In 2023, how much does it cost to build a house? What are the factors to consider when determining the estimate for a construction project?
Estimating home construction costs do not need to be complicated or time-consuming, especially with the right information and tools for guidance.
Whether a general contractor, estimator, or homeowner, below will review the following about budgeting for a home construction project:
What is the average cost to build a house?
Factors to consider when building a home
How to ensure the accuracy of the construction budget
Disclaimer: The pricing stated here is based on average data from third-party research. Prices may still vary due to differences in seasonality and supplier.
What Does It Cost To Build A House?
How much does it cost to build a house from scratch? During the course of the COVID-19 pandemic, labor, and supply shortages have led to an increase in building costs. The shortage was driven by more people spending time at home and doing DIY home projects.
Factors that contribute to pricing are location, design, and building size. On average, to design and build a house costs between $201,000 and $310,000 for a 2,000-square-foot home.
In the table below, compare the average costs of building a house:
How Much to Build a Home vs Buy a Home
It’s cheaper to buy an existing home than to build a new one. This is because material and labor costs increase over the years. However, both options offer benefits and disadvantages.
Buying a Home
As of January 2023, home prices in the US increased by 1.5% compared to last year. The median price is $383,460.
Building a Home
How much would it cost to build a house? If you exclude the cost of land, the average is around $300,000.
What Does It Cost To Build a House Per Square Foot?
On average, an American family with three to four members can fit comfortably in a 2,000-square-foot home. As shown below, the construction costs per square foot are around $150 on average. Effectively, construction costs for a home for a family of four should be $300,000.
If aiming for builder-grade home construction, the lower cost range will be most relevant. Customized luxury construction will be in the range of $500 per square foot or more depending on the features of the home.
For builder-grade or mid-grade home construction, expect the following costs depending on the size of the home:
In the United States, the typical cost per square foot varies based on the region or state. Census Bureau data below indicates the differences between regions:
Average Cost to Build a Small House
How much does it cost to build a small house? According to HomeAdvisor, the cost to build houses that are tiny depends on the size, quality, materials, and details. However, the typical range would be between $30,000 - $60,000.
How Much Does It Cost to Build a Small House?
How much does a house cost to build if it’s smaller than average homes? Here’s a breakdown of potential costs depending on the type:
How Much Does It Cost to Build a Small Cottage Home?
How.much does it cost to build a house if it’s a small cottage home? According to Fixr, the national average cost for a cottage is $300,000.
Here’s a breakdown of potential costs depending on size and type.
How Much Does It Cost to Build a Building
Investing in residential buildings and multi-family homes can be advantageous if you want to rent out some of the rooms. You can generate income from rent payments and create a steady stream of income.
How much cost to build a house for multi-family purposes still depends on factors like location, size, materials, finishes, and amenities like a pool or gym. However, here’s recent data on the residential construction costs in the U.S. by Q3 2022 by city.
Average Construction Costs of Single-Family and Multi-Family Residential Buildings Per Square Foot in the U.S.
The figures below are taken from the 3rd quarter of 2022, by city.
What Is the Cost to Build a House By State?
Location is one of the largest factors in home construction costs. Areas with a higher cost of living equate to higher costs in land, materials, and labor. Specific regions have union labor for construction which charges a premium compared to non-union. In the table below, explore the most affordable states to build a home and how much it costs to build an average 2,000 square feet home.
Price to Build a House Based on Number of Bedrooms
For wood-framed homes, a 1-bedroom house can cost between $80,000 - $400,000 for 800-1000 square feet. Building a larger home with higher-end materials will increase construction costs.
In contrast, builder-grade materials or building a smaller home should lower the costs.
The Pre-Construction Cost to Build a Home
Some of the factors that impact pre-construction costs are the house plan, land condition, design, demolition costs, and building permits. Overall, 10%- 25% of construction costs may be spent on pre-construction.
Below are some of the pre-construction costs to consider before starting a home building project:
Local Fees and Building Permits
A building permit is required when building a new home or completing an addition to an existing one. In general, the cost of a building permit ranges from $1,200 to $2,000.
Construction Project Management Fees
A construction manager ensures the project is executed according to plan. On average, a construction manager charges 5% to 15% of the project's total cost.
Expect to pay between $3,000 - $25,000 for demolition Several factors affect demolition cost including the house size, location, and presence of asbestos or lead paint.
Building a dream home begins with the creation of architectural plans. Plans can cost around $5,000 depending on the complexity of the house and the qualifications and experience of the architect.
Impact Fee or Local Charges
Before beginning construction, impact fees, permits and local fees are imposed by the local government. The fees can cost around $3000 depending on the location of the property.
A variety of different factors, including the lot's size and location, can influence the cost of a lot. According to Home Advisor's data, the average cost of land is $76,500, but some undeveloped rural lots are priced as low as $3,000. Additionally, anticipate spending $1,500 - $3,000 on land preparation and site work before construction begins.
Water and Sewer Inspections
An inspection of the sewer line can cost between $227 - $797. Costs vary depending on location and the experience of the inspector. Before performing work, it is always recommended to get a price quote from multiple companies that may potentially perform the work.
General contractors that are hiring estimators can expect to pay the following in annual salary according to Zippia and ZipRecruiter:
Cost to Design a House
Before building a house, you need house plans. With that, a couple of professionals can help.
An architect is a licensed professional who designs buildings and oversees their construction, taking into account factors such as aesthetics, functionality, safety, and sustainability. Hiring one can cost up to 10% of the project’s cost.
Drafters and Building Designers
Drafters create technical drawings and plans based on the architect's design. Building designers work on the initial design and planning of buildings. They’re both qualified to design a house, but they are often better suited for smaller projects. Hiring a draftsperson can cost as much as 3%.
Land Development Costs Breakdown
Here are some of the costs associated with developing the land you’ve bought for construction. This includes site preparation, grading, utility expenses, and more.
The process of removing trees, brush, and other vegetation from a piece of land before construction. It prepares the land for construction and ensures a clear area for building.
The process of measuring and mapping the physical features of a piece of land, such as boundaries, topography, and existing structures. It ensures that the building is located in the correct position on the lot and complies with local zoning and building regulations.
The process of removing earth and rock from a site to create a level base for construction. It prepares the site for construction and ensures a level foundation for the building.
The process of moving and shaping soil and other materials to create a desired landform or contour. It helps to create a level base for the building, as well as grading and shaping the land around the building for drainage and landscaping purposes.
Land grading is the process of reshaping the ground on a construction site to achieve a desired slope or contour. This typically involves removing soil or adding fill to create a level surface for the building, as well as grading and shaping the land around the building for drainage and landscaping purposes.
The process of reinforcing the soil or other materials on a site to prevent erosion or settling. It helps to ensure the stability and safety of the building and the surrounding land.
The practice of preventing soil erosion and sedimentation on a construction site. It helps to protect the environment, maintain soil stability, and prevent damage to nearby waterways and ecosystems.
The process of testing a building for the presence of asbestos, a hazardous material commonly used in building insulation and other applications. It ensures the safety of workers and occupants, and helps to prevent the spread of asbestos-related diseases.
Site Development Plan
A comprehensive plan that outlines the proposed use of a piece of land, including building locations, access roads, parking areas, landscaping, and other features. It helps to ensure that the building is constructed in compliance with local zoning and building regulations, and provides a framework for the development of the surrounding land.
Percolation (Perc Test)
The process of testing the soil on a site to determine its ability to absorb and filter water. It helps to ensure that the site is suitable for a septic system or other on-site wastewater treatment system.
On-Site Water Well and Septic Systems Installation
The process of installing a water well and septic system on a site that is not connected to municipal water and sewer systems. It provides a source of water and wastewater treatment for the building, and ensures that the building can be occupied and used as intended.
Gas Line Installation
The process of installing a gas line to provide fuel for heating and other uses in a building. It provides a source of fuel for the building, and ensures that the building can be occupied and used as intended.
The process of installing a water line to provide a source of water for a building. It provides a source of water for the building, and ensures that the building can be occupied and used as intended.
Electrical Line Installation
The process of installing electrical lines and connections to provide a safe source of power for a house.
Here’s the cost breakdown for land development.
Labor Cost To Build a New House
Around 40% of the total cost to build a house is attributed to labor. These labor costs are often influenced by a general contractor's buying power, the size and complexity of the house, and the property’s location.
Material Cost to Build a New Home
Cost To Build A House - Home Exterior Materials
The exterior finishes contribute to the overall look and feel of the home just as much as the exterior design. Finishes include exterior walls, roofing, windows, and doors.
Exterior finishing costs between $40,000 to $60,000. However, the number of openings and types of exterior finishes will affect the final price.
For more in-depth detail on the cost of exterior materials, refer to the table below:
Cost To Build A House - Home Interior Materials
Interior finishes often cost between $50,000 - $175,000. Interior elements include HVAC systems, flooring, insulation, plumbing, paint, and fixtures.
For more detail on the costs of interior materials, refer to the table below:
How to Reduce the Cost to Build a House
Reduce Pre-Construction costs
For general contractors trying to reduce costs, the pre-construction process is one of the highest sources of overhead. Manual and digital takeoffs are both costly and time-consuming and can cost around $66,816 in annual overhead.
With Togal.AI, automate up to 80% of the takeoff process with machine learning models. Estimates can be finished faster while reducing extra overhead.
Ensure Accuracy of the Estimate
Inaccurate estimates can lead to cost overruns. For a contractor, this can result in disputes and loss of profit. For homeowners, cost overruns can cause the project to go over budget and derail finances.
Preventing cost-overruns can be done by eliminating manual, error-prone calculations. An AI estimating software such as Togal.AI can interpret plans with 97% accuracy in less than a minute.
Consider Alternative Materials
The materials used can heavily impact the cost to build a house. With a small budget, consider using cheaper, more available, alternate building materials that are similar in quality. Recycled but otherwise structurally robust materials such as steel can be a cost-effective solution.
Work with Qualified Specialists
When hiring estimators, architects, or interior designers, look for experienced and certified specialists. Having excellent qualifications and experience will provide better quality.
Maintain the Project Timeline
Delays in home construction completion can lead to increased total project costs. To ensure the timeline is maintained, follow below:
Outline clear timeline expectations in the contracts. Document and communicate with everyone involved.
Document and communicate to keep everyone informed.
Review the schedule on a regular basis. It is important to be aware of potential delays and to strategize to mitigate risks.
Building a house offers many benefits. It's often cheaper and easier to customize an existing home compared to buying a newly built home. Before building, it’s important to first determine the cost and budget. That’s why some of the most common questions general contractors hear from homeowners are “How much do I need to build a house, and how do I reduce it?”
How much to build a house often depends on several factors like location, materials used, and cost of land. To reduce the cost to build a house, it’s important to plan meticulously and work with professionals. Leverage the power of Togal.AI’s efficiency when conducting cost estimation. Refer to updated prices based on factors like location, building size, labor costs, and materials.