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Okay, something happened over the past year that completely changed the building versus buying conversation. I was just in a team meeting last week reviewing our project data, and it caught my attention. For the first time in decades, existing homes are actually selling for MORE than new construction in many markets. Let me say that again because it surprised me too: used homes cost more than brand new ones in several regions.
According to the U.S. Census Bureau and National Association of REALTORS® data from Q2 2025, the median price for a new single-family home was $410,800, while existing homes sold for $429,400. That's an $18,600 difference, with the existing home costing MORE. This marks the largest historical gap where existing home prices exceeded new construction.
Think of it like this: you're essentially paying a premium for someone else's lived-in space while builders are offering brand-new, never-occupied homes for less money. The housing market is unlike anything we've seen before, and understanding these dynamics is crucial before you make what's probably the biggest financial decision of your life.
Just breathe for a moment. I know this feels overwhelming. Between mortgage rates that refuse to cooperate, home prices that keep climbing, and construction costs that seem to change weekly, it's enough to make anyone want to give up and rent forever. But here's the thing: both building and buying have paths that work, you just need to understand which one aligns with your specific situation.
Whether you're considering building or buying, AmeriSave can help you understand your financing options. We offer construction loans, traditional mortgages, FHA loans, VA loans, and conventional financing. Our digital platform lets you compare rates, upload documents securely, and track your application progress from anywhere. Start by getting preapproved to understand your budget before you begin your home search or building project.
When we talk about building costs, we're looking at several moving pieces. According to HomeAdvisor's 2025 data, the national average to build a home is $323,026, with costs typically ranging from $138,937 to $531,294. That's excluding the land.
The cost per square foot averages $100 to $200, with $150 per square foot being the median. But here's where it gets interesting and this is what people don't always realize: these numbers swing dramatically based on where you're building.
Let's walk through the math for a standard 2,000 sq ft home at $150/sq ft:
Midwest Example:
Coastal Urban Example:
The location difference: $223,000 or 65% more for the same house.
Regional cost breakdown from reAlpha Tech's 2025 analysis shows these averages per square foot:
Here's where your money actually goes when building. The U.S. Census Bureau breaks down construction expenses into these major categories:
Land Purchase: $3,000 - $150,000+ (varies dramatically by location)
House Design and Blueprints: $500 - $5,000 (stock) / $5,000 - $20,000 (custom)
Construction Permits: $500 - $2,000
Site Work and Excavation: $2,900- $11,800
Foundation: $8,000 - $25,000 (varies by size and type)
Framing: $20,000 - $50,000
Exterior Finishes: $25,000 - $60,000
Interior Finishes: $50,000 - $175,000
Home Systems (electric, plumbing, HVAC): $30,000 - $75,000
Appliances: $3,000 - $16,000
Site Clean-up: $250 - $1,250
Labor costs eat up about 30-50% of your total construction budget, maybe 40% on average. When we acquired processes from another division, I learned something important: you're not just paying for materials and work, you're paying for expertise, time, and risk management. General contractors typically charge 10-20% of the total project cost, but they're the ones coordinating 15 different trades, managing timelines, and fixing problems before they become expensive disasters.
Materials account for roughly 60% of construction costs, and here's where it gets tricky. According to Sweeten's 2025 construction analysis the industry faces an average effective tariff rate of 17.8%, the highest since 1934. What this means for you: lumber, aluminum, steel, and even motor vehicles used in construction have gotten significantly more expensive, and these costs get passed down to homebuilders.
Now let's talk about what you'd pay for an existing home. According to NAHB's Q1 2025 analysis, the median price for existing single-family homes was $402,300 nationally. By summer, actually June specifically, the National Association of REALTORS® reported in July 2025 that existing home prices hit a record high of $435,300, marking the 24th consecutive month of annual price growth.
Here's what nobody tells you about those prices: they don't include the hidden costs waiting for you after closing. That charming 1985 colonial with the mature landscaping? The roof might need replacing ($10,000-15,000), the HVAC system could be on its last legs ($8,000-12,000), and don't even get me started on what happens when you discover the electrical panel needs upgrading to handle modern appliances ($2,000-4,000).
Understanding Your Home Buying Budget
Before you commit to building or buying, you need to know exactly what you can afford. At AmeriSave, our digital platform provides instant preapproval so you understand your budget from day one. We'll show you what your monthly payments would look like for different price points, help you understand closing costs, and guide you through down payment requirements for FHA, VA, conventional, and USDA loans. Getting preapproved takes minutes and gives you confidence when you're ready to make an offer or start your build.
Let me break this down with a real scenario. You're looking at a 2,000 square foot home in the suburbs of a mid-sized city.
Option 1: Existing Home
Option 2: New Construction
The difference: $42,200 savings with new construction over 5 years, plus you get modern energy efficiency, your choice of finishes, and no surprise repair bills.
Here's what's driving the unusual price dynamics:
According to Eye on Housing's analysis, tight inventory continues pushing up prices for existing homes because many homeowners who secured mortgage rates below 4% during the pandemic are hesitant to sell. Over half of current homeowners have rates under 4%, while new buyers face rates above 6.5%. Nobody wants to give up a 3.25% mortgage to take on a 6.75% one.
Builders adapted to affordability challenges by constructing smaller homes on smaller lots and offering significant incentives. A May 2025 National Association of Home Builders reportshows 61% of builders using sales incentives like mortgage rate buydowns. These temporary or permanent buydowns can reduce your effective mortgage rate by 1-2 percentage points, saving hundreds per month.
The price flip isn't universal. Data from NAHB's regional analysis for Q1 2025 shows interesting patterns:
If you need to move quickly, buying wins every time. According to HomeAdvisor's 2025 data, building takes 7-14 months from breaking ground to move-in. That doesn't include the months you'll spend finding land, getting permits, finalizing plans, and securing financing.
Buying an existing home? You can close in 30-45 days if you're preapproved and have your finances ready. Our team at AmeriSave can often get buyers from application to closing in under 30 days for existing homes when everything lines up properly.
Building lets you make every decision from the ground up. Want an open floor plan with a chef's kitchen and a home office? Building gives you exactly that. Existing homes require compromise. You might love the neighborhood and school district but hate the layout, or adore the kitchen but need to renovate the bathrooms.
One thing I've noticed from working with our acquisition integration teams: the cost of major renovations to existing homes often approaches or exceeds what you'd pay for custom features in new construction. Knocking down walls, relocating plumbing, rewiring electrical... it adds up fast. I think the last project I reviewed had renovation costs that ended up at like 80% of what new construction would've cost.
New construction comes with modern insulation standards, energy-efficient windows, LED lighting, high-efficiency HVAC systems, and often solar-ready infrastructure. Your monthly utility bills could be 30-50% lower than in a comparable older home.
Let's look at the numbers for that 2,000 sq ft home:
New homes typically come with builder warranties covering major systems for 1-10 years depending on the component. Structural issues might be covered for a decade, while HVAC and plumbing get 2-5 year coverage. Your maintenance budget in years 1-5 is minimal.
Existing homes mean you're inheriting someone else's deferred maintenance. That 20-year-old water heater? It's living on borrowed time. The roof with a few missing shingles? You'll be replacing it in 3-5 years. Windows that "work fine"? They're leaking air and costing you money every month.
Construction loans work differently than traditional mortgages, and that's where we can really help. If you're exploring construction loan options, AmeriSave offers both construction-to-permanent loans (one closing, converts to mortgage when complete) and standalone construction financing. Our loan officers explain the draw schedule, how inspections work, and what happens during each construction phase. For traditional purchases, we offer rate locks that protect you from market fluctuations while you complete your home search. Let us walk you through your options and show you exactly what each path costs.
Finding buildable land in established neighborhoods with good schools is really tough. Most desirable suburban lots were developed years ago. Building often means going further from urban centers or accepting less-developed areas where infrastructure is still catching up.
Existing homes let you choose established neighborhoods with mature trees, walkable amenities, and proven school districts. You know exactly what you're getting in terms of neighbors, traffic patterns, and community character.
Here's something interesting from the data: new homes are experiencing year-over-year price declines while existing home prices continue rising. According to Eye on Housing, new home prices declined 0.9% year-over-year in Q2 2025, marking nine consecutive quarters of declines. Meanwhile, existing home prices increased 1.7%, marking eight consecutive quarters of growth.
What does this mean for resale? Honestly, it's hard to say. New homes in desirable locations with good schools typically hold value well. But if you build in a rapidly developing area that becomes oversaturated, you might face challenges selling later.
Just breathe. Building a home requires hundreds of decisions and constant oversight. You're choosing everything from floor plans to faucet finishes. You're reviewing draw schedules, approving change orders, and visiting the site regularly to ensure work meets your expectations. It's basically a part-time job for 6-12 months.
Buying an existing home? You make an offer, get an inspection, negotiate repairs, and close. Done. Way less stressful, way less time-intensive.
Let me share some things that surprised even me when reviewing project budgets.
Okay, so here's how to actually decide. I use the following decision framework when working through complex choices.
Look for builder incentives. According to Fortune's analysis of builder strategies, 61% of builders in 2025 offer sales incentives including mortgage rate buydowns. A 2-point temporary buydown could save you $400-600 monthly in the first few years.
Choose stock plans over custom designs. You'll save 10-25% on architectural fees and your builder will be more familiar with the costs and timeline.
Build up, not out. Adding a second story costs 10-30% less per square foot than expanding horizontally because you're using the same foundation footprint.
Get a thorough inspection. Spend the extra $400-600 for specialized inspections (sewer scope, chimney, structural) on older homes. These could save you $10,000+ in surprise repairs.
Budget 1-2% of purchase price annually for maintenance on homes over 20 years old. That's $4,000-8,000 per year on a $400,000 home.
Negotiate repair credits at closing. Sellers in this slower market are often willing to contribute $5,000-10,000 for repairs rather than fix items themselves.
Where you're buying or building dramatically changes the math. Here's what the data shows:
The South offers the smallest price gap between new and existing homes. According to Eye on Housing's Q4 2024 data, new homes averaged $377,200 versus existing at $366,800. Building makes economic sense here because land costs less, construction timelines are shorter due to weather, and labor costs run lower than coastal regions.
The West is the only region where existing homes consistently cost MORE than new construction. New homes average $522,100 while existing homes hit $626,000. The catch? Finding buildable land in desirable California, Washington, or Oregon locations is extremely difficult and expensive when you can find it.
The Northeast maintains the largest new home premium. New construction averages $784,900 versus $482,700 for existing homes. The brutal truth? Building here costs 62% more than buying existing, primarily due to high land costs, strict regulations, and expensive labor markets. Unless you absolutely need that specific custom home, buying existing makes more financial sense.
The Midwest offers the most affordable building costs at $100 per square foot and the lowest existing home prices at $297,800. If you're budget-conscious and willing to live in a lower-cost-of-living area, the Midwest provides the best value for both building and buying.
Let me simplify this for you because it trips people up constantly. When you buy an existing home, you get one mortgage secured by the property. Simple.
When you build, you typically need THREE financing steps:
Some lenders, including AmeriSave, offer construction-to-permanent loans where you close once and the loan converts automatically when construction finishes. This saves you thousands in duplicate closing costs and rate-lock headaches.
Here's something we need to talk about honestly. According to NAHB's housing affordability analysis, nearly 75% of U.S. households cannot afford a median-priced new home.
At a 6.5% mortgage rate, you need a minimum income of $141,366 to afford the median new home price of $459,826. In 23 states plus DC, over 80% of households are priced out of the median new home market.
This isn't meant to discourage you. It's meant to ground your expectations in reality. Maybe building that 3,000 sq ft custom home isn't feasible right now, but a 1,800 sq. ft. home with smart design could work. Maybe you need to expand your geographic search or consider a smaller starter home now with plans to build later.
I'm not a fortune teller, but here's what the data suggests into 2026:
Construction costs will likely remain elevated due to tariffs and labor shortages, but could stabilize as supply chains adjust. Labor wages are projected to increase 4.1% according to Sweeten's labor market analysis.
Existing home prices should continue rising modestly as long as current homeowners with low mortgage rates refuse to sell, keeping inventory tight.
Interest rates are unlikely to drop significantly. Most economists project rates staying in the 6-7% range through year-end.
Builder incentives will probably remain aggressive as builders compete for the shrinking pool of qualified buyers who can afford new construction.
I learned something about making decisions when you don't know what to do in my Master’s of Social Work (MSW) program. There's rarely a perfect choice, just the best one for you right now. You can look at spreadsheets for as long as you want, but at some point you have to accept that both paths have pros and cons.
Building lets you customize your home, makes it more energy-efficient, and costs less to maintain in the long run. However, it takes more time, stress, and money up front. Buying gives you speed, established neighborhoods, and easier financing, but it also means making compromises, paying more for upkeep, and dealing with unexpected repairs.
Think about the things that are most important to you every day. Is it going to coffee shops in the neighborhood? Pick a place to buy that is already well-known. Is it exactly how you always wanted your kitchen to look? Pick a building. Is it moving in by summer so your kids can start school on time? Pick buying.
And hey, no matter what you decide, you won't be stuck forever. The average length of time someone owns a home is 7 to 13 years. You can build now and buy later. Or you could buy a house now and build your dream home in ten years, when your career and finances are more stable. I've been thinking about this a lot lately because I see people in my MSW program making their own housing choices while also going to school and working. It's all about timing and what's best for you right now.
Okay, let's finish this up by saying what you really need to do:
It's not about which option is better for everyone when it comes to building or buying. It's about which choice fits your life, your budget, your schedule, and your priorities better at the moment.
Where you are and what is going on in your life will determine the answer. The national median price for new construction in the second quarter of 2025 was $410,800, while the median price for existing homes was $429,400. This means that new construction was $18,600 cheaper up front. But this change doesn't happen in all markets. New homes in the Northeast cost a lot more than existing homes. The average price of a new home is $784,900, while the average price of an existing home is $482,700. The South has the smallest difference, with new homes costing $376,000 and existing homes costing $361,800. You should also think about the costs of financing in addition to the purchase price. When you buy a new home, you usually need more complicated financing, like construction loans with higher interest rates. When you buy an existing home, you can use a regular mortgage with lower rates and easier closing processes. When figuring out the real costs, don't forget to add in five-year maintenance estimates. New homes usually only need $5,000 in repairs over five years because of warranties and new systems. Older homes, on the other hand, need $15,000 in repairs to things like roofs, HVAC, and plumbing that are getting old. When you add up the costs of both lower maintenance and better energy efficiency over five years, new construction often comes out ahead by $30,000 to $50,000. cutting down on monthly utility costs by $100–200.
According to industry data from 2025, it takes an average of 7 to 14 months to build a house from start to finish. However, this timeline only starts after you've already bought land, made plans, gotten permits, and set up financing. The pre-construction phase adds another 2 to 4 months, so the whole process takes 9 to 18 months from the time you decide to move in. Weather delays, not having enough materials, and scheduling inspections often add 2 to 4 months to the timeline. In contrast, buying an existing home moves much faster. You can usually close on the property in 30 to 45 days after you get preapproved and find the right one. When buyers have all the paperwork ready and the property appraises correctly, AmeriSave can process many existing home purchases in less than 30 days. If you have to move for work, your lease is up, or your kids need to start school in a certain district by fall, the speed difference becomes very important. If you're short on time, buying something that already exists almost always makes more sense. Building goes more smoothly when you are flexible and patient, since delays are almost certain. To avoid stress and having to find temporary housing, add an extra 3–4 months to the builder's estimated completion date.
There are different ways to pay for building a home than for buying an existing one. Knowing your options can help you avoid costly mistakes. The most common way is to use a construction-to-permanent loan. You only have to close once, and when the building is done, the loan automatically changes from construction financing to a regular mortgage. This saves thousands of dollars in closing costs that would have been paid twice and gets rid of the risk that rates will go up between construction and permanent financing. You only pay interest on the money you've already borrowed during construction, which keeps costs down while your home is being built. The other option is to get separate loans for land, construction, and permanent mortgages, each with its own closing costs and requirements for getting the loan. This three-loan method costs more in the long run, but it gives you more options if you already own land or want to work with a builder who doesn't accept construction-to-permanent loans. Both of these options usually need bigger down payments than regular mortgages, usually 20–25% of the total project cost. This is because lenders see construction as a bigger risk than buying an existing home. We help you with construction financing at AmeriSave, including how to set up draw schedules, what inspections are needed, and how payments work during each phase of building. We also help you understand how construction loans turn into permanent loans and what happens if the project goes over budget or takes longer than planned. Before looking for land or a builder, you need to get preapproved for construction financing. This is because the amount you are approved for will determine what you can actually build.
Builder incentives can save you tens of thousands of dollars and dramatically improve affordability, making them absolutely worth considering in your decision. NAHB data shows that 61% of builders now offer sales incentives. The most common and useful ones are mortgage rate buydowns. A standard 2-1 buydown lowers your rate by 2% in the first year and 1% in the second year, which saves you $400 to $600 a month during that time. A 2-1 buydown on a $400,000 mortgage at 6.5% saves about $8,000 over two years. The builder pays this cost up front by prepaying the interest difference. Some builders offer permanent buydowns that lower your rate for the whole loan term. This can save you $100,000 to $150,000 over 30 years on a typical mortgage. In addition to lowering the interest rate, builders often help with closing costs of $5,000 to $15,000, upgrade appliances or finishes for free, or pay the first year's HOA fees. These incentives help make up for the higher costs of building a new home compared to buying an old one. But make sure that incentives are worth something and not just higher base prices. Check the builder's base price against similar new homes in the area, and then decide if the incentives really make the deal better or just bring the price down to market level. Also, make sure to read the terms of the incentives carefully, especially for temporary buydowns, since your payment goes up a lot when the buydown period ends. Before you buy something with a buydown, figure out if you can afford the full-rate payment.
Builders are always surprised by hidden costs because base construction quotes don't include a lot of important costs that can add $30,000 to $75,000 to the total cost of the project. You will have to pay between $12,000 and $18,000 for a year of rent or mortgage payments while you wait to move into your new home. Installing and restoring landscapes costs between $5,000 and $15,000 because construction destroys plants that are already there, so you have to start from scratch with bare dirt and add sod, trees, shrubs, and irrigation systems. Paving the driveway isn't always included in the base quotes, and it can cost between $4,500 and $8,000 more, depending on the materials and the length. If you're building in an area that is still being developed and doesn't have any infrastructure at the property line, permanent connections for water, sewer, gas, and electricity can cost between $10,000 and $30,000. Fees and permits usually cost between $1,000 and $5,000, but they can be very different depending on where you live. In some places, impact fees and development charges can cost more than $10,000. Change orders usually add 10% to 15% to the cost of the project as you make changes to the plans while construction is going on and you see the space take shape. If you have a $300,000 budget for building, you should set aside $30,000 to $45,000 for changes you will want to make. For mid-range options, appliance packages for the kitchen and laundry cost $5,000 to $15,000. For high-end options, they can cost $25,000 or more. If you want to move into a home that is ready to live in, you will need to spend an extra $10,000 to $30,000 on window treatments, landscaping, and furniture. Smart builders add 20–25% to the base construction quote to cover these costs without using up all their savings or needing to take out emergency loans during the project.
When it comes to energy use, new homes built to building codes use 30–50% less energy for heating, cooling, and other everyday tasks than homes built 10–20 years ago. A new home with 2,000 square feet costs an average of $125 to $200 a month in utilities. This is because of modern insulation standards, energy-efficient windows with low-E coatings, LED lighting throughout, high-efficiency HVAC systems with 16+ SEER ratings, and better air sealing that keeps drafts and heat from escaping. A home of the same size built in the 1990s or 2000s usually costs $250–350 a month because the insulation has compressed and lost its effectiveness, the original windows let a lot of heat through, incandescent or CFL lighting uses more power, and the HVAC systems with 10–12 SEER ratings have to work harder to keep the temperature stable. The $100 to $175 you save each month adds up to $1,200 to $2,100 a year and $12,000 to $21,000 over ten years of ownership. New homes often have solar-ready infrastructure and EV charging capability, which makes it easier and cheaper to add renewable energy systems later. Some new buildings will come with solar panels that can cut or even get rid of electric bills, saving another $100–200 a month. When you look at the total cost of ownership for new construction and existing homes, energy efficiency often makes building new worth it, even if the upfront cost is a little higher.
Before you buy land, find your builder. Experienced builders can help you avoid costly mistakes when deciding if a piece of land is suitable for building, so you don't end up buying land that has problems that make building impossible or too expensive. Builders look at the soil, drainage, access to utilities, setback requirements, easements, and local building codes to see if your desired home will fit on a certain lot. People buy beautiful wooded lots, but then they find out that wetland restrictions, septic limitations, or steep slopes make it impossible to build their planned home without spending $50,000 to $100,000 on site work. Builders also work with land developers and often know about lots that are for sale before they are made public. Some builders own land or have deals with developers to get better prices that they then pass on to buyers. If you work with a builder first, you'll know exactly what size and type of lot you need for your dream home. This will keep you from buying a lot that's too small or paying too much for land you don't need. Also, builders can help you figure out how much the whole project will cost, including the land, the building, and the site work, all in one package deal. This way, you can get an accurate budget before you buy the land. If you already have land you like, have your builder check it out before you make an offer. Smart sellers allow builder inspections during the due diligence period specifically because informed buyers who've consulted builders are more likely to successfully close rather than backing out after discovering construction problems. The land-first approach only makes sense if you know a lot about building and are sure you can judge whether a site is suitable for your needs, or if you're willing to change your home plans to fit what the land allows instead of having a specific vision you need to follow.
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