Get insights into the expenses involved in building your dream home. Read for clarity on budgeting for your house construction.
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.1
The first step is ensuring you can answer “how much does it cost to build a house” based on your specifications, timeframe, and location.
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.
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
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:
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.
Is there any destruction that needs to be done before building begins? The site development costs could include:
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:
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:
Before you choose the bathroom tiles, you need to break ground for the skeleton that will support them. This includes:
Getting your new home to the point of keeping the rain out is an exciting stage. Exterior surface construction includes:
Interior rough-ins provide the systems that will allow inhabitation. Builders will install:
Finally, it’s time to turn the shell into a home. Interior finishes include:
While not part of a construction budget, you may also want to plan for:
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:
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
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.
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.
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:
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:
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.
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:
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? https://www.homeadvisor.com/cost/architects-and-engineers/build-a-house/
2 Forbes Home. How Much Does It Cost To Build A House In 2023? https://www.forbes.com/home-improvement/contractor/cost-to-build-a-house/
3 Bridgit. How to calculate construction labor cost. https://gobridgit.com/blog/how-to-calculate-construction-labor-cost/
4 FRED. Bank Prime Loan Rate Changes: Historical Dates of Changes and Rates. https://fred.stlouisfed.org/series/PRIME
5 The Washington Post. Prefab houses were once the ‘holy grail of design.’ So why aren’t there more of them? https://www.washingtonpost.com/lifestyle/magazine/prefab-houses-were-once-the-holy-grail-of-design-so-why-arent-there-more-of-them/2018/06/11/2af7f14a-1011-11e8-8ea1-c1d91fcec3fe_story.html
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