Have you ever found yourself dreaming of your own custom home? With construction prices becoming more affordable in some areas, custom builds can be a viable option for some, but the costs can vary widely. The cost of building a custom home depends a lot on individual factors: where you live, the materials you use, and your square footage.

A custom-built home is different from a production build. In a production build, you’re choosing certain customization options within a subdivision. While your home is custom to some degree, you’re limited to selecting from what the builder or developer offers.

The average cost to build a home was $428,000 in 2019, based on a single-family home of around 2800 square feet. Based on that, the average cost to build a house is $153 per square foot.

Cost by Region

According to the U.S. Census Bureau’s Survey of the Median Price per Square Foot for new homes in 2019, in the Northeast, the average cost was $161. In the West, the average cost per square foot was $139 and in the South it was $100. For the Midwest, the average cost was $106. That means if you want a deal, you’re hopefully building in the South or perhaps the Midwest. The Northeast is the most expensive region to build a home.

That being said, costs can still vary wildly depending on the county, city and state where you’re building.

How the Individual Costs Break Down

When you’re building a home, you’re quite literally starting from the ground up.

After you buy land, you'll begin with site work. Site work includes inspections, plans, and preparing land for construction. This usually costs around $16,000, depending on the extent of the work. This can also include money you’ll have to pay to the local government like the impact fee, which pays for roads and parks in your community.

The cost of a foundation is usually around $25,000. The foundation will include excavation to ensure your land is completely level before construction is started. A home’s foundation costs will also include concrete and lumber. If your home is going to have a basement, count on foundation costs being more.

From there, you pay for framing, which is tens of thousands of dollars, and then you’ll pay a similar cost for exterior finishes. Exterior finishes include the walls and support structures, as well as things like windows and doors. Between framing and finishing the exterior, you’re looking at upwards of $70k.

Count on spending around $35,000 for your systems like your HVAC and plumbing.

Then, you can start counting the costs for your home’s interior. This will probably be where most of your budget goes, and there’s a lot of variance depending on the type of finishes you want. Interior finishes include everything from your countertops and cabinets to your trim.

On top of the actual construction costs, you’ll also need to pay hefty finished lot costs, permitting and other assorted builder fees.

Is it Cheaper to Buy or Build?

There’s no one-size-fits-all answer here, it all depends. For example, the average sale price of a home in 2019 was around $291,000, which is quite a bit lower than the average building price of $428,000. That doesn’t mean you can’t build a cheaper house, it just depends where you live, the size of the project, and the type of materials you use.

If you do decide to build a house, unless you’re paying cash as you go, you’ll need a construction loan. A construction loan is usually converted or refinanced into a mortgage loan once the house is completed.

You go through a similar application process for a construction loan as you do a mortgage, but rather than getting the money in a lump sum, your builder gets a series of draws. Your builder requests a draw when they’re moving onto the next phase of work. An inspector comes out, checks the progress for the lender, and then disburses the draw.

***With all of this being said, the costs of building a home, AND buying a home have gone up considerably with the state of the economy, and the effects of supply chains across the globe. It will be interesting to compare these numbers to the numbers in 2022 or 2023, I'm sure it will show to be a considerable increase!