What It Costs to Build a Home

According to the National Association of Home Builders (NAHB), the average square footage of a home in the United States (2021 data) is 2,594. The average cost to build a home this size is $296,652.

The Material Costs of Building

That average may look appealing, but there are a lot of factors that can quickly change it. The NAHB estimates that while the average cost of a new build is just under $300,000, the high-end estimate to build is closer to $416,000. 

What are these prices based on? Let’s get into the details below.

Where Building Expenses Come From

Unless you’re doing the work yourself, your building expenses are based on the cost of materials, the cost of labor, the cost of the land, and the potential interest on any loans you use to pay for the project. 

Building Permits

In order to even have the green light to start with your custom build, you have to schedule and pay for building permits and fees. These vary depending on region, but it’s good to budget for 6% of the cost of your construction project.


Whether you’re digging out a basement or laying a foundation on already level ground, there’s going to be excavation costs. These are estimated to take up 11% of your overall construction budget.


In 2021, framing is a tough cost to estimate! Lumber material pricing skyrocketed in 2020 and continues to stay high well into 2021. Generally, framing used to account for 17% of your budget when building a new home.

Exterior Finishes

These are the roofing materials, siding elements, windows, and doors of your house. Depending on the quality you choose, expect to spend 14% of your budget here.

House Systems

If your home includes heating and cooling, running water, and electricity (we sure hope it does!) this is another 14% of your budget. Extras such as central vacuuming or radiant flooring wll definitely cost extra.

Interior Finishes

Not to be confused with just draw pulls and light fixtures, interior finishes include a whole lot more. From insulation and drywall to painting and countertops, you’ll have a lot of decisions to make here that affect the budget. On average, you should expect to dedicate 25% of your budget to cabinets, appliances, flooring, and more.

Landscaping and Hardscaping

If you want grass, vegetation, a driveway, or a deck, these options can take up 6% of your budget, depending on lot size. Look at ways you can use local materials and plants to help reduce costs and make your home’s outdoor living spaces easy to care for.

Inspections Along the Way

Remember how you got initial permits for building? Well, throughout the whole process you’ll also have periodic inspections. This is to ensure all systems are up to code according to where you live. 

Factors that Affect Cost

Why are some places cheaper to build in than others? It comes down to a lot of factors, such as availability of supplies, the expertise of your contractor, and how long it takes to complete the build.


Where in the U.S. you live can affect the cost of living, including building a home. Additionally, the landscape where you’re breaking ground has an impact as well Building below, on, or above grade determines how much prep work your site needs. You may need to factor in the cost of retaining walls, additional excavation, or backfilling some space for your new build.

Here’s how HomeGuide breaks down the average cost per square foot to build new as of 2017:

  • South – $100 per square foot
  • Midwest – $109 per square foot
  • West – $131 per square foot
  • Northeast – $155 per

Raw Materials

You probably can’t list all the materials you need for your build on two hands; all those supplies add up! Raw materials is a term that includes everything from the cement poured for your foundation to the doorbell and everything in between. Current events can affect the cost of raw materials, as sourcing them and transporting them relies on the availability of the materials themselves, and the labor to get them from point A to point B. If you can source some materials yourself, you might save by finding up/recycled products, local products, or salvaged materials.


Have you heard the term “Builder Grade” before? This is referring to the finishes that are included in what your contractor and builder quote you. If you’re interested in further customizing your home (deviating from the floorplan you may have purchased), it’ll cost you. Everything from the number of windows, types of finishes (brushed nickel vs brass), types of hardware, and light fixtures may require an upgrade. You can save money by doing these upgrades yourself after the build is completed.

General Contractor 

If you hire a general contractor who can do it all, you can save yourself money by not having to hire a number of sub-contractors. Do your research and find a contractor that can oversee as much of the work as possible while still being reliable and adhering to a reasonable timeline. A contractor is never the place to try saving money, as it usually results in poorly done work or, even worse, abandonment of the project.

New Site vs Demolition and Rebuild 

If you’re demolishing an existing structure to build a new one, it can cost anywhere between $5 and $10 per square foot to demo. This doesn’t account for additional costs to remove the debris and prepare the lot for the new construction. However, rebuilding on land you already own is a great way to save on your construction costs.

Speaking of Demolitions and Rebuilds…

Maybe you already have your dream home or dream location, but you just want to improve upon it a little bit. What are the costs you’re looking at to remodel or restore an existing home?

Much like building a new home, the costs to remodel range widely. Also, some investments are worth more than others, so if you plan to sell your home in the future, there are better rooms than others to consider remodeling.

No doubt about it though, a targeted renovation is usually much less expensive than a new build. On average, people across the U.S. spend about $13,000 per renovation project. The average costs for a total house reno can range from $15,000 to $200,000. 

Rocket Mortgage has a handy breakdown of how much you should budget for a renovation, based on the value of your home. Let’s start with the big-ticket rooms that usually give you the best return on your investment if you ever sell.


Expect to spend 16% of what your home is worth to remodel your kitchen. A kitchen remodel averages an estimated 72% return on your investigation (ROI).


Plan to spend 7% of your home’s value on an ensuite bathroom reno and see an 86% ROI. For a secondary bathroom, you should budget to spend 5% of what your home is worth to tackle the task.

Garage Door

Up curb appeal by replacing your garage door for about 93% ROI. Costs vary, but on average a new door is just under $4,000 (door, motor, hardware, resizing the opening, and removing old door materials).


Updating your siding may cost between 3% – 5% of your home’s current value. Depending on the product you use (vinyl, stone, etc…) you could expect a 69-92% ROI. Always be sure you’re using materials and a style that complements your existing structure so as not to compromise the overall look your home already has.

Of course, you and a trusted realtor can analyze the current market to see what the trends are that affect home value. If bonus rooms are a big deal, or impressive landscaping is drawing in buyers, you may find it best to invest your money in those areas to increase your home value.


Before you get carried away demolishing your house and renovating it room by room, are there elements you can restore to increase the value and aesthetic of your home? With the help of restoration experts, you can determine whether an old stone or brick fireplace is worth saving, or if it’s more cost-effective to rent a dumpster for an old structure on your property compared to giving it a new life. Weigh the pros and cons of tearing down versus restoring, factoring in not just the cost, but the way it may or may not enhance your life.

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