Cost to Build a Home
- Ivory Innovations Team
- Mar 1, 2024
- 10 min read
How Much Does It Cost to Build a Home?
According to the National Association of Home Builders' (NAHB) 2022 Construction Cost survey, the average cost to build a single-family home is $392,241. This figure encompasses multiple components, each contributing differently to the overall expense. Here's a breakdown of these costs, highlighting the primary factors that influence homebuilding costs.
Key Price Components:
Construction Costs: $392,241 (60.8%)
Finished Lot Cost: $114,622 (17.8%)
Builder Profit: $65,369 (10.1%)
Overhead and General Expenses: $32,979 (5.1%)
Sales Commission: $23,080 (3.6%)
Financing Costs: $12,192 (1.9%)
Marketing Costs: $4,268 (0.7%)
The five components below represent the majority of construction costs, which, as noted above, is the largest component of completed home sales prices.
Top 5 Most Expensive Construction Components:
Interior Finishes: $94,300 (24.0%)
Framing: $80,280 (20.5%)
Major Systems Rough-ins (Plumbing, Electrical, HVAC): $70,149 (17.9%)
Exterior Finishes: $46,108 (11.8%)
Foundations: $43,086 (11.0%)
The NAHB survey provides an in-depth analysis of construction costs, which reveals that nearly a quarter of the total construction expense is allocated to interior finishes. This includes essential elements such as insulation, drywall, trims, painting, lighting, cabinets, countertops, appliances, flooring, and plumbing fixtures. Framing and major systems rough-ins also demand significant investment, underscoring the importance of a robust structural framework and essential utilities.
Furthermore, exterior finishes, including wall finishes, roofing, and windows and doors, account for a substantial portion of the construction budget. Foundations, which involve excavation, concrete work, and backfill, are another critical area of expenditure. Each of these components plays a vital role in ensuring the durability, safety, and aesthetic appeal of the home.
More Affordable Options for Building a Home
While a bare-bones building strategy can get you into a new construction home for less, it’s important to avoid compromising on quality, as shoddy build quality can lead to problems down the road. Instead, consider alternative home-building options that can offer more value and flexibility.
Tiny Homes: Typically 600 square feet or less, tiny homes can be built for $30,000 to $60,000. They may not be ideal for large families but can be a faster and more affordable option for those comfortable with smaller spaces. Tiny homes also serve as excellent starter homes, especially given the decline in new starter home construction.
Modular and Manufactured Homes: Modular homes are built to the same standards as site-built houses and can be placed in any area zoned for housing. Manufactured homes are built to a federal building code, but may be prohibited in certain zones. Both forms of prefabricated housing offer the benefits of faster construction times and potentially lower costs due to factory efficiencies. The per-square-foot price depends on the selected features and finishes, providing flexibility to fit various budgets.
How long does it take to build a home?
Inefficient construction processes, material and labor shortages, and strict regulatory requirements can all add to the length of time it takes to complete the construction of a new home in the US. According to the 2022 Survey of Construction (SOC) from the Census Bureau, the average completion time of a single-family house is around 9.6 months — almost six weeks longer than the average completion time in 2021 — reflecting supply-side challenges and skilled-labor shortages that persisted throughout the year. These delays add significant cost to the construction of a new home, and these costs are ultimately passed on to the homebuyer.
Average Completion Times by Type of Build:
Houses Built for Sale: 8.9 months
Custom Builds: 13.4 months
Homes Built by Hired Contractors: 11.3 months
Homes Built for Rent: 11.6 months
Regional Variations in Completion Times:
The values below represent the average time period from permit to completion for single-family homes completed in 2022. The national average is 9.6 months.
New England: 12.6 months
Middle Atlantic: 11.8 months
Pacific: 10.8 months
East South Central: 10.1 months
Mountain: 10 months
East North Central: 9.7 months
West South Central: 9.6 months
West North Central: 9.6 months
South Atlantic: 8.6 months
The average waiting period from permit to construction start also varies across divisions, ranging from 24 days in the East North Central to 47 days in the South Atlantic.
Factors Contributing to Delays:
Material shortages: Delays in the supply chain for essential building materials can halt progress at any stage.
Labor shortages: A lack of skilled labor can slow down construction, especially in areas experiencing high demand for new housing.
Regulatory approvals: Obtaining necessary permits and inspections can be time-consuming and vary significantly by location.
Weather conditions: Inclement weather can cause unforeseen delays, particularly in regions prone to severe weather events.
Understanding the typical timeframes for each stage of construction can help prospective homeowners set realistic expectations and plan accordingly. It is also crucial for builders to manage these stages efficiently to minimize delays and control costs, ensuring a smoother construction process from start to finish.
Cost Per Square Foot to Build a House
The cost per square foot to build a house has seen significant increases in recent years, driven by rising construction and labor costs. According to NAHB analysis of the latest Survey of Construction (SOC) data, median square foot prices for new for-sale single-family detached (SFD) homes started in 2022 increased by 18%. For new custom SFD homes, the increase was even higher at 19%, which is more than double the US inflation rate of 8% recorded by the Consumer Price Index (CPI) the same year. These increases reflect the substantial cost pressures that have pummeled homebuilding in the post-pandemic environment.
Regional Variations in For-Sale Home Prices:
The values below represent per-square-foot prices for new SFD homes for sale started in 2022. The prices exclude the value of the improved lot.
New England: $219
Pacific: $214
Mountain: $202
West North Central: $156
West South Central: $152
East North Central: $151
South Atlantic: $150
Middle Atlantic: $140
East South Central: $132
In the for-sale market, the Pacific and New England divisions registered the highest median prices per square foot, at $214 and $219 respectively. These high costs are in addition to the most expensive lot values in the nation. In contrast, the most economical SFD spec homes were started in the South region, with median sale prices per square foot at or below the national median of $155. The East South Central division, in particular, had the lowest median price of $132 per square foot.
Regional Variations in Custom Home Prices:
The values below represent median per-square-foot prices for new contractor-built SFD homes started in 2022. The prices exclude the value of the improved lot.
New England: $213
Mountain: $200
East North Central: $185
Pacific: $160
Middle Atlantic: $160
East South Central: $156
West North Central: $155
West South Central: $141
South Atlantic: $131
Custom homes tend to be more expensive per square foot compared to for-sale homes. New custom SFD homes in New England were the most expensive to build, with half of the homes started in 2022 priced above $213 per square foot. The Mountain division followed with a median of $200 per square foot, and the East North Central division saw strong appreciation, reaching $185 per square foot. In contrast, the South Atlantic division had the most economical custom homes, with median prices at $131 per square foot.
Factors Influencing Square Foot Prices:
Several factors contribute to the regional differences in square foot prices. Overly restrictive zoning practices, more stringent construction codes, and higher regulatory costs contribute to higher prices in certain regions. Additionally, the types of homes, prevalent features, and materials used in construction vary by region. For example, lower square foot prices in the South partially reflect the less frequent occurrence of costly new home features like basements.
Overall, while contractor-built custom homes have historically been more expensive per square foot than for-sale homes (excluding lot values), the pandemic-induced supply chain disruptions and skyrocketing building material costs have led to faster appreciation of spec home prices. As of 2022, the custom home premium per square foot has returned to positive territory but remains well below historic norms, indicating that custom home buyers are now less likely to pay for pricier features and materials than before the pandemic.
Building versus Buying: Is it cheaper to build a house?
When considering whether to build or buy a house, cost is a crucial factor. According to the National Association of Realtors (NAR), the national median existing-home price in March 2024 was $393,500. Comparatively, the NAHB's 2022 Construction Cost survey indicates that the average cost to build a single-family home is $392,241, excluding lot costs and other fees. Despite the similar price points, building a new home can incur additional expenses due to land acquisition, permits, and construction delays, often making buying an existing home more cost-effective in the current market.
Data from NAR shows a sluggish pace in existing-home sales, reflecting challenges in affordability and availability. Additionally, NAHB reports that new home construction costs have risen significantly due to supply chain disruptions and labor shortages. While building a home offers customization and modern features, these benefits come with higher initial costs and potential delays, emphasizing that buying an existing home might be the more economical choice for many buyers today.
Cost-Saving Innovations in Housing Construction
Ivory Innovations’ annual Ivory Prize for Housing Affordability recognizes pioneering solutions from private-sector companies, nonprofits, and government agencies in the housing sphere. Each year, the Prize recognizes winners in each of three areas of focus: Construction and Design, Policy and Regulatory Reform, and Finance. Over the years since the Prize’s inception, organizations from the first category - Construction and Design - have provided the housing industry with a wide range of innovative models to reduce construction costs and shorten building timelines. Here are some of the organizations from that list:
Villa - Villa is a homebuilding platform that focuses on building prefab homes in “missing middle” infill locations. Villa uses an asset-light approach by partnering with factories to build homes based on Villa’s designs; with a focus on technology, modern design, quality construction, and affordability, Villa is creating a scalable solution that can meet the needs for more attainable housing production across America.
Capsule - Capsule exists to bring a new streamlined construction workforce online. Their team of engineers, machines, and assembly technicians manufacture buildings as components to increase the number of units of housing available. In everything, Capsule does more with less.
Apis Cor - Apis Cor develops highly mobile 3D printers and construction materials for homebuilding. Their robot is smaller than most others on the market, and is ready to work within 30 minutes of arriving at the job site, driving down the transportation and set-up costs associated with a project.
Onx - Onx is accelerating a new era of homes and neighborhoods, combining proprietary X+ Construction technology, design, and advanced material science expertise in concrete. Onx's solutions—scaled at speed—deliver more value at every step of the homeowner journey.
PathHouse - The PathHouse modular housing solution is the first-ever application of true Design for Manufacturing and Assembly (DfMA) techniques to our nation’s housing problem. By combining carbon-sequestering mass-timber products together with our SmartCassette, the result will be the production of over 50,000 housing modules per year within four years.
Diamond Age - Diamond Age’s mission is to get first-time homebuyers into their first home faster, using 3D printing and advanced industrial-scale robotics – AKA – building robots bigger than houses to build houses. Diamond Age is automating new home construction for the production housing industry – solving the massive labor shortage plaguing the home construction industry and bringing more entry level housing to market to balance demand. Diamond Age is currently building entry-level homes for the 9th largest homebuilder in the U.S..
Inherent L3C - Inherent L3C believes in the power of community reinvestment through the creation of trade careers, homeownership, and community-based businesses. From their community housing production facility delivering all-electric, solar-ready smart homes, to their work with public, private, and nonprofit organizations to prepare households for homeownership, and their suite of support services for a household’s first five years, Inherent L3C believes that by coming together, “we can bring the best of us to the most of us”.
BotBuilt - BotBuilt is revolutionizing the building process and solving the labor crisis in construction through flexible, precise robotic systems, patented hardware, and cutting-edge software. BotBuilt uses the latest technology to implement advanced motion planning with computer vision to build a more sustainable future for construction, forever changing the way the world builds with automation.
Madelon - Madelon simplifies infill housing development by streamlining and productizing the entire process. They seamlessly integrate each component, including pre-designed housing products that are compatible with industrialized housing manufacturers, into their online REDtech platform. This allows small local developers, non-profit institutions, and even community trusts to get into the driver's seat and finally leverage new construction technology to identify and build more affordable housing supply at scale.
Vantem - Vantem builds affordable, energy-efficient, climate-resilient homes at scale. Vantem reduces the cost of delivering quality homes by leveraging an innovative structural panel technology to factory-craft modular structures, including full Net Zero homes.
Connect Homes - Connect Homes designs, builds, and installs modern, green, award-winning single-family homes and interim housing solutions. Using its revolutionary modular platform, Connect builds the equivalent of a medium-sized home every six days – at a fraction of the cost and waste of site-built alternatives. The company’s radically simpler process and beautiful structures are evidence that the housing crisis can be successfully overcome through innovation.
Autovol - Autovol is tackling affordable housing by using innovative technology to automate the modular construction process, cutting 40% of the traditional build time.
Blokable - Blokable’s comprehensive modular development model significantly reduces the cost and time required to create and operate new multi-family housing.
Module - Module is re-designing homeownership for the 21st century - buy the amount of house you need today, add on as your family grows, income grows, or needs change.
Volumetric Building Companies - Volumetric Building Companies is a vertically integrated global volumetric modular construction leader headquartered in Philadelphia, PA, with locations across the United States and Europe. The company focuses on building the future by providing high-quality, sustainably produced buildings in less time across varied market sectors utilizing its technology-enabled design and engineering model, precision-driven manufacturing capabilities, and project-proven modular construction expertise.
ICON - ICON develops advanced construction technologies that advance humanity. Using proprietary 3D printing robotics, software and advanced materials, ICON is shifting the paradigm of homebuilding on Earth and beyond.
FullStack Modular - FullStack Modular merges modular building with new construction technologies to bring a higher level of control, predictability, and scalability to development. Fullstack is the first fully integrated modular solution, allowing them to innovate modular building in the areas of design, manufacturing, and construction. FullStack Modular built the modules for 461 Dean Street, which currently is the tallest modular building In the world.
Factory OS - Factory OS is transforming the construction industry by vertically integrating 21st century off site building technologies, software operating systems, lean manufacturing, & progressive labor practices to deliver multifamily housing more than 40% faster and at 20% lower cost.
