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The states where buying land and hiring a contractor to build a new house beats buying an existing one.
The last few years have been among the most challenging for home buyers. The pandemic blew up prices as demand for single-family homes grew. Today, inflated prices, highinterest rates and few active listings continue to make finding and buying a house extremely difficult.
But what about building a house from the ground up? A study by StorageCafe looked at the costs of building a house compared to buying a newly built, roughly equivalent house in each of 46 U.S. states. Alaska, North Dakota, Rhode Island and Vermont were not included because data was not available.
The total cost to build was based on Oct. 20, 2022, land prices listed on Point2, a listing site, plus contractor costs drawn from 2021 U.S. census data (the latest available) with 8 percent added for inflation. The median lot size was determined from Point2 listings for new homes over the last five years. Finally, 10 percent was added for surveys, permits, andreal estate agent and lawyerfees. The median list price wasalso based on Oct. 20, 2022, listings on Point2. All results were rounded to the nearest thousand.
Building was found to be cheaper than buying in 18 states. In Hawaii, the median-priced house was listed at $1,045,000, but the study found that building would cost only $551,000, about $494,000 less, the greatest savings discovered.
Building in California was found to save over $200,000, and in Colorado, over $100,000. In New York, where building from scratch was the least financially advantageous, new constructionwould cost $524,000 and buying $535,000. In 28 of the states studied, building wasn’t worth it.
The report should be considered carefully, as the cost of building a home exactly where you’d want to live may fall above or below the state median. The real wrench in the works for those who want to build are supply-chain issues, which have plagued contractors since the pandemic took hold. If you build, be prepared for delays.
Cheaper to Build
The states in which it’s cheaper to build a house than to buy one.
Building vs.buying
difference
State
Median list price
Building cost
Hawaii
California
Colorado
Utah
Virginia
Delaware
Maryland
Montana
Florida
Idaho
Washington
Massachusetts
Texas
Oregon
North Carolina
Georgia
Tennessee
New York
−$494,000
−$205,000
−$108,000
−$97,000
−$96,000
−$96,000
−$95,000
−$84,000
−$76,000
−$70,000
−$66,000
−$53,000
−$51,000
−$43,000
−$32,000
−$30,000
−$13,000
−$11,000
$1,045,000
$700,000
$600,000
$635,000
$458,000
$490,000
$460,000
$599,000
$451,000
$575,000
$559,000
$629,000
$412,000
$545,000
$395,000
$395,000
$374,000
$535,000
$551,000
$495,000
$492,000
$538,000
$361,000
$394,000
$365,000
$515,000
$375,000
$505,000
$493,000
$576,000
$361,000
$502,000
$363,000
$365,000
$361,000
$524,000
Median
list price
Building
cost
Building vs.
buying difference
Hawaii
California
Colorado
Utah
Virginia
Delaware
Maryland
Montana
Florida
Idaho
Washington
Massachusetts
Texas
Oregon
North Carolina
Georgia
Tennessee
New York
$1,045,000
$700,000
$600,000
$635,000
$458,000
$490,000
$460,000
$599,000
$451,000
$575,000
$559,000
$629,000
$412,000
$545,000
$395,000
$395,000
$374,000
$535,000
$551,000
$495,000
$492,000
$538,000
$361,000
$394,000
$365,000
$515,000
$375,000
$505,000
$493,000
$576,000
$361,000
$502,000
$363,000
$365,000
$361,000
$524,000
−$494,000
−$205,000
−$108,000
−$97,000
−$96,000
−$96,000
−$95,000
−$84,000
−$76,000
−$70,000
−$66,000
−$53,000
−$51,000
−$43,000
−$32,000
−$30,000
−$13,000
−$11,000
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A correction was made on
March 27, 2023
:
An earlier version of this article transposed the costs of building from scratch and buying a home in New York. Building from scratch would cost $524,000 and buying $535,000, not the reverse.
How we handle corrections
A version of this article appears in print on , Section
RE
, Page
2
of the New York edition
with the headline:
A New Home, From the Ground Up. Order Reprints | Today’s Paper | Subscribe
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As a seasoned expert in real estate and home construction, I bring a wealth of knowledge and experience to shed light on the fascinating dynamics presented in the recent article by Michael Kolomatsky. My expertise is grounded in a deep understanding of the intricacies of the housing market, construction costs, and the factors influencing the decision to build a new home versus buying an existing one.
The article, published on March 23, 2023, delves into the challenges faced by home buyers in recent years, particularly addressing the impact of the pandemic on housing prices and the scarcity of available listings. However, what sets this piece apart is its exploration of an alternative approach—building a house from the ground up.
The study cited in the article, conducted by StorageCafe, evaluates the costs of building a house in comparison to purchasing a newly built, roughly equivalent house in 46 U.S. states. Alaska, North Dakota, Rhode Island, and Vermont were excluded due to a lack of available data. To establish the total cost of building, the study considers land prices from October 20, 2022, listed on Point2, a listing site. Contractor costs, drawn from the latest available 2021 U.S. census data, are adjusted with an 8 percent inflation rate. The median lot size is determined from Point2 listings for new homes over the last five years, and an additional 10 percent is added for surveys, permits, real estate agent fees, and lawyer fees. Median list prices, based on October 20, 2022, Point2 listings, and rounded to the nearest thousand, complete the calculation.
The findings reveal that building a house is economically advantageous in 18 states. Notably, in Hawaii, the median-priced house is listed at $1,045,000, while building the same house would cost only $551,000—a savings of about $494,000. California and Colorado also demonstrate significant cost savings, with over $200,000 and $100,000, respectively. Conversely, in New York, building from scratch is the least financially advantageous, costing $524,000 compared to buying at $535,000.
It is crucial to approach the results with a discerning eye, recognizing that the cost of building a home in a specific location may deviate from the state median. Additionally, the article highlights potential challenges for those opting to build, such as supply-chain issues that have plagued contractors since the onset of the pandemic, leading to potential delays.
In conclusion, this comprehensive analysis provides valuable insights into the economic considerations of building versus buying a home, offering prospective homeowners a nuanced understanding of the current real estate landscape.
