How Much Does It Cost To Build A House In 2021?

Key Takeaways:

Whether investor or prospective owner, there are countless reasons someone would choose to build their own home. More often than not, building a new house has become synonymous with the “American Dream” and represents the pinnacle of financial achievements. Subsequently, plenty of people view today’s distinct lack of inventory as the perfect excuse to build a home. On the other hand, someone may want to turn an empty plot of land into a cash-flowing real estate asset. While the reasons may differ, however, there’s one constant variable that never changes: Building a new home will cost a lot of money. As a result, home construction costs must be at the top of every builder’s mind.

New homes require a great deal of planning, resources, time, permits, capital, and expertise, which begs the question: How much does it cost to build a house? While existing homes are more of an “as-is” purchase, new builds come complete with an entirely different set of costs than their traditional counterparts. As a result, anyone looking to build a house needs to familiarize themselves with all of the costs they may incur upon taking on a respective project.

Average Cost Of Building A House

Home construction costs have taken some dramatic swings in recent history. If, for nothing else, the average cost of building a house is directly correlated to the current market value of the goods and services it will require to complete the project. In the wake of the pandemic, the costs of goods and services have fluctuated based on a very volatile marketplace.

The price of lumber, for example, has increased almost exponentially. According to the National Association of Homebuilders, “lumber prices have nearly tripled and oriented strand board (OSB) prices are up more than 250% since last spring.” Increases in lumber prices have drastically impacted the average cost of building a house, to the tune of an additional $24,000 per single-family home since the second quarter of last year.

In addition to the costs of goods and services, the average cost of building a house will also differentiate from region to region. Generally speaking, it’s more expensive to build homes in the West, followed in descending order by the Northeast, Midwest, and South.

When all is said and done, building a new home is associated with many different costs. However, when everything is accounted for, the average cost to build a home is somewhere in the neighborhood of $294,672. According to HomeAdvisor, the average homeowner spends “between $134,698 and $456,215 to build their new home. New home construction typically falls between $100 and $200 per square foot, but custom and luxury options can reach $500 or more per square foot. Labor makes up roughly 40% of the build cost, with permits, design fees, and materials making up the rest.”

Instead of looking at broad averages, let’s look at the individual variables that combine to make up the average cost of today’s houses.

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How much does it cost to build a house?

Purchasing Land

The first step in building a new home is acquiring the land on which it will be located. While it’s entirely possible to inherit land, the vast majority of people building new homes will most likely have to purchase the land they hope to develop. Provided the land is already ready for development, no further steps may need to be taken to make the land usable. However, most land will require some development. In addition to tree removal and leveling, proper permitting must be in place to move forward with any building. As with everything else on this list, the cost of purchasing land will depend on many different factors, but the National Association of Homebuilders suggests a 22,000 square foot lot (the average lot size) will run homeowners upwards of about $90,000.


The cost of labor needs no introduction for anyone who has ever taken their car to an auto shop. Nonetheless, labor is one of the home construction costs that will account for many expenses. Some estimates, in fact, place the cost of labor somewhere around 30% – 60% of the entire project. Of course, some contractors will warrant more pay than others, but it’s safe to assume labor will be one of the largest expenses on building a new home.


Home construction costs can’t ignore the specific area where the plot of land is located. The location on which the home is built will play a big role in the costs incurred. Not only do individual locations come complete with different taxes and costs, but supply and demand in a given region will impact how much the land and labor will cost.

Plans & Permits

Once homeowners have the land they want to build on and a reputable contractor, the next cost to account for is associated with both plans and permits. If for nothing else, no progress can be made without a proper foundation to build off of. At this phase of the building process, homeowners will collaborate with architects to draw up the plans for their dream home. It is fair to assume most homeowners don’t know how to build a house, so they will need to hire trained professionals. For many, this is where things start to get real, as homeowners can translate their vision onto blueprints. Following the initial design, permits will be needed for everything from the design of the future home to the land it sits on. In all, homeowners can expect somewhere in the neighborhood of $20,000 on designing the home and making sure everything is permitted accordingly.

Building A Foundation

Provided permits are granted and the plans are in order, the next large cost homeowners will incur is breaking ground on the project. Quite literally, builders will dig out the home’s foundation once permits give them the green light. Then, concrete is poured into the newly created hole based on the specs of the blueprints. Depending on the plans, the concrete will serve as the foundation for a slab, basement, or crawlspace. Of course, the type of foundation is entirely dependent on the type of home being built, but the three options will set homeowners back an average of $35,000.

Framing The House

Once the foundation is set, it’s time to frame the home. Contractors and subcontractors will frame everything from the floor to the roof with plywood and lumber. This is the first step where the home itself starts to take shape. Framing will clearly layout the floor plan and allow builders to get the structure in place before moving onto more finishing details. Since the price of framing is entirely dependent on lumber’s market price, the cost of this particular step can vary from year to year, but homeowners should expect to spend a little more than $50,000 (depending on the size of the home).

Walls, Roofs & Openings

With the frame in place, builders will then work on specific, individual aspects of the home. In particular, external components of the home will start to take priority. Walls, roofs, and openings will all receive the attention they need at this phase of the building process. In other words, builders will turn the frame into a more finished product. Siding will be added to the frame to turn the empty spaces into walls, doors, and windows will be added where necessary, and the roof will start to take shape. Once again, the specific cost of this step will vary dramatically from owner to owner but expect it to set owners back about $40,000.

Plumbing & Electrical

Now that the house is finally starting to look like a home, it’s time to add the plumbing and electrical components. This process was already accounted for when the foundation was laid, but this step will introduce everything from plumbing and water heaters to light switches and breaker boxes. It is worth pointing out that no fixtures will be added during this step, only the wiring, and plumbing. Fixtures will be added once the home resembles a more finished product. Nonetheless, plumbing and electrical work can cost homeowners upwards of $40,000 to $50,000.

Interior Elements

Plumbing and electrical are the last components installed before the finishing touches can be made. More specifically, however, now that everything is in place, contractors can finally start bringing everything together. First, the walls will be completed by adding insulation and drywall. Next, appliances and fixtures will be assigned to their corresponding locations, and walls will be painted. Simply put, this is the step that will bring the final product to life. Literally everything the owner wants out of the home will be added here, from cabinets to lights. Once everything needed to make the home “livable” is in place, doors will be installed as the final step. On average, adding individual interior elements will cost about $75,000, but this is perhaps the most varied cost of the whole process.

Final Additions

There is no universal definition to account for “final additions,” but they generally include projects which may be included at any point in the building process. For example, this cost will include things like a patio addition, a deck, or landscaping. Therefore, homeowners can think of this cost as the “anything else cost.” Since it may include nothing or a lot of additions, this cost will fluctuate wildly. However, averages suggest homeowners will spend about $20,000 on final additions.

Pool Construction Costs

Not surprisingly, there are some regions in which pools have become a bit of a commodity. Hot and dry areas, for example, may actually push most buyers to pay a premium for a home with a pool. And if that’s the case, you may want to consider adding pool construction costs to your budget.

According to HomeAdvisor, the average pool construction cost is $22,766. Of course, that’s just an average, and the cost of the pool will most likely be determined by the value of the home it’s being added to. That said, some high-end pools can set your home construction costs back upwards of $100,000, so be certain you know buyers in your area will be interested.

Garage Construction Costs

Garage construction costs, not unlike their pool counterparts, will vary. A low end garage, for example, may only set fix and flip investor back about $6,030, according to HomeAdvisor. However, a high-end garage can easily reach $56,000 or more. Fortunately, most homes will rest somewhere in the middle, as the national average garage construction cost is about $26,077.

how much to build a house

What Affects Home Construction Costs?

Uncovering the average cost of building a home will only do so much for aspiring homeowners. The average cost is better used as a starting point, not something to anchor future prices on. To answer the question “how much does it cost to build a home in 2021,” it’s more valuable for homeowners to determine what affects home construction costs. If for nothing else, the costs of goods and services are always in flux, ebbing and flowing with today’s most prominent indicators.

A lot goes into building a house, which leaves one important question: What affects home construction costs? The housing market plays such an important role in the economy that just about everything impacts housing costs. Costs can vary depending on everything, from which political party is holding office to forest fires reducing the world’s lumber supply. In the most recent turn of events, access to lumber was significantly restricted by COVID-19. As a result, the cost of lumber tripled, which meant builders had to charge more for their services.

Outside of lumber, secular real estate trends, local labor costs, and the quality of the materials being used are just a few factors impacting home construction costs.

When Should You Build A New House?

Not unlike the costs associated with building a new house, the reasons for doing so will vary greatly from person to person. Consequently, there’s no universal time by which a house needs to be built, nor is there anything that says you even need to build a home in the first place. Instead, anyone looking to build their own home must look at their own situation with an unbiased opinion. So, with that in mind, when should you build a new house?

Prospective homeowners should consider building a new house when:

  • Time is on their side: According to the 2019 Survey of Construction (SOC), “the average completion time of a single-family house is around 8.1 months, which usually includes a little over a month from authorization to start and another seven months to finish the construction.”

  • It’s financially viable: Anyone looking to build a home should only consider doing so when they have the funds to do so. That said, there are times when it may make more sense to build a new home than buy an existing one. The average cost to build a home is about $294,672. However, the median home value in the United States is approximately $281,370. Therefore, it’s entirely possible to build a new home for less than it would cost to buy an existing one.

  • They work well under stressful situations: Building a new home is a complicated process. New homeowners will need to take care of everything from permitting and acquisition to hiring and designing. To some, the idea of taking control over everything is a dream come true; to others, it’s a nightmare. Nonetheless, anyone looking to build a new home will have a lot of responsibility, and they will need to be able to make important decisions under a lot of pressure.

  • They want to customize their living arrangements: Not surprisingly, anyone who wants to customize their home (and the amenities within) should strongly consider building a new house. Existing homes do not offer the same level of personalization (without demolition costs) as new builds. In other words, building a new home will coincide with fewer compromises than buying an existing property.

How To Finance Building A House

Traditional buyers are awarded the luxury of using traditional financing means to fund the purchase of a home. However, it is worth noting that the same luxury isn’t extended to people who want to build a home; they won’t be able to secure a traditional mortgage. Instead, borrowers will need to turn towards an alternative source of funding: a home construction loan. As their names suggest, home construction loans can be used to fund the building of a new house.

Moving forward when the construction is done will depend on the underwriting of the original construction loan. If the loan is construction-only, the borrower will need to take out a traditional mortgage to pay off the construction loan. However, some construction loans can be converted into traditional mortgages once the construction is complete. People often prefer the latter, as the conversion helps avoid additional closing costs.


How much does it cost to build a house? The simplest answers will refer to national averages or even account for home construction costs in different regions of the country. However, there are far too many variables to account for to rely on national averages. Instead, it’s best to judge each scenario based on its own merits. Accounting for each of the variables listed above, in conjunction with personal interests and geographical location, aspiring builders should be able to pinpoint the average cost of building a house accurately. Next time you find yourself asking, “how much does it cost to build a house in 2021,” refer to this article and plug in the variables yourself.

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The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only.

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