Is it cheaper to build a house or buy one?

Aaron Jones test-Category April 02, 2025

The very common question we have in mind if we have the budget is to either build or buy a house, right? And which of the two is cheaper?

However, there are some other things that you may need to consider.

In this blog, we will talk about how and why buying is cheaper than building the ideal house for you. Our simple analysis, will show you the financial differences between buying and building a home to help you make an informed decision.

Statistics

Statistically, there has been a housing shortage for years already, and this can be attributed to increasing raw material costs, which is adding discouragement to builders, which in turn causes shortages in the construction of entry-level homes.

Freddie Mac on is take on the housing supply: “The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”

And

According to statista.com, the data on new house prices has steadily increased since 1965.

a bar graph of house prices in the USA

Source: statista

Comparative Analysis

When comparing the two options:

Existing Home: The average purchase price is around $402,000. And this is according to the National Association of Realtors as of January 2025.
New Construction: As of January 2025, the average price of a single-family house was $510,000, according to the New Residential Sales Press Release of the U.S. Census Bureau.

According to the latest data above, it is conclusive that buying a house instead of building it is much more preferable than building one.

There are other factors, such as the emotional side of us human beings, that must also be taken into account.

When buying a house, you should also consider factors such as the time to move in, the design of the house, the amenities, the resale value, and the location.

Pros and Cons (Buying)

Pros:

Move in right away - you can move in right away if transactions go smoothly.
Resale Value - depends on the location
Location - the value will depend on where the house is located. The good thing is when buying, you can choose where instead of what's only available land area left.
Tax Benefits - (capital gains exclusion, property tax deduction, and etc.)
Sense of Accomplishment - gives a sense of accomplishment for someone who worked hard to achieve finally buying a home.

Cons

Bidding wars - this will drive the price higher
Maintenance and Repair Costs - you as an owner is solely responsible to the maintenance of your house and this will likely be done annually.

Pros and Cons (Building)

Pros:

Design - you have the freedom to customize it the way you want it.
No repairs - since everything is new, it will take time to have maintenances and repairs. Maybe in 5 years or so depending on the strength and quality of materials.
Latest technologies - you can also design your house depending on what latest technologies you add to your home.
Warranties - new homes are protected unexpected issues giving them peace of mind

Cons:

Longer time to wait - it will take time to complete the construction of the new home so waiting will be a requirement before you can move in.
Stress factors - although, it is not everytime that there will be construction issues, whether major or minimal, but this will happen most likely. One other thing to be taken into consideration is also coordinating with builders, designers, and contractors.
Financing - if you do not have the full budget on hand, then applying for financing will also cause stress and will most likely add up to the waiting time.

Based on the financial data and additional factors, buying a house often proves to be the more affordable and time-efficient option for most buyers.

Questions to Ask Yourself

Before proceeding to decide, you must ask yourself these basic questions to narrow down what suits you better between the two choices.

What is my budget?
How soon do I need to move in?
Am I willing to oversee a construction project?
What are the interest rates for mortgages vs. construction loans?
Do I value customization over convenience?

Mortgage Loans for Buying vs. Construction Loans for Building

Financing options:

Mortgage	Construction Loan
15 year fixed rate mortgage loan	Construction only loans
30 year fixed rate mortgage loan	Construction to permanent loans
Variable rate mortgage loan

Differences:

Long term	Short term
Full amount is given when approved	Disbursement of funds is staggered depending on the progress
Only for existing homes	Only for new homes to be built
Generally lower than construction loans	Higher than traditional mortgage loans

Looking For The New Home

If you’re working within a tight budget, buying a smaller pre-existing home may provide the best financial advantage. On the other hand, if customization is your priority, building a house may be worth the additional costs.

Again, there are factors you may need to consider: if you prefer moving in in a short amount of time, or would you rather wait since you are not in a rush, or if you’d rather have the freedom to choose the design, or if it’s okay for you to live in a home with previous ownership.

Tip: Look for a good agent to help you choose your next home. They will make sure all you need to worry about is choosing the home you prefer, and they will take care of other important things for you.