Building a custom home can be one of the most exciting experiences of your lifetime. However, when considering a custom build, one of the first questions we get asked is: “How much does it cost to build a custom home?”
In this article, we want to look at the overall cost of building a custom home and then get into the more specific details. This way, you can be better prepared to make the right cost decisions for you.
Average Cost of Building a Custom Home
The cost of building custom can vary significantly depending on what you are looking for. From tiny homes and manufactured homes to million dollar mansions–there really is no set price on how much it costs to build a custom home.
However, there are general guidelines and averages.
According to the National Association of Home Builders, the average cost of building a home in the US in 2022 was $644,750, or $252 per square foot. This included the cost of land with an average build size of 2,561 square feet.
This includes all of the costs that go into building a custom home. Where most educational articles on building a custom home only discuss the cost to the builder, we find it more helpful to review all of the costs paid by you, the consumer–not just the cost to the builder.
With that, let’s examine the broad costs of building and then get into more detailed pricing.
What Factors Influence the Cost of Building a Custom Home?
As expected, there are a range of factors that influence how much it costs to build a custom home. These are the broad factors that will make the biggest difference in the overall custom build cost.
They can be broken down into these five categories:
- Location
- Lot size and characteristics
- Home size and layout
- Quality of finishes and upgrades
- Additional features added
Let’s examine these costs.
1. Location
Where you choose to build your custom home has a big impact on the overall price of your project. The state, city, and neighborhood where your lot is located all play a part in the total price of the land.
There is a wide variation between all of these factors. For example, an acre plot in rural California will cost significantly less than an acre in Beverly Hills.
The price of your lot will generally be more expensive in urban areas and the higher the demand for the location the higher the cost.
However, keep in mind that in remote areas, it may be more expensive to build the home itself if it requires more transportation or is difficult to access.
2. Lot Size and Characteristics
Besides the location, there are characteristics of the lot that will affect the cost of your custom home. Not only does the size of the lot matter but there are also other factors that make a difference.
Some of the characteristics that may alter the cost of your build are:
- Slope of the land
- Existing vegetation
- Soil consistency
- Proximity to bodies of water
- Access to utilities
There are also neighborhood features to consider. Lots in a cul-de-sac may be considered safer than one at the neighborhood’s entrance and fetch a premium. Lots with a more square shape may cost more than one that is very thin or oddly shaped.
Consider having a land surveyor conduct an inspection before you make a purchase so they can assess any risks that may be inherent to the lot. You can also work with your builder to make sure the lot you’re considering is buildable for your team.
3. Home Size and Layout
We already know the overall square footage of your home will generally determine the cost of your build. The bigger the home, the higher the base cost.
Although you may have a general idea of the square footage that you want for your home. Some restrictions may need to be taken into account depending on the rules and regulations of the area you are considering.
Many neighborhoods have square footage restrictions. A dense city-center may restrict how big you can build, whereas luxury communities may have minimum size and quality standards.
These factors may affect the pricing of your custom build project.
The size or shape of your lot may also alter the buildable square footage.
Perhaps less obviously, the shape of your home also plays a role in the cost. This generally applies to the footprint of your home. For example, a single-story home will likely have a greater cost than a two-story or tri-level home due to the smaller foundation.
More complex shapes, like a rotunda or u-shaped home, also add time and difficulty to your build. The extra labor and materials used for your foundation and framing will add to your cost.
4. Quality of Finishes and Upgrades
Another factor that impacts how much it costs to build a custom home is the quality of finishes and upgrades. This includes selections made in the kitchen, bathrooms, flooring, and even the materials used for the roofing and walls.
In the kitchen, the major aspects that impact the bottom line include the worksurfaces, cabinetry, and the quality of appliances. For example, granite and quartz countertops are more expensive than hardwood, laminate, and composite.
For flooring, carpet, luxury vinyl, and laminate floors tend to be cheaper. Hardwood flooring and engineered wood are more durable, attractive, and desirable to buyers. However these cost two to three times more which may impact your budget when furnishing an entire property.
In your initial conversations with the builder, you can discuss the finishes you’re interested in so they can give you more information on different options and the associated costs.
5. Additional Features
Lastly, the more features added to a property, the higher the budget required. Costly additions can include features like a swimming pool, extra garage space, guest house, sports court, or outdoor kitchen.
Sustainable additions also add to the finishing and construction budget. For example, when installing renewable energy sources like solar panels and water conservation mechanisms.
All of these additions will add a cost to the overall construction so take these into account when planning your budget.
More Info: How to get a custom home built?
Now that we know the overall categories and costs let’s look at a price breakdown and some average ranges for building a custom home.
Cost Breakdown of Building a Home
Here is our more detailed breakdown of the costs.
- Land Costs
- Planning Costs
- Construction Costs
- Finishes and Upgrades
- Fees
The table below shows a summary of how much each task will add to the overall cost of your home build. These numbers are based on the costs of building an average custom home, typically three or four bedrooms, around 2,500 square feet.
Land Costs
Purchasing Land
$40,000 to $400,000
The first major cost for a custom home is the cost of the land you’ll build on.
As we discussed before, several factors affect the cost of the lot you’ll purchase for your new home. In some areas, land can cost more than $2,000,000. However, on average you can expect to pay between $40,000 and $400,000 for land.
As per research from NAHB, the average cost of a single-family lot in the US is $114,622. This includes the administration fees of buying a lot including sales commissions, closing fees, financing costs, and other expenses.
You may choose to purchase a lot on your own, and then build. Or, you can select your lot through your home builder where the cost will be wrapped into your final mortgage.
Developing the Land
$20,000 to $60,000
In most instances, you will purchase a lot that is already developed. If your ideal location is inside a community or a parcel of existing development, you won’t have to worry about this cost.
However, large acreage or rural locations may still be considered raw land. Before your new home can be built a developer or builder will need to develop the land.
Developing the land consists of the following::
- Vegetation removal
- Leveling and grading
- Connection to electrical access
- Septic tank installation or sewage access
- Well drilling or water access
- Paving and road access
Depending on your location and plans for the lot, you may also have an expensive permitting process.
You can generally expect to pay upwards of $20,000 for land development.
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Planning Costs
Hiring Experts
Before you can begin building, there are several preliminary costs to get everything in place for your new home. Engaging experts to help you with this massive endeavor is the most important part of this planning phase. You will need to find a builder or contractor, an architect, and an interior designer, each of whom will have their own costs.
These costs are separate from the costs of material and labor that go into the construction process.
Builder or Contractor
$75,000 to $150,000
Ideally, you should shop around and find the best builder in your area who can construct the type of home you want, such as Oakmont Custom Homes, a Boise custom home builder. A reputable home builder will usually have an architect and designer on staff to help simplify your process.
If your construction team, architect, and designer are all under the same umbrella all of their costs will all be part of the total purchase price of your custom home financed through the home mortgage.
Architect
$15,000-$50,000
The architect’s job is to create a comprehensive set of construction documents. These include a general floor plan, ventilation, roofing, electrical and more. They will then pass those plans along to your builder who will oversee the actual construction of the project.
Your architect may charge you by the square foot for the completed plans. Depending on their expertise, you may pay between $2 and $10 a square foot for your construction documents.
You can hire and pay an architect on your own, or one may be offered to you through your builder.
Interior Designer
$5,000 to $10,000
The designer will usually work with you early on and over the course of the project to make aesthetic choices for your home.
Like the architect, a designer will usually be part of your home builder’s team but can be hired separately.
Designers will charge you by the room or by the hour. For a new construction home, designers often charge a percentage of the total construction costs. The average cost per project for a designer was $7,808 in 2022.
Permitting
$1,000 to $5,000
Once your architect has drawn up all the plans for your home, they need to be submitted for approval.
Your home builder or contractor will take your completed plans through the permitting process. They will know which permits you’ll need for your jurisdiction. Building a custom house will usually require between 6 to 10 building permits, required at different stages of the project.
The cost of building permits is usually within the region of $3,000.
Since permitting costs are handled by your home builder, they will usually be rolled into your mortgage and paid as a fraction of your home price.
Construction Costs
Foundations
$4,000 to $30,000
Building strong, sturdy foundations is crucial when building a custom home. On average, foundations cost around $7,300 to install.
There are different types of foundations you can build, each impacting the overall cost. When planning your custom home, you’ll want to consider the additional costs of different foundation types.
The most expensive type of foundation is a basement foundation which costs within the region of $10,000 to $30,000 depending on the square footage and specifications. The cheapest foundation is a basic concrete slab, costing between $4,000-$10,000.
Framing the Structure
$10,500 to $48,000
Framing the structure of a home can be one of the most expensive tasks in the construction process. This involves erecting the entire structure of the property– including the walls, floors, and roof. It also includes the construction of load-bearing walls, interior walls, subfloors, and roof sheathing.
On average, framing a house costs $23,000. Most properties are framed using high-quality lumber. Framing is one area you might want to be aware of potential cost changes throughout your build. Over the last couple of years, we’ve seen lumber prices fluctuate significantly which affect the total cost per square foot.
Installing External Aspects
$17,500 to $35,500
Once the house has been framed, exteriors are installed. This includes roof shingles, exterior siding, windows, and external doors. This is where you’ll start to see your custom choices applied to your new home.
You can expect to pay between $5,500 and $11,500 for roofing, depending on the size of the property and the type of shingle used.
Working with your designer, you’ll determine where your home will have siding, wood, or stone finishes. Those choices will affect your overall budget. The most common types of siding are vinyl, wood, metal, fiber cement, brick, stone veneer, and composite. Costs are, on average, between $6,150 and $15,900 for siding.
The cost of doors and windows also applies to this portion of your home; remember there will always be more and less expensive options that can determine where your home will fall in the price range.
Connecting Plumbing, Heating & Electrical Systems
$22,000 to $44,000
Installing plumbing and heating systems is another high-cost task when building a custom home. Because there’s room for personalization, costs can vary significantly depending on the complexity of your home design.
Generally, you can expect to pay around $9,000 to plumb a property. Using copper pipes is standard for durability. But cheaper options are available.
For electrical, costs generally range between $4 to $9 per square foot. But the more complex your lighting system is (i.e. extra outlets, specialty wiring), the larger your electrical budget needs to be.
Your builder will also install your HVAC system at this point. Most systems are available at a cost between $7,000 and $12,500. The higher end caters to homes in hotter climates that require larger and more high-tech HVAC systems.
More Info: How long does it take to build a custom home?
Finishes and Upgrades
Interior Finishes
$18,500 to $44,000
Furnishing interiors is the most personalized part of building a custom home. Your tile, flooring, carpentry, countertops, and carpentry are all part of this cost.
The most expensive part of finishing the interior is installing drywall, which can cost between $1,500 to $10,000 per room.
Flooring will also make a big difference in your total cost. Carpet, tile, laminate, LVP, and hardwood all have their own price ranges which will be applied to the square footage used in your home.
All of your costs can vary significantly depending on the finishes you choose. This is where your designer can help you make selections that suit both your style and budget and help keep the overall home costs in your expected range.
Upgrades and Appliances
$4,000 and Up
If you wanted an ordinary, builder-grade house, you wouldn’t be building a custom home. This is where upgrades matter.
Upgrades are additional options and features that builders will integrate into your custom home for added cost. From something as small as a shelf in your kitchen ($100), to an entire system of heated floors ($37,500), upgrades are what make your home unique.
One of the common ways to upgrade your home is with your appliance selection. For example, you can opt out of having a refrigerator come with your home or install a built-in side-by-side with paneling for around $10,000.
A wider range, dual ovens, or a wine fridge are all upgraded appliances that can add thousands of dollars to your custom home cost.
Your builder may offer pre-priced upgrade packages for your selection, as well as provide you with specific quotes for the upgrades you want.
Landscaping and Adding Outdoor Finishes
$5,000 to $40,000
Concrete is a large portion of this price. Although there are other material options, you will generally need concrete for your driveway and patios, as well as additional features like a pool or sport court,
Driveways typically cost between $2,300 to $7,500. But prices can be significantly higher for more complex designs or special features.
Your lawn, trees, shrubbery, garden, and other outdoor additions to your property are also part of this cost. Basic landscaping costs around $2,500, while bigger projects range between $10,000 to $30,000.
You can usually work with your builder to have some of these costs bundled into your mortgage price. However, you may need to plan on some projects being completed separately after your build is finished.
Builder Costs
$40,000 to $100,000
Just like any other business, your builder will have their own costs associated with constructing your home. Those additional costs are worked into your home price.
If we take the average home price per the NAHB of $644,750, those fees incurred by the builder would break down like this:
- Financing Cost – $12,192
- Overhead and General Expenses – $32,979
- Marketing Cost – $4,268
- Sales Commission – $23,080
On top of recouping these costs through the pricing, the builder will also look to make a profit. The profit range for a builder is generally going to vary a lot depending on the economic climate and the surrounding housing market. If you’re looking to build a home in an area with high levels of home inventory and moderate prices, your builder will charge lower prices.
In 2022, when this data was captured, builder profits were higher than average due to the exploding housing market and record-breaking home sales. The recorded builder’s profit from NAHB was $65,369.
Remember, the cost to build a custom home will always be highly associated with the general cost of homes being sold. Profits, prices, and fees will all fluctuate with market demand.
Now You Understand the Costs
The costs of building a custom home can vary significantly, but you can generally expect to pay around $644,740 to build an average-sized property (including the lot cost).
Building a custom home is all about personalization. For most people, building a house is a life-long dream. It’s an opportunity to design your forever home and make it a space you want to live in long-term.
Now that you know more about all the factors and costs associated with building a custom home, you’re one step closer to achieving that dream.
