Key Takeaways:
- In California, over $200K can be saved on average when building a house instead of buying one
- In states surrounding Washington DC — Virginia, Maryland and Delaware — almost $100K can be saved
- Rocky Mountain states — Colorado, Utah, Montana and Idaho — occupy more top spots than any other region does for home building vs. buying costs
- In Hawaii, purchasing a house costs almost twice as much as building one
- The Midwest states are the most cost-effective for buying a home — the costs of building one are from $64K to $178K higher
With limited inventories and home prices at all-time highs, many Americans cannot dream about buying a ready-made house. Building a home from scratch is always an attractive alternative, but with construction costs growing as well, is it cheaper to build a house?
Since nearly 40% of self storage users are homeowners, we decided to help prospects navigate the residential market by analyzing the costs associated with both buying and building a home in each US state. We started by surveying land prices per median lot size nationwide. We also determined the (8% inflation-adjusted) regional costs of making a contract with home builders and then added 10% for administrative costs to these combined factors. Finally, we compared the totals with median house prices.
The key takeaway: Western and South-Atlantic states prove to be the best places to build instead of buy. In California, no less than $200K can be saved on average, while around half that amount can be realized in states such as Colorado, Utah and those close to Washington DC. Away from the contiguous US, Hawaii can offer house builders great savings.
In the Midwest, South and Northeast, meanwhile, lower house prices tend to make purchasing a home more attractive, though Florida and Massachusetts favor building.
Hawaii houses list for over $1M while constructing one costs half that
Hawaii has the highest single family home median listing price of any state, just over $1.045M — that is approaching twice the overall cost of building a house there, which stands at around $551K. The attraction of building in the Aloha State increases when considering the 0.62-acre average lot size for homebuilding — almost double the national average — and many lots for sale in Hawaii give access to beaches and spectacular views.
"The median house price in Hawaii is typically higher than most other states, making buying an existing home significantly more expensive than building a new one from the ground up. Even so, constructing a residential property in Hawaii can still be costly compared to building on the mainland," confirms Nick Mueller, director of operations at HawaiianIslands.com. "The cost of building a new home in Hawaii can be substantial, with estimates ranging on average from $185 to over $400 per square foot.... typical costs for new construction on the mainland range between $80-160 per square foot before factoring in land fees or other related expenses.
California leads Pacific Coast states favoring building rather than buying
The cost of building a home in the West can be considerable. But owing to comparatively high single family home listing prices in the states along the Pacific Coast, the savings made there by building a new home are some of the highest in the country.
"Building a house in California is becoming increasingly cost-effective," says Scott Berens, CEO of California real estate experts Balsamo Homes. "While purchasing land, hiring professionals, and paying out for the raw materials can add up to a hefty price tag, these tend to compare favorably to the listing prices of homes in the same area. That being said, house building in California has unique challenges due to the varied climatic conditions throughout the state. Right now, places like San Francisco and Los Angeles may be more expensive for house-building projects; however, several other locations in California, such as Marin County and San Diego, may provide better cost-efficiencies for housebuilders."
California stands out as the mainland US state where building a home looks most advantageous compared to buying one. The cost of constructing a home in the Golden State ranges around $495K, representing a saving of around $205K compared to the median listing price for single family homes of $700K. It should be noted, however, that the median lot size here is one of the nation’s smallest at 0.17 acres, though that should still be enough for a home with that all-important swimming pool.
Washington State is in 11th position in the ranking of financial advantages that can be realized when building a home, with anyone who chooses that option instead of buying one able to save around $66K. Combined building costs are about the same as California’s at $493K, but this is compared to a much lower median house listing price of $559K. Land for building on is reasonable at a median cost of $44K per acre.
Oregon has considerably greater median residential land costs at $113K per acre, but savings of $43K can still be made by building rather than paying the median price of $545K for a ready-made house. Building costs can be a little more expensive in Oregon than in other West Coast states but building away from the big cities tends to lower the amount required.
Rocky Mountain states give savings of around $100K when building a home
The mountainous, western states of Colorado, Utah, Montana and Idaho are all in the top-10 for saving money when building a home. In addition, Wyoming, which also has Rocky Mountain views, is in the top half of the ranking of states in this regard. The region’s southern desert states of Nevada, Arizona and New Mexico tend to have lower home prices, making home building there look less profitable.
Colorado can offer the biggest aggregated savings in this region when choosing to build a home, no less than $107K, assisted by a rather reasonable median land price of $43K per acre, applied to a median lot size of 0.18 acres. This results in a combined home building cost of around $492K, compared to a median home price of $600K. The state has both building opportunities in cities with thriving employment markets and in more remote yet beautiful locations.
To the north, Montana and Idaho can allow savings of around $84K and $70K, respectively, for anyone looking to take the long way round to getting a house. The median cost of buying a house in both states is less than $600K, so this more northerly region is a little cheaper for anyone buying a house off the peg. Montana’s homebuilding numbers include the added advantage of a 0.36-acre median lot size, compared to Idaho’s 0.21 acres.
High home prices in Utah's Summit & Wasatch counties make building much more cost effective
Utah has been a rapidly up-and-coming state in recent years, with a booming tech sector and real estate prices to match. The median land price of around $234K per acre is in fact the highest in the nation, resulting in a total cost for developing a median-sized lot — which is 0.21 acres here — of $538K. However, that still looks good compared to a median house listing price of $635K, a $97K difference.
Among the Utah counties with available listings, Summit County gives builders the biggest savings, no less than $1.7M. The large median lot size of 0.38 acres results in a hefty price tag of $176K and a total building cost of $677K. But this is dwarfed by this sought-after region’s median house listing price of almost $2.5M. Wasatch County has the next best savings for builders at $843K, with a house listing price of around $1.5M and despite an even higher median lot price of $189K. Rich County offers lower profits of around $185K when building — the median lot purchase price of $82K is offset by a house listing price of $760K — and Washington County gives a small saving of $15K.
At the other end of the Utah spectrum, Cache County is best for buyers, and the total building costs of $643K cannot compete with a listing price of $498K, a difference of $145K, while Box Elder County has the next-best advantage for buyers of around $90K. Salt Lake County, by far Utah’s most populous, unsurprisingly has the state’s smallest median lot size at 0.16 acres but also the highest land prices at $1.3M per acre, and the total cost of building a home ($711K) exceeds the listing price ($636K) by $75K. In Davis, Sanpete, Iron, Utah, Weber and Kane counties it is cheaper to buy rather than build, with differences ranging from $14K to $73K.
States around DC knock a fifth of the price of a new home when building it
The nation’s capital draws workers from all over the country, but they can’t always live there. Fortunately, many can commute from the surrounding states of Virginia, Maryland and Delaware — this region is considered to be in the South of the country for the purposes of calculating building costs. In all these three states, savings hovering around $95K can be made by building instead of buying a home.
Virginia offers a low median price per acre for residential lots of $33K, and their median size here is 0.29 acres. The combined median homebuilding cost of around $361K compares to a median house listing price of approximately $458K, and the state has both communities over the river from DC and scenic areas further out. Maryland offers very similar numbers of $365K and $460K — though the median lot size is somewhat smaller at 0.17 — plus the city of Baltimore and other employment markets.
Delaware is slightly further beyond the National Capital Region, but the public transportation options to DC from the state’s capital Wilmington, for example, are excellent, and there are all those great beaches and recreational options in the area. The residential land price here of $176K per acre — the third highest in the nation — pushes total construction costs to $394K, but this compares to a median house listing price of $489K, a difference of around $96K.
South Atlantic states offer homebuilders savings with Florida leading the way
Still in the South, Florida tops the list for the amount of savings anyone building a single family home instead of buying one can make, with North Carolina and Georgia also putting money in their pockets.
Florida can offer savings of $76K when building a house, with the cost of residential land being fairly pricy at $108K per acre and the median size being a compact 0.20 acres. While the savings are comparable to those obtained in the Western mountain states, the median prices are considerably lower — the costs of building and buying are $375K and $451K, respectively, meaning the savings would stretch further to pay for more real estate construction work.
Within the Sunshine State, there is a very wide difference in costs across the various counties and regions. For example, Monroe County, which includes the exclusive Florida Keys communities, has the state’s highest-priced houses, with a median price of slightly over $1.5M. And although land is unsurprisingly expensive here too — $1.3M per acre, with the median lot size being a compact 0.14 acres — building a house would generate huge savings of around $1M compared to buying one.
Other places where building gives a big financial advantage include the coastal Panhandle counties Walton and Gulf — the benefit in the former would be no less than $657K due to an average listing price of $1.1M. Similarly, Gulf Coast retirement-paradise counties Collier and Sarasota also favor building, having low land costs of $81K of $108K per acre, with building a home in the former costing around $576K less than a median listing price there of approaching $1M. Other counties rewarding builders are the desirable addresses of Palm Beach and Martin, north of Miami, and Orange, which includes the employment-magnet city of Orlando.
Anyone wanting a house in or around Magic City should know that Florida’s highest land prices of $2.5M and $1.7M per acre, in Broward and Miami-Dade counties respectively, make buying far more economical than building on a median-sized lot there. Interestingly, inland counties are often the ones that most favor buying a ready-made residence, with Washington and Jackson in the Panhandle making purchasing $145K and $128 cheaper and Putnam and Bradford near Jacksonville leaving buyers with averages of around $100K in their pockets — in all these cases, although total building costs are not exorbitant at less than $400K, median listing prices are less than $300K.
North Carolina and Georgia can get homebuilders only half the savings Floridians might generate if they do not choose to buy a ready-made home. However, the construction costs of $363K-$365K in those states are still significantly less than the average listing price of $395K. South Carolina scores 21st position on the list of states ranked by homebuilding costs versus home buying costs, although in this case the former slightly exceed the latter.
Where is buying cheaper than building a home? The South and Northeast make buying the cost-effective option
Other regions of the nation make buying a house a more cost-effective prospect than building one. This includes all the states in the Midwest and a number in the South and Northeast regions as well. The more southern states of the West region also have listing prices that often mean building is the more expensive option.
In most Midwest states, a sum of more than $100K would be needed to build a new home rather than buy one that is on the market. Ohio is the state where buying a home is most cost effective, with the $272K median listing price for single family homes being $178K less than the total cost of building a house. Nebraska and South Dakota have the region’s highest land costs at $135K and $177K per acre, respectively.
States in the South such as Arkansas and Louisiana offer houses on the market for median prices of around $260K and $268K, respectively, which are more than $90K less than the total cost of building a house there. West Virginia is the most attractive Southern state for buying, as building a home would cost fully $133K more than the listing price of a median home.
In the southern, inland states of the West — marked as much by desert as by mountains — a different situation arises compared to those to the north. Building a home is slightly more expensive than buying one in Arizona, Nevada and Wyoming. New Mexico is the best place to buy, with a median single family listing price of $385K, more than $100K less than the cost of buying.
In the Northeast, most states have median house prices that make building less profitable. Buying a house in Maine and Connecticut would be $164K and $125K cheaper than building one, while the figure would be $92K in New Hampshire. South of New England, Pennsylvania’s low median listing price of $344,995 means building would cost $183K more there, the highest difference in the nation. Massachusetts is the major Northeast exception, where in spite of the nation’s highest home building cost of $576K — boosted by a generous median lot size of 0.66 acres — building can save around $50K. In New York State, building brings small savings of around $11K.
Self storage supports both building and buying a home
Self storage can come in useful whether you’re keen on building or buying. Equipment and raw materials can be stored while building, which keeps them secure and protected from the elements. When buying a ready-made house, all the contents of the old home can be moved into a storage unit until the new one is fully move-in ready. Irrespective of how a new home is obtained, the storage unit can be kept on and used as an overflow space for possessions that are not used regularly, ensuring that clutter in the new residence is minimized.
A 10’x10’ storage unit costs an average of about $134 per month nationwide. However, in some of the key areas where people might be inclined to build a home it can cost somewhat less, for example $118 in Idaho and $127 in Utah. The same sized unit would cost averages of $156 in Colorado, $166 in Virginia and $186 in Florida, while in California and New York State the rates tend to exceed $200. These prices all work out much less than residential square footage, meaning that self storage is a very cost-effective way to increase living space anywhere in the country.
Self Storage Rates and Availability
| State | Self Storage/ Capita (sq. ft.) | Self Storage Street Rate * |
|---|---|---|
| Idaho | 9.1 | $101 |
| Oklahoma | 7.8 | $78 |
| Arkansas | 7.5 | $81 |
| Tennessee | 7.3 | $103 |
| Alabama | 7.2 | $91 |
| New Mexico | 7.1 | $100 |
| Nevada | 6.8 | $124 |
| Mississippi | 6.6 | $99 |
| Alaska | 6.5 | $143 |
| North Carolina | 6.3 | $102 |
| South Carolina | 6.2 | $96 |
| Texas | 5.7 | $101 |
| Nebraska | 5.5 | $90 |
| Kentucky | 5.4 | $93 |
| New Hampshire | 5.3 | $125 |
| Louisiana | 5.2 | $111 |
| Indiana | 4.7 | $91 |
| Georgia | 4.6 | $108 |
| Oregon | 4.5 | $141 |
| Maine | 4.5 | $134 |
| Arizona | 4.5 | $125 |
| Kansas | 4.3 | $92 |
| Washington | 4.1 | $155 |
| Virginia | 4.1 | $126 |
| Colorado | 4.1 | $125 |
| Florida | 4.1 | $131 |
| Wisconsin | 4 | $96 |
| Iowa | 3.7 | $85 |
| Missouri | 3.4 | $101 |
| Utah | 3.3 | $106 |
| Ohio | 3 | $97 |
| Delaware | 2.9 | $139 |
| Minnesota | 2.7 | $108 |
| Michigan | 2.7 | $107 |
| Connecticut | 2.6 | $136 |
| California | 2.5 | $181 |
| Maryland | 2.4 | $140 |
| Hawaii | 2.4 | $266 |
| Pennsylvania | 2 | $125 |
| Illinois | 1.9 | $112 |
| New York | 1.9 | $179 |
| District Of Columbia | 1.6 | $157 |
| Rhode Island | 1.6 | $146 |
| Massachusetts | 1.4 | $151 |
| New Jersey | 1.1 | $155 |
Source: StorageCafe analysis of Yardi Matrix data
Is it cheaper to build or buy a house?
Across the nation as a whole, building a home is slightly more expensive than buying one, a total cost of $421K compared to $415K. In fact, building costs less in 18 states as opposed to 28 states where buying costs less. High listing prices of ready-made houses can make constructing one from scratch a more cost-effective option, especially in popular coastal locations.
Some regions of the US are more profitable for building than others. $100K or more can be saved in the West and around the nation’s capital, while diverse places such as Florida and Massachusetts also favor building. Plus, of course, if smaller-than-average lot and home sizes are acceptable, the cost of building a home is reduced further. The cash saved could be useful for adding great features to the new property. And as building can take longer these days — six to twelve months, compared to perhaps three months previously — the money would also be useful for ensuring comfortable living before the new home is ready. Building a new house is clearly a very good option in many parts of the US these days, making a lifetime’s dream also an economical one.
See how much building and buying a home costs in every US state in the table below:
What the experts say about building vs. buying
We spoke to experts to discover more about the pros and cons of building a house compared to buying one across the country.
Doug Ressler, Business Intelligence Manager - Yardi Matrix
Read more....Even with fewer sales across the board, home prices have been on an upward path nationally. Over half a million more Americans stepped onto the employment ladder last month, and combined with low inventory levels, this may in fact support further housing price growth. However, the shift in housing preferences, mostly related to people’s migration away from expensive urban hubs, has brought about some noteworthy decreases in home prices, especially in once-booming West Coast locations. The work-from-home lifestyle, which ramped up considerable during the pandemic, makes relocating easier for many workers.
Whereas prices indeed dropped in San Francisco and San Jose, many residents of coastal California cities relocated to states such as neighboring Arizona or slightly further to Utah and Idaho, pushing up prices in those destinations in the process. Aside from personal preferences, when choosing between buying and building, it often boils down to the area’s available land and how expensive the existing home sales market is.
Methodology
This analysis was done by StorageCafe, an online platform that provides storage unit listings across the nation.
- Total home building costs were calculated as being land price plus the median cost of a contract with constructors, with 10% added for other costs (for example, permits, surveys and fees for attorneys and real estate agents).
- Land price is calculated as the cost of land for residential building on October 20, 2022, obtained from Point2 listings, multiplied by the median lot size calculated using Point2 listings for new homes for sale during the last five years.
- Contract median prices were obtained from the US Census, at a regional level, for 2021 (the latest data), and were adjusted for inflation at a rate of 8%.
- House prices were obtained from Point2 listings on the October 20, 2022.
- Costs have been rounded to the nearest $1,000.
- Ranking of the states was made on the difference between total home building cost and house price.
- 46 states were included in the study; data wasn't available for Alaska, North Dakota, Rhode Island and Vermont, and Washington DC and Puerto Rico were also not considered.
Fair use and distribution
This study serves as a resource for the general public on issues of common interest and should not be regarded as investment advice. The data is true to the best of our knowledge but may change if amendments to it are made. We agree to the distribution of this content but we do require a mention in return for attribution purposes.
