In 2020, the median sales price of a new home was $336,900, compared to $300,200 for existing homes.
That’s a 20% premium to build a home. However, those are just numbers. If you are actively looking to buy an existing home, you understand how difficult it is to find a home within your budget.
The alternative to buying an existing home is to build one. However, if you’re building a home, you are painfully aware of the rising materials and labor costs. Contractors are as busy as they’ve ever been, and material costs continue to increase. As of September 2021, materials input cost has risen 23% for 2021. As a construction professional, I can tell you material prices are still increasing. Over the same period, labor costs have increased by almost 5%. When you add all those together, all factors being equal, it costs contractors close to 30% more to build a house today than it cost in 2020.
Existing home prices rose more than 19% in 2021 over 2020. That’s a National Average and varies by market. For example, existing home prices in Phoenix rose 33.1% in 2021 over 2020 prices. In Atlanta, existing home prices have risen 21.2% over the same period.
Based on this simplified analysis, it’s probably less expensive to build a new home than to purchase a new home in Phoenix but less costly to buy an existing home in Atlanta than to build a new home.
There are many more factors that go into a build versus buy decision. However, the cost of building materials has increased faster than existing homes. Although building may still be an option, a good design with a smaller footprint may offset the material and labor increases.
The decision is difficult, and I encourage anyone wrestling with this decision to make a thorough pro versus con decision for both options.
Building a home is an excellent way to ensure you get what you want, but in most cases, it requires more money and more energy.
Depending on your market, buying an existing home is currently less expensive and less stressful, but you may not get all the amenities you desire.
Once you decide on your best option, take the time to learn how to buy a house or build a house.
The proper knowledge will reduce the pitfalls inherent in both and move you closer to your homeownership goals.
Chris Pacheco is licensed real estate broker and licensed contractor with over 15 years of experience in real estate and construction. Chris holds a B.S with a concentration in Economics from the United States Military Academy at West Point and an MBA from Boston University.