Why Building a Custom Home Costs More Right Now — And What Buyers Need to Know
If you have been thinking about building a custom home, you may have noticed something that has been hard to ignore lately: building a home is not getting any simpler.
Between material costs, labor, interest rates and the overall cost of construction, there are a lot of moving pieces right now. And if you are planning to build a home that is customized specifically for your family, there is another piece to understand.
Custom homes can cost more per square foot than homes built for the general market. According to recent data from the National Association of Home Builders, the price difference between a custom-built home and a typical spec home has grown to its highest level in more than a decade. As a home builder, this doesn't surprise me, but I also don't think the answer is that you should avoid building a custom home. I think the bigger question is whether you understand what you are paying for and whether you have the right builder managing the process.
Why does a custom home cost more?
When you build a custom home, you aren't simply choosing a house off a shelf. You are making decisions about the layout, the size of the rooms, the location of the windows, the kitchen, the bathrooms, the outdoor living space, the finishes and countless other details. Those decisions are what make the house yours, but customization also requires more planning, more coordination and, in many cases, more labor. For example, moving a wall may seem like a small change on paper. But that wall can affect electrical, plumbing, HVAC, framing, drywall, flooring and even the way other rooms function. This is one of the reasons I always encourage people to think about the entire home before getting too caught up in individual selections.
The cheapest decision isn't always the least expensive decision once construction begins.
The biggest mistake I see buyers make
One of the biggest mistakes I see people make is focusing only on the price per square foot. I understand why. It is an easy number to compare. Builder A is $200 per square foot. Builder B is $215. Builder C is $230. At first glance, it seems obvious which one you should call, but price per square foot doesn't tell you what is actually included in that number.
What type of foundation are you getting?
What insulation package is included?
What windows and doors are being used?
What is included in the kitchen?
What are the countertop options?
What is included in the electrical package?
What happens when you make a change?
What happens if material pricing changes?
Who is managing the subcontractors?
Who is making sure the details are done correctly?
Those are the questions that matter. A lower starting price isn't necessarily a lower final cost and a higher starting price isn't automatically a better value. You have to compare what you are actually getting. This is where having an experienced building company matters. Building a home is a lot more complicated than picking a floor plan and choosing paint colors. There are hundreds of decisions happening behind the scenes that most homeowners never see. A good building company is coordinating those moving pieces for you.
We are communicating with trades.
We are watching the schedule.
We are ordering materials.
We are dealing with inspections.
We are making sure one phase of construction is ready before the next one begins.
And we are solving problems when something doesn't go exactly according to plan.
Because eventually, something won't go exactly according to plan - that's construction. The goal isn't to pretend problems never happen. The goal is to have an experienced team that knows how to handle them when they do.
So should you wait to build?
I get this question all the time. With construction costs and interest rates where they are, some people assume they should simply wait until everything gets cheaper. The problem is that none of us can predict exactly when that will happen.
Material prices can move.
Interest rates can move.
Labor costs can move.
Land prices can move.
And the cost of the home you want can change while you are waiting.
Instead of trying to perfectly time the market, I think it is more important to make sure the numbers work for your family and that you understand exactly what you are getting. If you are financially ready to build, the better conversation to have is about how to build wisely.
Where should you spend your money?
Where can you save?
Which upgrades are worth doing during construction?
Which things can be added later?
How much should you keep in your budget for unexpected expenses?
What should you ask your builder before signing a contract?
Those conversations can make a much bigger difference than trying to guess what construction costs will look like six months from now.
Build the house you actually want to live in.
One of the reasons I love custom building is that your home can be designed around your actual life. Maybe you need a home office because you work from home. Maybe you want a larger pantry because you cook for your family. Maybe the outdoor living space is more important to you than having an oversized formal dining room. Maybe you want a larger garage. Maybe you need a bedroom on the main floor so you can stay in the home comfortably as you get older. Those are the things that make a house feel like your home. Those decisions are worth thinking through before construction starts. My advice if you are considering building: Don't start with Pinterest. Don't start with picking countertops. And don't start by calling five builders and asking who has the lowest price per square foot. Start with a conversation. Tell your builder how you live. Tell them what you want your home to do for your family. Talk about your budget honestly. Talk about what is most important to you and where you are willing to compromise. Then let your builder help you understand what it will take to accomplish that.
At Two Structures Homes, we have been building homes since 2009, and one of the things I have learned over the years is that the best building experience starts long before the first piece of lumber arrives on the jobsite. The planning matters. The communication matters. The experience matters. And the relationship you have with your builder matters. Building a custom home is a big investment. You should enjoy the process, but you should also understand what is happening along the way. The goal isn't simply to build a beautiful house.
It is to build a home that works for your family, fits your budget and is Built For A Lifetime.