Building a home is more expensive nationally compared to buying one, however building actually costs less in 18 states, according to a new report from StorageCafe.
StorageCafe’s latest report analyzed the differences in cost between building and buying to locate the best states for each option. Across the nation as a whole, the report found that building a home has a total cost of $421K, compared to buying a home’s cost of $415K.
The report found that Western and South-Atlantic states prove to be the best places to build instead of buy. In the Midwest, South and Northeast, meanwhile, lower house prices tend to make purchasing a home more attractive, though Florida and Massachusetts favor building.
Key highlights:
- Hawaii comes in as the top place for building vs. buying. The state has the highest single family home median listing price at just over $1.045M—almost twice the overall cost of building a house there, which is around $551K.
- California follows with the cost of constructing a home at around $495K, representing a saving of around $205K compared to the median listing price of $700K.
- Rocky Mountain states give savings of around $100K when building a home. Colorado, in third, can offer the biggest aggregate savings in this region when choosing to build a home, no less than $107K, assisted by a median land price of $43K per acre and 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.
- Fourth is Utah, with a $97K difference between building and buying. The median land price of around $234K per acre is the highest in the nation, resulting in a total cost for developing a median-sized lot (0.21 acres here) of $538K. However, that still looks good compared to a median house listing price of $635K.
- States around DC knock a fifth of the price of a new home when building it. Virginia, in fifth, 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.
- 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.
- Pennsylvania’s low median listing price of $344,995 puts it in the top spot for buying vs. building, as homebuildings’ median cost of $528K would be $183K more.
- Second is Ohio, whose median price of $272K is $178K less than the median homebuilding cost of $450K. Illinois, in third, boasts a similarly low median listing price of $295K, $166K below the median homebuilding cost of $461K.
- Fourth is Maine, with a median price of $380K, $164K below the median homebuilding cost of $544K. Lastly, in fifth falls Iowa with a median price of $299K, $161K below the median homebuilding cost of $460.
Major takeaway:
“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,” said Doug Ressler, Business Intelligence Manager at Yardi Matrix. “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 considerably during the pandemic, makes relocating easier for many workers.”
Ressler added, “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.”
For the full report, click here.
