18 States Where It’s Cheaper to Build a Home Than Buy
With soaring interest rates over the past year and very little movement in home prices, buying a home has become much more expensive. A buyer in the market for a $600,000 home that is financing $500,000, is paying $3,500/month in principal and interest at current rates north of 7% vs. $2,000/month for the buyer who locked in when rates were under 3% a few years ago. I can’t imagine how difficult this environment is, especially for first-time home buyers, who are seeing the cost of owning the same home essentially double in just a few years.
Because of these dynamics, many buyers are turning toward building in parts of the country where it is cheaper than buying an existing home.
Late last year as builders were stuck with a large inventory of homes, they turned to strategies such as buying down the rates for buyers who would purchase from them, making the home more affordable than comparable existing home sales in the area. While these may be the cheapest overall states, buyers should consider the specific area they are building in, as the benefit may be much more or less than the average.
For buyers in the market for a new home, there are several takeaways to consider -
1) Simply evaluate your local market to see if building is cheaper than buying existing homes.
2) Talk to multiple builders since the finances of each company is different and some may be more incentivized to give discounts or concessions in this environment.
3) If possible, consider other local markets to live in where building may be cheaper.
Happy Planning,
Alex
This blog post is not advice. Please read disclaimers.