Published on Sunday, October 25, 2015 by Land Century
Its a very tricky market, and house prices are on the rise yet again. But, you can negate the high cost of home prices by building your own home. While this is a timely endeavor, its an avenue that is worth considering when you want your dream home without the exceptionally high price point attached.
Understanding Current Market Conditions
Just three short years ago in 2012, the housing market had such low prices that building your own home would either provide a very small benefit in terms of cost, or be more expensive than buying an already built home. Most economists stated that the only benefit at the time was the ability to customize your home, and believed building was more expensive.
Current Home Values
Trulia provides in-depth statistics for the average home price based on listing, sale price and state. Youll need to consider the state you live in to determine the viability of building a home. You may find that the average listing in New York is currently $461,556 with the median sale price being $420,000. These are very high prices due to the high cost in and around New York City.
If you planned on living in Buffalo or north New York, you would be able to buy an exceptionally large home for this price.
The U.S. Census provides us with information as recent as August 2015 with the median new home price being $292,700 and the average home price being $353,400. This includes the land as well as the actual home itself. But, new homes are always more costly. Zillow also provides data through August 2015 that shows the median home value in the country is $180,800; an increase of 3.3% over the past year.
Cost to Build
The cost to build a new home varies so greatly that its impossible to provide an accurate figure. Why? There is a lot that needs to be considered:
* Land: How much will the land in the area cost? You can find a nice lot in Florida for sale for a few thousand dollars, while you may spend $40,000 an acre in other parts of the country.
* Price per Sq. ft.: The average home will be priced per square foot and will cost between $100 and $150 a sq. ft. on average. In this case, youre likely to spend $100,000 - $150,000 per 1,000 square feet of living space.
* Fixtures: Home prices vary drastically based on fixtures. You may spend $5,000 more to have marble countertops throughout the home instead of granite. Or, you may choose $2,000 toilets instead of $200 toilets, so these extras do cost more.
And, location will further dictate the price. Builders in rural areas may charge less than in-demand builders in populated cities. All of this needs to be taken into account.
But, you also have the option of modular homes that are built in a factory and assembled on-site. When you have your own home built, there are several benefits:
* You choose everything from the materials used for flooring to your design layout.
* The land you choose will be exactly what you want in terms of acreage and features.
* The home will be new and still under warranty.
Ive found that the biggest advantage when building a home is not realized when the home is built on a smaller lot. In fact, if youre building a home on a lot that is less than .5 acres, youll likely pay more to build your home than buy a pre-existing home.
But, if you buy a lot of acreage, youll be able to save a ton of money. Most homes that have several acres of land will have their price increased dramatically. And, if you can buy the land for a major discount, youll walk away from the home building process with a lot of money in your pocket.
Considerations Before Building a Home
The dream of building your own home does come with a lot of other aspects that need to be considered:
Financing: It will be more difficult to find financing to build the home. You will likely need to provide a bigger down payment to the lender.
Builders: Visit several builders to get an estimate on your homes price. Youll find different builders have dramatically different pricing. And, you also want to make sure you choose a reputable builder and not a fly-by-night operation.
Land Preparation: Youll need to clear the lot before building can begin. This can cost several thousands of dollars depending on how wooded the lot is. Youll also need to have the foundation poured, which can range from $1,500 to $20,000. The average cost is $7,775, with most people spending $4,200 - $11,700 on foundation costs. This data is based on 300 cost profiles.
If youre planning to build in under-developed areas, you may also find builders that offer substantial discounts on homes. This will allow you to have your home built for a much lower price. But, be warned that initial estimates almost always outweigh the true cost of the home. It all comes down to the builder and your fixture choices.
If constructed properly, youll be able to ensure energy efficiency and quality in your homes construction. This can also result in a much lower home price.
Before you buy in an expensive market, look at the cost of land and see if building your own home may be cheaper. If you can purchase a large lot for cheap, youll often save tens of thousands of dollars having your own home built instead of buying a pre-existing home on an equivalent lot.