For most people, the idea of home ownership centers around going to a realtor and looking at houses that are currently available on the market. These days, the average person usually isn’t choosing to build a house because it’s viewed as a difficult process that requires more steps than simply qualifying for a mortgage, planning for property taxes, packing and hiring a mover. However, the upside of a custom build is that the home is truly catered to your needs as compared to a pre-built home that might contain only some of your wishlist needs.

Building a house is a big financial decision that requires careful planning. Many factors affect the total cost, including land prices, design fees, materials, labor and unexpected expenses. If you’re thinking about building a home, it’s important to understand these costs so you can create a budget that works for you. Here’s what you need to know.

Essentials To Consider Before Building

Building a home requires some forethought; potential homeowners first need to take several steps before they can move forward with the actual building stage. In fact, the process of finding land and ensuring that the desired location is zoned for residential use are just a few of the big issues to consider.

Buying the Land

Before construction begins, homeowners need to have a piece of land to build on. As with anything related to real estate, the cost of land depends on its location. Lots in a city or a desirable suburban location will always be much more expensive than those located in a rural area. On average, land can cost anywhere from a few thousand dollars to hundreds of thousands, depending on the size and location of the plot.

House Design and Blueprints

Once the land has been secured, homeowners will need a design for their future home. Hiring an architect or a home designer to create blueprints can cost between $2,000 and $8,000, or more for a custom design. Meanwhile, some people opt for pre-made house plans which can often be purchased online. This is a much more affordable option for those that want to save money.

Trust the Process as Building Takes Place

Once the land is purchased and a blueprint is secured, homeowners can then turn to building the actual home. Here are a few of the most common expenses to expect.

Material Costs

Materials are the next major expense associated with building a home. Prices can vary depending on quality and supply and demand for items. Here are some key materials and their costs:

• Lumber: Wood is one of the most important building materials, and is used for framing. Prices can fluctuate due to supply shortages or high demand. Shortages that began during the COVID-19 pandemic have caused costs to rise significantly.
• Concrete: Used for foundations and driveways, concrete prices vary but typically cost several thousand dollars.
• Insulation: One of the biggest expenses homeowners face with the upkeep of their home is energy costs. Insulation is critical, as this material keeps homes warm in the winter and cool in the summer. Costs depend on the type, with fiberglass being more affordable than spray foam.
• Roofing: Shingles, tiles or metal roofing each come with different price points.
• Finishes: Finishes refers to the features a person sees when they walk into an empty home. These include flooring, countertops, cabinets and other design elements. A basic finish costs less, while high-end materials like granite or hardwood floors can increase expenses.

Plumbing, Wiring and Specialty Tasks

Beyond basic construction, homes require plumbing, electrical wiring and other specialty work:

• Plumbing: Installing water pipes, sinks, toilets and showers can cost between $5,000 and $15,000, depending on the house size and number of bathrooms. Also note that expenses can skyrocket if a septic tank is required or a plot of land must rely on well water.
• Electrical Work: Wiring for lights, outlets and appliances generally costs $3,000 to $10,000.
• HVAC System: Heating, ventilation and air conditioning systems usually cost $5,000 to $15,000. Depending on a homeowner’s goals, opting for mini split systems can be a way to save money as compared to a traditional HVAC system.
• Specialty Tasks: Additional work like installing fireplaces, smart home systems or custom features will also add to the total cost.

Labor Costs and Workforce Challenges

Hiring professionals to build your home is another major expense but is something that should be considered carefully. Labor costs vary based on location and demand. If there is a shortage, wages increase, making the project more expensive. For example, when fewer workers are available due to a construction boom or political factors that reduce the number of available workers, builders charge more for their services. Additionally, if materials like lumber are in short supply, builders may have to wait or pay higher prices, increasing overall costs.

Be Prepared for Unexpected Costs To Arise

Even with careful planning, unexpected costs can arise. Here are some examples:

• Building in a Flood Zone or Near Water: Land located in a flood zone or near a lake or ocean will require more preventive steps to avoid extensive damage in the event of flooding. This can include extra foundation work or flood-proofing. Special permits or insurance can also add costs.
• Extreme Weather Areas: Homes located in areas prone to extreme weather such as hurricanes, tornadoes or earthquakes, may need stronger materials or special construction techniques to prevent damage which will increase costs.
• Soil Issues: Some land has poor soil, requiring additional work to make it stable for a foundation.
• Permit Fees and Inspections: Local governments require building permits, which can range from a few hundred to several thousand dollars.

Final Cost Estimates for Building a Home

The total cost of building a home depends on all of the above factors. On average, building a house in the U.S. costs between $150,000 and $500,000. A basic, small home may cost around $150,000, while a custom, high-end home can exceed $500,000.

Building a home is exciting but can be a costly project. From land prices to materials, labor and unexpected expenses, it’s important to budget carefully. Plan ahead and factor a contingency into budgets to prepare for unexpected costs or situations that might arise.