Shouldn’t it cost less? Is it to do with construction costs being high for unrelated reasons?
In: Economics
its not the house that is expensive because of limited supply, it is the land it is built on.
Although you are wrong. Its generally less expensive to build than buy, it just takes more work and you cant move in immediately (since its not built yet).
The cost of building depends on how well you can organize lots of different workers or by however much your general contractor(worker manager) charges. An already existing home doesn’t require any of that and is ready to move into right away. Most people will pay extra for that.
A house that’s already built has a known cost. A house that you build requires a ton of steps and takes a long time, from buying a piece of land through architecture and then construction, and many steps are subject to inflation, cost or time overruns, screwups and re-do fixes, supply chain fluctuations, etc., each of which can cause costs to increase, plus people tend to splurge more on customizations when the build versus just accepting an existing house even if it has some imperfections. Also that plot of land is probably in short supply same as houses are, if it’s in a desirable location.
I have my own land and want to build an in law suite in the yard. Nothing extravagant, just a basic 1 bed, 1 bath, living room and kitchen kind of place around $700 sq ft. From what I’ve heard this will easily cost over $200k. I no longer believe it’s cheaper to build.
To add to this. Buying a brand new build means it will be many years before you need to replace the roof, hvac, water heater, carpet, fixtures, etc. with older homes you may need to replace those things much earlier or immediately depending on the condition. With very old homes, there’s risk of damage, bad building materials that may need remediation like asbestos, outdated wiring, etc.
Anecdotal, but we built a house about 3 years ago, for a little over $300 thousand in a new neighborhood. We could get well over $400,000 almost immediately.
This is such a loaded question and not sure if it can be answered in an ELI5 manner, but a lot of it comes down to utilities being available in your area and whether they sell serve you or not and what the conditions of your specific parcel are.
When you’re doing a large project on an undeveloped parcel, there is a lot of earthwork and utility infrastructure that needs to be laid down and that cost is spread throughout all homes, so it may be cheaper to buy the home than it is to deal with a particularly disadvantageous lot or challenging circumstances around making sure the land is code compliant.
Assuming all things being equal on a nearly pad-ready lot with easy access to already existing utilities, then it is definitely cheaper for you to build your own home than it is buy one from a land developer; You are paying money to the developer to get his cut, but also paying money for a lot of people to figure out how to build a home that is compliant with all local regulations.
Zoning codes make it illegal to build cheap housing in most areas. Local governments only want Rich people moving in. And home owners only want the value of homes to go up.
I’m sure it depends on the area, but building your own house is almost always going to be less money than buying one. However, building a house is extremely difficult, not just for contracting the construction, but finding land and getting ready to be built on, the design, endless amount of decision making, the details that are all so important, and the permits, testing, and inspections. So in essence, it’s all the blood, sweat, tears you avoid when buying AND the developers have the above-described process nailed down.
Source: husband and I built our home in a major US city about 2 years ago and was worth 3+ times the amount we spent on it at completion (with no landscaping).
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