Homes continue to sell above asking price in many areas of the country, which may have some prospective home buyers wondering, “Is it cheaper to build a home than to buy one?”

The cost to build a new home has increased with inflation and from lingering pandemic supply and demand issues. And with that, new housing starts decreased throughout 2022, declining by more than 27% over the year.

Of course, that’s not a blanket statement for every area. Many factors impact local markets, creating differences in new home start projections and the labor and material costs to build homes in each state. Today’s Homeowner took a thorough look at what goes into the cost of building a house in each state, analyzing the main cost drivers and geographic differences.

If you want to estimate the cost of building your dream home, check out our: Cost of Building a Home Calculator.

Key Findings

• The average cost of building a 2,100-square-foot home in the U.S. is \$332,376, or \$158 per square foot.
• Building the same 2,100-square-foot home varies by more than \$140,000 across states.
• The average cost to build a 2,100-square-foot home is less than \$300,000 in six states, all in the South: Mississippi, Arkansas, Alabama, Louisiana, North Carolina, and Florida.
• Hawaii is the most expensive state to build, costing \$431,364 for the average 2,100-square-foot home (\$205 per square foot).
• Building a home (including land and building cost) is less than the median home sale price in only eight states.

What Goes Into the Cost of Building a Home?

Outside of land and land preparations, there are many costs associated with building a home. The table below shows the average cost by type of expense (including the cost of materials and labor) for a 2,100-square-foot home. Labor typically averages 36% of the total cost of building, excluding contracting upcharges.

Exterior Costs of Home Building

We estimate that the average total exterior cost for a 2,100-square-foot home is roughly \$150,900. There are 10 primary expenses relating to your home's exterior that sum to that total. For more details on each, click through the expenses below.

Before you break ground on your new home construction, you have to get your plot of land approved. To start, a land surveyor or engineer will come out and look at your land and your blueprints to ensure your dream home is doable from both a practical and safety standpoint. They’ll also be the person to help you through getting the appropriate permits approved from the city.

An engineer will visit multiple times throughout your home build process to ensure structural integrity. We estimate \$5,000 to cover all surveyor and engineer costs, as many charge flat and hourly fees.

Your home's foundation is one of the most expensive pieces of a home build, costing about \$20,900 for the average 2,100-square-foot home. However, the three primary types of foundations — slab, crawl space, and basement — have varying price tags.

A simple slab (a flat concrete pad poured directly onto the ground) can be most affordable, while a crawl space or furnished basement can cost up to \$30,000 or more.

Read our foundation repair cost guide to learn about regular maintenance and repair costs you may need.

Framing is the stage where your house takes shape. It’s the most significant portion of the home-building process — physically and financially — and costs \$49,622 on average for a 2,100-square-foot home. But price depends on materials, home size, layout, labor, and market conditions for lumber.

Lumber is the most common method for new U.S. home builds, but metal studs or concrete block construction (CMU) are popular in parts of the country. Expect to pay between \$40,000 and \$68,000 for framing, with costs varying depending on the type and availability of material used.

The sheathing is the outer layer or casing that construction crews place on your home during the building process. This material strengthens your home, protects it against the elements and provides a sturdy foundation for roofing, siding and flooring. Sheathing will cost around \$11,100, depending on material and quantity.

Wood is the most common home sheathing material, typically plywood or oriented strand board (OSB). Some other materials include fiberboard, cement, gypsum, or glass mat.

Once your roof is framed, it’s time to install a roof system. New roof installation costs run between \$10,000 and \$20,000, on average. The final cost will depend on size, shape, slope, and roofing material.

Asphalt shingles are one of the most affordable and common, ranging from \$1,200 to \$12,500 for a 1,000-square-foot roof. Metal roofing costs range from \$4,500 to \$18,000 for the same size roof.

Homeowners typically choose between wood and vinyl materials for windows and doors, with costs varying by type. Expect to spend between \$12,000 and \$20,000 for exterior window and door installations, with the average homeowner spending \$14,615. Interior door installations cost between \$200 and \$300 per door.

Siding is the material that wraps around the frame and protects your home from the elements, so choosing a durable material is essential. Siding installation costs between \$10,000 and \$17,000 on average, depending on the material and size of the home. The average U.S. home builder will spend \$12,310.

Most homeowners will choose between the following siding materials, priced per square foot:

• Vinyl: \$2–\$8
• Natural wood: \$10–\$35
• Engineered wood: \$7–\$11
• Fiber cement: \$5–\$14
• Everlast composite: \$8
• Aluminum/metal: \$7–\$35
• Brick siding: \$10–\$30

Concrete slab flatwork and driveways will cost similar to foundation costs of about \$10.55 per square foot. Flatwork includes any type of hardscaping, including sidewalks and patios. We estimate the average 2,100-square-foot home will pay around \$4,000 for flatwork, although it’s highly dependent on your desired yard aesthetic.

Asphalt and gravel driveways are more cost-effective options, but asphalt will lead to higher prices over time because it’s a higher maintenance material. The average new home builder will spend between \$3,000 and \$5,000 on the driveway alone.

Decking material costs range from \$3 to \$15 per square foot, with labor costs from \$8 to \$22 per square foot. Decks are usually built with bamboo, cedar, composite, ipe, pressure-treated lumber, or redwood. Prices vary based on durability, but the average deck costs between \$8,000 and \$13,500 to build.

Landscaping amounts to about 2.5% of the total new home construction budget because you’ll have to transform a construction site into the pristine yard you envision. Most new-home builders spend around \$7,500 on landscaping, including gardens, shrubbery, and tree planting.

Installing sod (grass) and other greenery will likely put you back at least a few thousand dollars. Growing grass by seed is cheaper but requires much more time and patience.

Interior Costs of Home Building

The average total interior cost for a 2,100-square-foot home is about \$101,300. Like exterior expenses, we defined 10 primary interior costs of home building. For more details on each, click through the expenses below.

Running electrical wiring throughout the house costs between \$5.50 and \$5.70 per square foot, with the average homeowner paying about \$11,917. Materials sell for roughly the same amount throughout the country, but the complexity of your home’s layout and the number of installed lighting fixtures and outlets will affect labor costs.

Expect to pay between \$10,000 and \$14,500 for electrical installation.

Heating, ventilation, and air conditioning (HVAC) installation includes ductwork, central AC and a furnace, and hooking up any associated HVAC systems. Costs depend on the type of HVAC system you pick, your home's size and layout and your climate. We estimate the average homeowner pays \$10,000 for HVAC installation.

Read our HVAC installation cost guide for a breakdown of what goes into these pricing estimates.

There are a few types of insulation, including rolled, blown-in and spray foam. Installation cost depends on the size of your home and the materials you choose, but expect to pay between \$5,000 and \$7,000 for insulation material and labor. The average is \$6,017.

Rolled installation, also called batt, or batten, is typical for walls and some ceiling and roof applications, while ceilings and attics get blow-in insulation. Installers can use spray foam in all applications, but homeowners can expect to pay two to three times more for spray foam than traditional methods.

There are three stages for adding new-home plumbing: rough in below ground, rough in above ground, and installation. On average, plumbing installation costs \$900 per tub or shower and \$400 for non-tub fixtures. Using these estimates, each full bathroom costs around \$1,700.

You’ll likely spend between \$12,500 and \$21,000 to plumb your home, with the average plumbing budget at \$15,944.

Installing wall and ceiling drywall and adding paint throughout the home will cost you between \$10,000 and \$17,000. Drywall is cheaper and easier to install than plaster, so it’s the go-to material for most homeowners today. However, plaster has its benefits, including higher fire and mold resistance.

Like most aspects of home construction, flooring costs vary based on the type and quantity of material. Hardwood flooring installations cost between \$6 and \$25 per square foot. Epoxy flooring costs between \$3 and \$12 per square foot, while vinyl flooring typically costs around \$4.50 to \$5.00 per square foot.

Expect to spend between \$11,000 and \$15,000 on indoor flooring installation. The average price is \$12,964.

We put most of the interior aspects of your home under the “appliance” category, including cabinet and island installation, along with typical items like a washing machine and a refrigerator.

It’s hard to give an exact cost estimate for appliances because it will heavily depend on what features and technology you have installed in your home. We estimate the average home build will require a budget of around \$26,000 to account for all appliances.

You’ll need to dig into the ground to install pipes, lines and wires to get your utilities hooked up. To examine utility costs, we grouped sewer lines, natural gas lines and water main installation, examining labor and materials for piping.

Costs can vary widely depending on the specifics of your home and the distance to correlating city pipes. Expect to pay between \$2,700 and \$6,000 on average to install and connect these lines to your city’s system.

It’s important to note that our figure does not include the cost of a new septic system. If your land lacks public sewer access, you’ll need to install a new septic tank system, which can add tens of thousands of dollars to the project. The price of connecting utilities may also rise depending on soil conditions, distance from your home to the public system, and installation difficulty.

The house trim is the material that goes around the base of your home, as well as windows, doors, and other features. It can be seen on both the interior and exterior of your home. Again, costs will vary by material and quantity but expect to pay \$1,850 on average.

Adding a fireplace is a relatively inexpensive way to boost home value. Fireplace installation costs typically range between \$800 to \$4,000, with the average new fireplace adding about \$890 to the total home construction cost.

Other Costs Associated With Building a Home

Beyond exterior and interior expenses, individuals building their own homes will also need to factor in additional costs. The two primary extra expenses are trash cleanup and equipment rentals along with a contractor's upcharge. See more details on each below.

While your contracting crew will likely set up and clean up the construction site, you'll be responsible for the bill. Trash clean-up adds another \$3,000 on average to your new home construction cost. You’ll also be responsible for other costs, like a portable toilet rental, which typically costs about \$500.

A contractor upcharge is an amount your contractor adds above the direct cost of materials and labor. It includes direct, indirect, fixed or variable costs spent building the home. It also covers administration fees, transportation, overhead, and profit.

Contractors usually use a fixed price model or a cost-plus model. With a fixed-price contract, you get the up-front estimates of the upcharge. With a cost-plus, you’ll receive an estimate upfront but won’t get the final price until the project is complete.

These markups vary from contractor to contractor, but we assumed a fixed 30% contractor upcharge across all states for our estimates.

Average Cost of Building a Home in Each State

Material and labor costs vary significantly by state, hence the estimated cost of building the same 2,100-square-foot home ranges from roughly \$287,700 in Mississippi to about \$431,400 in Hawaii.

Many states where home building is expensive are known for their high living costs. Following Hawaii, Massachusetts and New Jersey rank as the No. 2 and No. 3, respectively, as the most expensive states to build a home. Interestingly, though California is known as one of the most expensive states to live in, it ranks No. 8 overall in building costs, trailing other states in the Northeast, including New York and Connecticut.

In Southern states, where building costs are low, the average price per square foot for building our model home can be as little as \$140. That’s true in Alabama, Arkansas, and Mississippi. The table below ranks states according to the average cost of building a house, from most affordable to least.

The above estimates are for a standard spec home. However, the cost of building your dream home depends on your customizations, the finishes you select, and square footage. Use the calculator below to determine the cost of building your home.

Buying a House vs. Building One: Which Is Cheaper?

We found that building a home is significantly more expensive than buying in most states. Specifically, in 28 out of 50 states, the average cost of building a home is at least \$100,000 more than the median home price.

Building a home includes construction costs for materials and labor and the cost of the land (and potentially the preparation of that land). Data from the Federal Housing Finance Agency estimates the average price per acre of residential land, but lot sizes vary significantly by geography.

Assuming the median lot size in each state and the average price per square foot, we combined the average cost of building a 2,100-square-foot home with land prices and compared the total average cost of a newly built home to median home prices in the state.

Some states buck the trend. Building a home is the most cost-effective in several Western states, including Utah, Colorado, and Washington. The map below compares the average home building cost and median home sales price.

Pros and Cons of Building a Home

Although the numbers above show the financial benefit of buying an existing home compared to building one in each state, people may have specific desires that they can only get by starting from scratch.

Below are some advantages and disadvantages to consider if you’re thinking of building a home.

• Customization: Do you have a dream kitchen or bathroom in mind? Being able to fully customize and design your home to your liking is one of the biggest appeals to building your own home.
• No Competition: You won’t have to worry about being caught in a bidding war with other homebuyers if you buy land to build your home.
• Less Maintenance: A newer home usually means less upkeep and maintenance costs. All your products and appliances will be new and often protected under warranty. Plus, you’ll have less chance of being surprised with a big homeowner headache, like a burst water tank.
• Energy Efficiency: Most new homes are built with energy efficiency in mind, leading to more significant cost savings over time.

• Significant Time and Effort: Building a home is no easy feat. A custom home can take anywhere from six months to two years to complete. There are always chances for delays from supply chain issues, weather, labor shortages, building permit hold-ups, or other unforeseen problems.
• Financing Complications: Land and construction loans are often more challenging to secure than home loans because of a lack of collateral. That means higher payments and interest rates to offset the risk to the lender.
• Securing Building Permits: The permitting process may delay your construction, and it can be downright stressful. You’ll have to obtain several permits and approvals and ensure your home abides by all local regulations. The process involves a lot of paperwork, waiting on inspectors, and sometimes a trip to the city council to fight for your dream home.

Home Building Financing Options

Securing construction loans to finance your build is different from securing a mortgage for an existing home. Below we’ll discuss what you need to know about financing for a home build.

How Do Construction Loans Work?

A home construction loan is a short-term, higher-interest loan that covers the cost of building a new home. It can include costs for the land, labor, materials, and permits.

The steps to applying for a construction loan are as follows:

1. Find a bank — likely a local one —  that offers construction loans.
2. Fill out the application, submitting financial documentation, project specifics, and timeline.
3. Once approved, you’ll receive the funds with each construction phase. An appraiser or inspector will monitor each project phase to ensure funds are available and used appropriately.
4. When your home is complete, you’ll receive a certificate of occupancy. That allows you to convert your construction loan into a mortgage loan, and you can start making payments on both principal and interest.

Construction loans and mortgage loans have notable differences. The biggest is that construction loans are shorter, usually lasting no longer than one year. After that, they often convert to a more traditional adjustable rate mortgage. Mortgages typically range between 15 and 30 years.

With a construction loan, you receive money in increments corresponding to the construction project stage and make interest-only payments until the home is complete. Because construction loans are riskier for lenders, they have higher interest rates.

With a mortgage, you receive the money in one lump sum and immediately begin paying off the lender in both principal and interest.

Types of Construction Loans

You have five types of construction loans available to finance the building of your new home.

• Construction-only loan: This short-term loan is typically issued for a year at most. That makes it risky for you because of potential delays in the home construction process. With a construction-only loan, you’re responsible for paying the loan in full at maturity (by the end of the year) or obtaining a mortgage to secure permanent financing. These loans are harder to qualify for and come with higher interest rates. Plus, you’ll have to pay a second set of loan fees when you apply for a traditional mortgage loan at project completion.
• Construction-to-permanent loan: Similar to construction-only loans, this one-time, short-term loan funds the construction process but can be converted into a permanent mortgage. The difference is you’ll make interest-only payments throughout the building process, and you’ll only have one set of closing costs to pay, reducing those costs. But these loans can be pricey, so shop and compare rates.
• Renovation loan: As the name suggests, this loan is reserved for those renovating an existing home rather than building one from scratch. Renovation loans give borrowers money to purchase and upgrade their new home, making one monthly payment to cover both costs. However, there are various types of renovation loans depending on the cost of your project. You could also consider a cash-out refinance, where you take out a new mortgage on the home at a higher amount and use that lump sum to finance the renovation. But beware of high-interest rates for that option.
• Owner-builder loan: Some banks offer owner-builder loans if you’re a licensed builder and acting as the general contractor for your home-building project. These loans usually require proof of experience, education, and licensing.
• End loan: This isn’t a construction loan. Instead, it refers to the mortgage that you take on after building the home. If you take a construction-only loan, you must go through a second closing and then apply for this end loan. An end loan is the same as a typical mortgage loan.

Construction Loan Requirements

Like with any loan, construction loan lenders have specific requirements you must meet to be approved. These qualifications generally involve your:

• Credit score: Most lenders require a minimum credit score of 620.
• Debt to income (DTI) ratio: This compares your recurring monthly debts to your gross monthly income.
• Down payment: Typically, you’ll need to pay 20% of your loan amount upfront.
• Choice of builder: You’ll likely need to have the builder approved by your lender. Banks will look at proper licensing and insurance certification.
• Construction plan: Your home blueprints, budget and timeline will need to be approved by your lender, as well as contracts or documents.

What Are Other Alternatives?

A construction loan is one of many financing options when building a new home. If you don’t meet construction loan requirements or just want alternative ways to fund your dream home, consider a few other options:

• Hard money loans: This is a short-term loan given by people or private companies rather than a traditional lender (like a bank). With this type of financing, the real estate you’re purchasing serves as collateral. So if you can’t pay it back, the lender acquires your land and home.
• FHA one-time close construction loan: This loan, backed by the Federal Housing Authority (FHA), allows you to finance your entire project, from land purchase to construction costs. It’s available to people with credit scores under 600, but you must fork up at least 3.5% of your down payment and meet a minimum DTI. You can apply for FHA loans with the mortgage lender of your choice, but you’ll be automatically enrolled in private mortgage insurance (PMI) with this option.
• VA construction loans: If you’re a military veteran or active member, you may be eligible for a Department of Veterans Affairs (VA) construction loan. Of course, you’ll have to meet all the eligibility requirements and have your construction plans approved by the VA, which can be tedious. A VA loan doesn’t require a downpayment but requires the construction project to be for your primary residence.
• USDA construction loans: People with lower incomes looking to build in rural areas can apply for a construction loan through the U.S. Department of Agriculture (USDA). These loans are low-interest and require no money down. You don’t have to be a farmer to apply (profiting farms are ineligible), but you must live in an eligible area. There are other qualifications, including a minimum 640 credit score.

Tips for Building Your Own Home

Now that we’ve discussed the pros, cons and costs of building a home, you may wonder: What do the experts think? Today’s Homeowner interviewed two home building specialists for their advice on building your own home.

Derek Price

President and Owner of DP Quincy

“Putting the work in the front of a project will save you time and money at the end, and this is accomplished in the design phase of the project if there is a good planning team. This phase includes making sure you have architectural plans, interior design, and that the general contractor is involved in the design.”

Uriah Dortch

Owner of The Inspiring Investment

"I would ask individuals one question: Do your finances allow you to exceed the initial budget? If your budget is strict, then you are better off purchasing an already built home or build a home with a fixed price builder and make sure all selections are completed before construction starts."

Through planning ahead and understanding cost fluctuations, individuals building their own homes can set out confidently on the building process.

Methodology

To estimate the cost of building a home in each state, Today’s Homeowner scoped the materials and labor needed for a 2,100-square-foot home. We compiled material costs from Lowe’s and Home Depot while labor costs were estimated based on hours of worker time and using data from the Bureau of Labor Statistics (BLS). Using a proprietary cost matrix, we adjusted material and labor cost figures by location and accounted for a fixed 30% contractor surcharge.

To note, we relied on several assumptions in reaching our final estimates. Firstly, our estimates do not include the cost of the land or any leveling. Additionally, we assumed that all stages of the building are done professionally and pass inspection, there are no weather delays, the crew owns all machinery and is not required to rent (except for the Truss setting), and the same house could be built in every location.

Editorial Contributors

Kristina Zagame

Senior Staff Writer

Kristina Zagame is a journalist with a background in finance, home improvement and solar energy. She aims to simplify data and information so homeowners feel well-equipped to take on their dream home projects.