint. You can either hire an architect, engineer, or draftsperson, or purchase or obtain a pre-designed floor plan online from a reputable source. 

Check with local regulatory agencies first, though, as some have specific requirements related to building plans and their creation.

#4 Land Development

Is there any destruction that needs to be done before building begins? The site development costs could include: 

  • Demolition of standing buildings 
  • Debris removal
  • Abatement of contaminants 
  • Clearing, draining, or leveling land

#5 Inspections, Permits, and Payments

State and local regulations vary, but you can typically plan on shaking hands with the government at least a few times before your construction begins. This is often due to:

  • Undergoing water and sewer inspections
  • Acquiring building permits
  • Paying impact fees or other local charges

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#6 Labor

Labor costs typically lie between 20 and 40% of a construction budget, according to the Construction Labor Market Analyzer (CLMA).3 Most home builds are managed through a central contractor, who then arranges labor with a combination of employees and subcontractors. 

Additionally, you may want to engage a project manager to handle the coordination of: 

  • Labor
  • Sequential dependencies
  • Deliveries
  • Quality management
  • Paperwork and compliance

#7 Constructing the Frame

Before you choose the bathroom tiles, you need to break ground for the skeleton that will support them. This includes: 

  1. Excavation, 
  2. Basement or slab foundation, and
  3. Wooden or metal framing.

#8 Exterior Shell

Getting your new home to the point of keeping the rain out is an exciting stage. Exterior surface construction includes: 

  • Siding
  • Roof
  • Windows
  • Exterior doors

#9 Interior Systems

Interior rough-ins provide the systems that will allow inhabitation. Builders will install: 

  • HVAC: heating, ventilation, and air conditioning
  • Plumbing
  • Electrical
  • Insulation

#10 Interior Finishes

Finally, it’s time to turn the shell into a home. Interior finishes include: 

  • Drywall 
  • Painting, wallpaper, tiling, or other wall surface finishes
  • Interior doors
  • Flooring
  • Trim
  • Cabinetry and countertops
  • Light fixtures
  • Plumbing fixtures
  • Appliances

While not part of a construction budget, you may also want to plan for: 

  • Window fittings
  • Furniture

#11 External Construction 

Once you step out of your new front door, you don’t want to be looking at a bare plot of dirt–you’ll want to add some exterior finishes. External components of building your new home include: 

  • Final grading
  • Paved or gravel driveway
  • Deck
  • Landscaping and hardscaping
  • Water drainage, containment, or irrigation systems
  • Standalone storage or other buildings 

#12 Contingency Fund

While everyone hopes and plans for a speedy and untroubled build, the reality is that factors like bad weather, regulatory hassles, shipping delays, and more can lead to extra costs. For this reason, experts recommend having a 15% contingency fund on top of your total budget to cover unexpected costs, as well as any changes or upgrades you order during the build.2 

#13 Cleanup

Finally, it’s moving day! Or is it? Make sure your general contractor includes cleanup as part of their work, and ask detailed questions about what that entails. You may need to plan for the time or cost of additional cleaning before you take up residence.

Factors Affecting Your Budget

So, exactly how much is it to build a house based on the factors that you can control, and how much do you need to budget for these variables? 

Take the following into account for a budget-friendly new home build that avoids runaway spending.

Location, Location, Location

Just as with buying a home, the average cost of building a home is highly related to location. In 2022, building a 2,200 square-foot home (not including the land) typically costs1

  • $525,000 in Alaska
  • $301,619 as a nationwide average
  • $117,500 in Arkansas

Plot Condition

In addition to where in the country (or world) you build, the specific plot location and condition factor into your home’s total cost. 

Think about trying to build on swampland formerly used as a toxic dump or a hoarder’s mansion that needs to be leveled versus an empty, tidy, dry lot connected to municipal utilities. You’ll rack up costs and delays if your land needs: 

  • Building demolition and removal
  • Major cleanup of debris or chemicals
  • Significant tree clearing, stone removal, land grading, or water drainage
  • Installation of off-grid septic, water, power, or communication systems
  • Rezoning
  • Squatter ejection

Size, Features, and Finishes

Are you building a tiny home or a sprawling manor? Lining the surfaces with marble, or choosing a cheery paint color? 

This one is pretty much a given—your budget will vary depending on how big, luxurious, and intricate you get with your design plans. 

Cost-Saving Tips and Strategies

There’s not a lot you can do about the rise in lumber and labor costs over the past few years (or what the Fed is doing with the prime rate spiking over 8.5% for the first time since 2001), but there are still many aspects of home building under your control.4 

Keep your budget in check with these tips:

  • Consider a modular home – If you’re not committed to a custom home, shop around to see if a modular home would work for you. Prefabricated construction can save as much as 20% compared to the cost of a custom home build, and take significantly less time.5
  • Sale-leasebacks during construction – To save on costs during construction, consider a sale-leaseback. Through this, you can sell your home to a company that will let you live in it as a renter. This way, you can save on the cost of moving to multiple locations during your home build. 
  • Vet your vendors – Interview at least a half dozen contractors, check references, and read the fine print when you compare quotes and promises. 
  • Be flexible – In the triangle of cost, time, and quality, you’ll most likely save money without sacrificing quality if you can be flexible on your start date and schedule.
  • Get your hands dirty – If you (or your friends and family) have skills on offer, talk to your contractor about what you can do to keep the total cost down, such as helping with debris clearing, painting walls, etc.
  • Stick to a plan – Plan in detail and with care from the get-go so that you can easily stay on track. Making changes mid-stream will inflate your budget, especially if they interrupt event dependencies or create delays for new materials or specialists. 
  • Avoid whimsy – What do a round turret room, a Victorian greenhouse, and your aunt’s handmade stained-glass windows have in common? Anything that’s a few steps away from standard is going to cost more. Before you add hidden staircases and Hobbit doorways, keep in mind that unusual shapes, materials, and sizes can be as expensive as high-end interior finishes simply because they require custom framing and installation.

Dreading temporary housing?

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a bridge to your dream home.

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Sale-Leaseback as a Bridge to New Home Construction

Building your dream home doesn’t always follow a simple schedule. In particular, moving from your current home to a new construction can include some hiccups in terms of both time and money. Not sure where to live while building a house?

Fortunately, Truehold's sale-leaseback is a solution that frees up your mobility, as well as your home equity. You can close on the sale of your property and combine it with a lease, plus a guaranteed right to stay as a renter. 

We’ll handle property insurance and essential repairs on your current home, and you’ll have the security of being able to move to your new house whenever you’re ready. 

Want to learn more? Visit us online and one of our advisors will reach out to review how Truehold's home sale-leaseback can help streamline the cost and timing of moving to your newly built home.


1 HomeAdvisor. How Much Does It Cost To Build A House In 2023?

2 Forbes Home. How Much Does It Cost To Build A House In 2023?

3 Bridgit. How to calculate construction labor cost.

4 FRED. Bank Prime Loan Rate Changes: Historical Dates of Changes and Rates.

5 The Washington Post. Prefab houses were once the ‘holy grail of design.’ So why aren’t there more of them?

Lucas Grohn headshot
Written by
Lucas Grohn
Senior Manager of Sales at Truehold - A Thought-Leader in Real Estate
Lucas Grohn brings over a decade of real estate expertise to his role, where he guides a team dedicated to innovative sales strategies. Known for his thought leadership and diverse experience, from managing brokerage operations to training agents at top firms, Lucas covers a broad span of real estate content for Truehold.
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Truehold's blog is committed to delivering timely and pertinent insights in real estate and finance, purely for educational and informational purposes. Crafted by experts, our content is thoroughly reviewed to guarantee its accuracy and dependability. Although designed to enlighten and engage, our articles are not intended as financial advice and should not be the sole basis for financial decisions. Our stringent editorial practices ensure the integrity of our content, empowering our readers with valuable knowledge.

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