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Should I Buy or Build a House? The Pros and Cons

Everyone loves getting something brand-new—especially if it’s custom-made. The problem is, custom-made things tend to cost more and take longer to get—especially when it comes to houses.

That’s important to consider when you’re deciding whether you should buy or build a house. To help you make the best choice, we broke down the costs and pros and cons of building a house.

Let’s check them out!

Is It Cheaper to Buy or Build a House?

In 2019, the average cost to build a house was over $485,000.1 Meanwhile, the average cost to buy an existing single-family home was just over $310,000.2 So choosing to buy a pre-existing house instead of building a new one would have saved you around $177,000!

Now, prices have gone up for both existing homes and new builds since 2019. But building a house is still more expensive than buying one.

Existing home prices are 15% higher in 2022 than last year.3 But building material costs have gone up 19%.4 And thanks to inflation, builders are also paying more for other things they need to build houses, like workers, fuel and marketing. All that to say, building a house is not cheaper than buying!

Building a House vs. Buying a House

Now, you’re probably wondering, Is it better to build or buy a house? Maybe the price tag is worth it . . . And you may be right! Or building a house may be a terrible idea for you. Whether building or buying a house is better for you really depends on your situation.

Find expert agents to help you buy your home.

Of course, it helps to weigh the pros and cons of building a house so you can decide if you want to go to all that effort or if you’d rather buy an existing home.

Pros of Building a House

To start off, let’s look at why building a house can be beneficial:

  • Customization – Building a house from the ground up lets you personalize it to suit your lifestyle and tastes—from the layout, cabinets and flooring to the sinks, lighting, and doorknobs! Even tract homes built within subdivisions allow for some customization in color choices, flooring and certain finishes.
  • Low to no competition ­– The 2022 real estate market is hot. In March, existing homes spent just 17 days on the market!5 With homes selling so quickly, you really have to compete to find the best existing home at the lowest price. But if you own land to build your home on, you obviously have zero competition!
  • Little maintenance – Since new homes must meet current building codes and have up-to-date technology, you probably won’t have to worry about big repairs or maintenance issues for the first few years—no leaky roofs or failing HVAC systems for you! Plus, you don’t have to worry about finding the last owner’s bad do-it-yourself repairs, because there wasn’t anyone before you.
  • Low energy costs – New homes often feature the latest energy-efficient systems and materials, which usually lead to lower energy bills—woo-hoo!
  • Newness – You get to start fresh as the first owner of your home and enjoy brand-spanking-new everything. That’s the dream, baby!

Cons of Building a House

Okay, we already know one disadvantage of building a house is that it costs more than buying an existing home. That isn’t so bad if you’re able to budget for it, but it can be a real showstopper for some people. Let’s consider the other cons of building a house too:

  • Long wait time – It takes an average of seven months to construct a new house—not counting the planning and approval stages.6 But closing on an existing house takes just 48 days.7 And keep in mind, you’ll have to pay to live someplace until your new home is ready—so if you’re building, you could get stuck paying your current rent or mortgage plus the construction costs for several months.
  • Hard to negotiate price – Most buyers go into a home purchase hoping to lower the price. While that’s super common in the resale market, usually there isn’t a lot of leeway on closing costs or purchase price with a newly built home—unless your real estate agent gets creative at the negotiating table. Still, you’ll probably get more bang for your buck with an existing home.
  • Noise and debris – If you build a house where other new homes are being built, you might have to deal with construction noise, traffic and glops of mud along your commute. Worse yet, you could end up with a roofing nail or a screw in your tire. Sure, things will eventually calm down as other homes get completed, but it’s something to think about if your tolerance for noise and messiness is on the low end.  
  • Stress – When you build a house, you’ll have to purchase land, decide on a home design, and pick out flooring, fixtures, cabinets, countertops, interior trim, exterior trim, and on and on. You’ll have to do all of this and stay within your budget. Managing all the details that go into building a house takes time and effort. Don’t underestimate the stamina you’ll need to make sure it’s all done the right way.
  • Hidden costs – Those dollar signs you see on things like countertops, fixtures and appliances are just the tip of the price-berg. Upgrades and unforeseen problems can quickly drive up the price of your new home, and those costs may or may not be rolled into your contract price. Play it safe by budgeting to pay cash for those unexpected expenses. And don’t forget about post-move costs like landscaping and blinds—they’ll sneak up on you too.

Hopefully now you’re getting a better idea of whether you want to buy or build a house. Next up, we’ll talk about how to pay for it—no matter which way you decide to go! 

Tips to Pay for a Newly Built Home or an Existing Home

Whether you build or buy, make sure you stick to a house you can actually afford. That means getting a house with a monthly payment that’s no more than 25% of your take-home pay—otherwise, you’d be house poor! 

That 25% limit includes principal, interest, property taxes, homeowners insurance and, if your down payment is lower than 20%, private mortgage insurance (PMI). And don’t forget to budget for homeowners association (HOA) fees if your new home is in an HOA.

Want to see what home prices fit your budget? Try our free mortgage calculator. And for a mortgage you can pay off fast, talk to our RamseyTrusted friends at Churchill Mortgage about getting a 15-year fixed-rate conventional loan. (We only recommend these loans because any other type of mortgage will drown you in interest and fees and keep you in debt for decades.)

Should I Buy or Build a House?

Maybe you’re still on the fence about whether to buy or build a house. We get it—that’s a big decision, and you want to get it right!

If you’re a first-time home buyer, it’s usually better to go the cheaper route and buy an existing house. You’ll save money and get some homeownership experience before you take on the challenge of building a new house. It’ll also give you time to build equity (your home’s value minus how much you owe on it). When you sell your first home, you can use that equity to help pay to build your next home.

If you’re an experienced home buyer, then building a house could be a fun adventure for you! That is, as long as you can stay within that 25% limit and still handle all the other homeownership costs like maintenance and utilities.

Whether you buy or build, owning a house you can afford is an incredible way to build wealth!

Buy or Build With Confidence

The best way to choose whether you should buy or build a house is to talk it over with an experienced real estate agent. They’ll know where to find the best deals in long-standing neighborhoods or in up-and-coming communities. And they’ll help you decide if building a house or buying an existing home will suit your needs best.

If you want an agent who will do whatever it takes to help you find the perfect home or lot to build on, try our Endorsed Local Providers (ELP) program. These RamseyTrusted agents are top performers who share our mission to help you crush your financial goals.

Find the best real estate agents near you!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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