Cost of Building a House

Many things, including building materials, could affect the price of a new home. Two of the more prominent factors are regulatory costs and the level of amenities.

Regulatory Costs

The issue of regulatory fees, environmental or otherwise, has been a heated debate topic for all involved in the home building industry. The reason is that ecological, state, and local regulations in some cases significantly impact the cost of new construction in some regions of the country.

Regulations vary on the state and local levels, but federal laws affect everyone. Many local and state laws also impact new homes' construction, such as growth controls, restrictive zoning, and impact fees.

Depending on where you live, regulations may have a very significant or insignificant effect on your home's price. If you are interested in knowing the impact of regulatory fees in your area, contact your local builder or local municipal offices.


The building materials that go into the price of a new home comprise a large percentage of its cost. Since both builders and buyers affect the kind of building materials that go into a house, it is essential to be aware of how building materials elements can affect its price. 

When figuring out how much a new home will cost, the common practice has been to price the home out per square foot. As a result, buyers often take a home plan, either from a plan book or one they’ve already purchased, to various builders for bids.

In recent years, with the variety, type, and quality of amenities rapidly increasing, many builders have found the cost per square foot analysis inadequate in successfully giving buyers what they are looking for. The problem with pricing a home on such a basis is that builders' different bids may not be an apples-to-apples comparison.

For example, one builder may offer better quality or higher allowances for appliances, lighting fixtures, etc. in their bid. Also, many features that builders consider their standard amenities often vary. One builder may make it a practice to provide energy-efficient heating and cooling systems in all of his homes, which will cost more money. Another builder may make a practice to exceed local code requirements in all areas of the house. 

The specific brand and quality of features and building materials you choose to put in your home will also dramatically affect the price. It is estimated that lighting fixtures will cost the average home buyer around three percent of their home's total cost. But if a buyer decides he or she must have a $5,000 chandelier in their entryway, their lighting fixtures and their home's total cost will be significantly impacted. The same goes for any appliance, doors, cabinetry, flooring materials, other building materials, etc. chosen for a home. 

So what’s the best thing to do as a home buyer to ensure a fair price on a new home? Make sure the bids you receive are apples-to-apples comparisons. Find out as much as you can about each builder’s product.

Find out as much specific information as you can about standard allowances, finishes, grades of carpet and lighting fixtures, paint, brick, plumbing and heating systems, and other building materials. Consider how long a builder has been in business and the quality of the building materials used in his homes. 

Being aware of where your money is going can be a comforting factor as a new home buyer. Taking into consideration building materials along with the level of amenities and regulations that might affect its price will help you prepare for a successful building process.

Can I Afford It?

For many of us as home buyers, the price of building a new home enters our minds in two contexts:

Can I afford to buy it?

Do I want to pay that price for this house?

Unless we are licensed appraisers, most of us rarely think about what makes up the new home's cost. And if we knew, we might be surprised to find out where the money we are spending is going.

Below is a standard breakdown of the costs to build a single-family home.

  • Construction Costs (Materials & Labor) 55-60%
  • Finished Lost Costs 25-30%
  • Financing Costs 2-5%
  • Overhead & General Expenses 5-7%
  • Marketing Costs 2-5%
  • Sales Commission 3-6%
  • Profit 8-10%