Have you heard people talking about how now’s a great time to buy a home? The decision to buy and sell is often informed by the housing market, namely interest rates. What people often overlook is the option to build your own house.
With rates as low as they’ve been, it can be a great time to obtain a home loan. What this does not include is the cost of homes or construction. When making the decision between buying or building, there is a lot to consider.
Just because mortgage interest rates are low does not mean homes are more affordable. The Ascent has a quarterly cost breakdown of median home price from 1970 to Q2 2020. The median home cost as of June 2020 is $295,300. This is a difficult metric to follow because these prices will differ dramatically by state, but it is a decent starting point when making the decision to buy or build.
According to Home Advisor, it will cost between $166,237 and $483,273 to build a home depending on your zip code. HA estimates that it can cost an average of $100 to $200 per square foot and can cost as much as $200 to $500 per square foot for luxury homes.
The model the architect shows you will typically have all the fancy upgrades on finishes, flooring, countertops, bathrooms, and kitchens. For those features, it’s likely that your build will cost extra.
Homes on the Market
As of June 2020, there are about 18% fewer homes available for purchase than in 2019. This is a historic low for the housing industry. That means, as much as it may be more affordable to buy, you will have significantly less options to choose from, especially if you’re looking for a specific town/school district. 1
The National Association of Home Builders says that there is an industry-wide labor shortage of anywhere from 250,000 to 400,000 jobs. Demand for new home construction is holding high and steady, putting pressure on prices as supply lags behind. Given that labor is a huge chunk of the cost of a new home build, this is presenting a cost issue for borrowers looking to save big.
When it comes to building or buying, the answer will depend on a ton of factors, both in the market and in your personal finances. It will take some time to do the appropriate research to weigh your options. Just make sure you’re considering all your long term and short-term goals before proceeding.
If a home purchase is in the cards for you, call or click to apply now and get started.