Why Building Costs More Than Buying a House

When choosing to build a custom home, there’s a general assumption that the cost will be similar to that of the current “comparable” market listings. People often expect a slightly higher cost due to the project’s custom nature, but few realize just how pronounced that difference can be. As a result, many people are surprised upon receiving an estimate from their custom home designers, with some even choosing to forego their dream home as a result.

As artists, we hate to see vision get discouraged, especially over lack of good information and estimation. Here are three reasons why building a custom home costs more than buying an existing home—and why choosing a custom home can still be a worthwhile option.

Starting from Scratch

When many people begin their custom home journey, they first look at other homes on Zillow, Redfin, or other real estate platforms. They will note the square footage, the number of bedrooms and bathrooms, and other general specifications in comparison to the home they’ve envisioned to get an idea of the cost required.

Unfortunately, while this may be an intuitive place to start, it is ultimately comparing apples and oranges.

Most homes on the market were constructed decades ago, so the cost required to build them is now irrelevant. Instead, they are priced by comparables (or “comps”) like the ones listed above. These prices are usually determined by real estate agents or bankers, who work primarily in averages and estimates. 

In short, existing homes are priced purely on what buyers are willing to pay, and what buyers are willing to pay is unattached to hard costs.

While that may be perfectly suited for the generalities of the real estate market, it falls short in appreciating the details and nuance that a custom home will require.

The cost of building a new home has consistently increased over the years. As a result, comparing a home that is being constructed today with one from twenty years ago will inevitably lead to confusion. The only accurate way to determine the price of a custom home is to calculate the raw value of the labor and materials required to build it. And in the end, there will be no other home quite like it.

Wholly Unique

Because every custom home is fully unique, each one also brings with it a number of unique expenses. From the floor plan and room count to wall brackets and windows, every client will infuse their home with its own distinct personalizations. This can be one of the most exciting parts of building a custom home, and hiring an experienced design team is vital to that process.

Designed for the Long Term

Finally, it is important to remember that every new home is a long-term investment. The initial building cost will always be higher than its immediate resale value, but market rates will allow it to turn a notable profit after only ten years.

Every existing home would cost more to build today than it did “back then.” Between the higher quality of materials, increased standards, and a rising demand for skilled labor, homes have historically continued to appreciate in value. Despite the high initial cost, over time it will be as strong an investment as any other property.

Deciding to Build

In order to prepare for a custom home project, it is important to understand the factors at play. Visiting a used car lot will not prepare someone to buy the latest model, and browsing existing houses online will not provide an accurate price range for a new custom build. In trying to compare the two, it is far too easy to overvalue the former at the expense of the latter.

By instead cultivating a healthy appreciation for the value of a custom home, it becomes far easier to make an informed decision. An honest conversation with an architect will always be the best gauge for pricing out your dream home. And while custom homes have always carried a higher entry barrier, the value they provide in flexibility, personality, and long-term equity is well worth the cost.

Gelotte Hommas Drivdahl Architecture approaches every home design with an eye to the client’s unique needs and tastes. From contemporary residences to traditional homes, we create spaces that work in harmony and provide beauty for daily life. Contact us to learn more about building your custom home.