How much does material cost to build a house

14 Min Read | Sep 20, 2022

Maybe you’ve always dreamed of building your own home. After all, home is where most of life’s biggest memories take place—who wouldn’t want to live in a brand-new house built just for them? The only problem is new things always come with a higher price tag. So how much does it cost to build a house these days? And will you be able to afford it?

What’s the Average Cost to Build a House?

The average cost to build a house is just a little over $485,000.1That estimate is based on a nearly 2,600 square-foot, single-family house. Now before you rush off to the bank, hang on!

The cost to build a house is based on changing factors like size, location, labor, materials and current real estate trends, which make it impossible to nail down a perfectly accurate, one-size-fits-all answer. So let’s take a closer look at what costs might look like based on factors like size and the state where you live.

Cost to Build a House by Size

The average cost to build a house by size is about $100–200 per square foot.2 Let’s see how that plays out for different home sizes:

You can see now why tiny homes are so popular, right? Before you jump on that bandwagon, think about how much space you need. You don’t want to cram your family into a house that’s waytoo small, but you don’t want to waste money on space you don’t need, either. (Unless you’ve worked hard to build your wealth and have plenty of cash saved up, in which case you can build any size house you want!)

Cost to Build a House by State

How much it costs to build a house also depends on where you build it. The higher cost of living in some states means you’ll pay more for land, building materials and construction services.

Find expert agents to help you buy your home.

Here’s a look at the average cost to build a 2,000-square-foot home in each state:

Now, there are many factors that go into the cost to build a house that are out of your control. And if you can’t (or don’t want to) move, the state you live in might be one of them. But don’t worry. We’ll show you one big way you can control some of the costs. So put on your hard hat and read on.

How to Build Your Own House

Okay, you want to build a house. Awesome. But the three little pigs did too. And we all know what happened to them. Two of the pigs had the dumb idea to build their houses out of straw and sticks. The other pig built a well-thought-out house of brick. When the big, bad wolf came along, the only house left standing was the one that was carefully built—brick by brick.

And that’s where we get our first lesson in how to build a house.

Make a Budget

Just like the three little pigs, you need a well-built home. And to make that happen, you need to build a budget—brick by brick.

Now we know budgets aren’t as fun as dreaming about your future house, but hear us out. A budget tells you how to build the house you want and protect your future. Without it, you risk spending too much and ending up like the builder in Luke 14:28-30. That guy didn’t count the cost of building and couldn’t finish his house. Yikes!

If you do try to build without a budget, you may have to cut corners at the end of the project or else take on even more debt to get it done. Talk about turning your dream home into a nightmare!

So your very first step is to decide how much you can afford to spend. (Hint: Your monthly house payment should be no more than 25% of your take-home pay.)

Find Land

This is a no-brainer. If you’re going to build a house, you need somewhere to put it! If you haven’t already found vacant land for sale or a neighborhood development where new houses are being built, find an experienced real estate agent. These experts, also called buyer’s agents, will help you hunt down and negotiate a deal on the perfect location to build your house. A good agent will know where to find up-and-coming areas so you can plant roots in a spot that’ll make your home more valuable over time, which is what you want!

Make the Plans

Now, once you’ve found that lovely plot of land or neighborhood property, get ready to make a lot of decisions! In each phase of construction you’ll make dozens of choices that affect the cost to build your house. You’ll need to start off with a well-planned, detailed vision of the home you want. That includes things like the number of rooms and finishes.

If you don’t decide on what you want now, you’ll end up making a ton of change orders. Change orders are work items that need to be added or removed from the original set of plans. They’ll send your budget through the roof and drag out how long it takes to build your house. (Don’t do this, people!)

Build the House

To help you prepare for each stage of the home-building process, we’ve broken down the typical costs to build a home into separate stages, from buying land all the way to landscaping—and even the final sales price.

While we can’t read your mind and predict how much it’ll cost to build the house you want, we can show you what costs to expect and when. Let’s dive into our home building cost estimator!

Home Building Cost Estimator

Finished Lot: $89,000

A finished lot includes both the land your house will sit on and all the utility systems you need, like water and electric lines and a sewage system. You can ask your real estate agent to help you find a finished lot if you want a place that’s ready to build on right away.

If you buy an undeveloped property, you’ll likely pay less for the land. That can be a huge money-saver up front, but you’ll feel the hit to your wallet when you pay to install all those utilities later. Those installations may also delay the start to actually building your house. So if you’re looking at unfinished lots, just make sure you’re prepared for a longer timeline and more potential hiccups.

Plans, Permits and Fees: $18,000

Building plans spell out your new home’s details—from the size and layout to the electrical wiring and design. An architect or draftsperson can create your building plans.

An architect can be really helpful for custom projects or if you want a totally unique look. But they tend to cost more—around $15,000 on average.4 Ouch! Your builder can draw up your house plans or hire a draftsperson for a lot less: They’ll cost you about $4,000.5

Pro tip: If you do hire an architect, have them work with your builder to develop the plan. Don’t let an architect who doesn’t know anything about building win you over with pretty pictures! Your builder has experience actually working with the materials you want, so they can make sure your architect isn’t drawing something that’s ridiculous or super expensive to build.

After you draw up your plans, you’ll need to pay for the inspections and permits that you’re legally required to have before your builder can start the actual construction.

The steepest cost here includes the $5,000 of fees (give or take) to obtain a building permit. Next in line are the fees for water and sewer inspections, which will, ahem . . . flush away about $4,000 of your budget.6

Remember, Uncle Sam wants his share too. The government will also charge you another nearly $4,000 for something called an impact fee, which pays for public services like roads, parks and water treatment in your new community.7 Lastly, leave room for a $1,000 buffer in case any of these items cost more than you expect.

Site Work and Foundation: $35,000

This is where the real fun begins! Site work is when you’ll break ground on your new home. Breaking ground, or excavation, requires heavy-duty equipment and expert operators to make sure the land is clear and level. So know that if a bunch of large rocks are hiding beneath your plot of land, excavation costs could shoot up.

Site work also includes preparing utilities that will eventually connect to your house, like water and electric lines. If you bought undeveloped land, that could lead to some major expenses—like putting in a septic system.

After excavation and utilities, your builder will lay the foundation for your home, which usually includes lumber and concrete. Homes with basements typically cost more than ones without because there are more square feet to cover. Your house could also need retaining walls installed to hold back surrounding soil from crumbling and falling onto your foundation.

Site work sets up the success of every other building phase. Casually throwing together a "straw-and-stick" budget here could crush you with unexpected costs! So plan on these expenses, folks! Laying a foundation costs about $34,000.8 And of course, prepare for an extra $1,000 just in case.

Home Framing: $52,000

Brace yourself. No, literally! The frame of your house will be one of the highest costs in your house-building budget—beaten only by interior costs and the sales price. This is when your house will start to take shape. Building the skeleton of a house (including the roof) takes a ton of lumber, which can drive up the cost to $41,000 or more.9

If trusses—the fancy name for a series of triangular structures designed to support the roof—aren’t included in the cost to build the frame, they might add another $6,000 to the budget.10

Once the "bones" are in place, you’ll need to pay around $3,000 for sheathing—a flat layer of boards that cover and protect the frame and trusses.11 Think of it as the skin that covers the bones of your house. If you add metal or steel materials, your framing expenses will bump up the budget another $2,000.12

Exterior Finishes: $42,000

The exterior wall is an expensive line item ($19,000) because it covers the perimeter of your house, and that requires a lot of material.13 It also supports the roof and structure of the house and prevents outside weather from getting inside, ensuring that when the weather outside is frightful, your home will be delightful.

Exterior finishes also include installing any openings in your house like doorways, windows and the garage. You can count on those costs being somewhere in the neighborhood of $12,000.14 Finishes on the roof will tack on another $10,000.15 This is another category where you’ll want to have at least a $1,000 cushion.

Major Systems Installation: $44,000

Installing major systems in your house will cost about as much as the exterior finishes. Major systems include plumbing ($15,000), HVAC ($14,000) and electricity ($14,000).16 Sure, you could trim the budget here, but we’re assuming you’d like to avoid outdoor plumbing.

Let us give you a heads up: These costs don’t refer to the actual fixtures (sinks, toilets and lights) that hook into plumbing and electrical systems. Those fixtures are grouped into the cost for interior finishes. On top of these major system costs, keep an extra $1,000 in your reserves.

Interior Finishes: $75,000

Get out your wallet. Besides the sales price, the interior is usually the most expensive part of the cost to build a house. This makes sense, of course, since you’ll spend most of your time and make most of your memories inside. Do you like granite countertops? Hardwood floors? Stainless steel? Whether you’re simple or bougie in taste, the finishes add up! There are a lot of expenses to cover, so let’s quickly break it down!

Final Steps and Miscellaneous: $31,000

You’re almost there! The final steps to build a house bring us to outside items like landscaping and the driveway ($7,000 each). They also include surrounding structures like a porch, patio or deck (more than $3,000). And the final cleanup can cost around $3,000.18

Of course, issues and additional costs can come up while your builder is putting on those finishing touches—or at any time during the project. Above and beyond the "buffer" amounts built into each stage, the majority of home-building projects require $11,000 for a separate, miscellaneous category that goes toward the overall construction cost.19 So plan for that extra $11,000.

Other Expenses: $99,000

As the final and heaviest “brick” of your house-building budget, you’ll need to plan for the other expenses that go into the final sales price. Had you decided to buy an existing home (instead of building one), your sales price would be in the hands of the seller, their real estate agent and an appraiser. But when you build, the sales price is determined by your builder and a bunch of vendors.

After the finished lot and construction costs are handled, the price to purchase and own your new house includes several line items—the most expensive being the profit your builder and vendors make on the project, which can come in at about $44,000.20

Other budget items include overhead and general expenses like construction management fees and the building crew’s wages ($24,000), sales commission ($18,000), financing ($8,000), and marketing ($5,000).21 That’s right. You probably never would have met the crew that builds your house if it wasn’t for their marketing and sales efforts, which are costs that get plopped into your lap.

Whew! That’s a lot of information! Let’s see what it boils down to.

Can You Afford the Cost of Building a House?

Remember, these are the national average prices. The actual cost to build your house is up to you. You have the power to make decisions on paper, on purpose before the shovel hits the dirt. You get to decide how to build a house that fits your budget.

If your budget allows you to pay cash to build a house, congratulations! You’re a rock star. If not, don’t give up hope! You can still make that budget, research ways to control costs, and start saving up for your dream house. Or you may decide that you’d rather find an existing home that actually does fit your budget. (They’re out there!)

Whether you decide to build or buy a house, make sure you know how much house you can afford. Don’t build or buy a house with any type of mortgage besides a 15-year fixed-rate conventional mortgage. And your payments need to be no more than 25% of your monthly take-home pay—otherwise, you’d be house poor and risk sacrificing other financial goals!

That 25% limit includes principal, interest, property taxes, homeowners insurance, private mortgage insurance (PMI)—and don’t forget homeowners association (HOA) fees. To feel confident you’re getting a mortgage you can actually pay off fast, talk to our friends at Churchill Mortgage.

Ready to Build a House?

Building a house is a huge undertaking! Start this project with an experienced expert who knows the process. Don’t know where to find one? Our free Endorsed Local Providers (ELP) program can help. The real estate agents in our ELP program have earned the right to be called RamseyTrusted because they’re constantly meeting our high standards for excellence. Connect with a RamseyTrusted real estate agent in your area who knows how to walk you through a house-building budget—brick by brick.

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.