When homebuyers are searching for their dream home, they often don’t realize the high cost of home construction until it’s too late. Understanding why home construction is so expensive will help you make better decisions and save money in the long run.
There are many factors that contribute to the high price tag on a new home: everything from your lot size and location to what type of materials you want to use for your house. The good news is there are many ways homeowners can cut back on costs by adding value themselves or by making smart purchase decisions throughout the process.
The Home Construction Process
The home construction process is expensive and time-consuming. Just how much does it cost to build a home? The National Association of Home Builders estimates that the average home costs $173,600 in 2016. This price includes both materials and labor for the home but doesn’t include any land or design fees. When you add these additional charges, the total can exceed $250,000!
In 2021, the cost of home construction projects has reached $323,000 on average. Many people wonder why home construction is so expensive when they see other homes on TV shows that look like they were built for less than $50,000. Homes on TV are often filmed during the day and don’t show all the work that goes into building them – including many hours of hard manual labor at night after everyone else is home from work.
Aside from paying for labor costs, homebuyers need to pay for materials and equipment. For example, parts for heavy-duty equipment such as cranes and bulldozers can cost thousands of dollars. Additionally, homebuyers need to pay for the building foundation, plumbing pipes and fixtures, wiring system, appliances such as refrigerators and ovens that run on gas or electricity, and insulation materials like fiberglass batting or foam sheets around windows and doors to keep hot air out during summer months and cold air out during winter.
What Makes the Home Construction Process Expensive?
There are so many factors that contribute to the expensive costs that homebuyers have to deal with. Below are examples of these factors:
- Material Costs
Building supplies such as lumber and drywall have increased in price by 120% over the last two decades. As a result, homebuilders have to charge homebuyers more money.
- Property Taxes and Insurance Costs
Homeowners who live in areas with high home values also pay higher property taxes, which means they’ll be paying a larger amount for their mortgage payment for this expense alone. In addition, home insurance costs are often expensive as well if the home is located near an area with high home values.
- Legal Costs
Homebuilders have to deal with legal costs to comply with building codes and zoning laws, which is why they also need to charge homebuyers more money for these expenses as well. Other factors like government fees can contribute towards the expensive costs that homebuyers have to deal with. Paying for legal costs is essential because homebuilders need to provide homebuyers with a home that’s safe and up-to-code.
For example, homebuyers might have to pay more money towards the homebuilder’s attorney fees if their homes are being built in an area where there is a high risk of lawsuits from neighbors or other parties. This can be very expensive for homebuyers because there are home builders who believe they can get away with charging homebuyers higher rates.
- Labor Costs
The home construction industry is having a very difficult time filling vacant positions, which means that home builders are forced to pay higher salaries to attract talent. This has resulted in the cost of labor increasing by 33% over the past decade.
The process of building a home is very labor-intensive, so home builders have to pay their employees a higher salary. This way, they can guarantee that they can get home builders who are willing to work hard and deliver quality results.
Building a home requires many workers with different skills, so the fees for home builders must be high to cover these costs and attract skilled professionals. These professionals will be able to deliver home construction projects that will truly last for decades.
Research is Essential
Homebuyers should always find out the costs of construction before signing a mortgage agreement because their homebuilder might sell them an overestimated home that doesn’t have enough room for expansion in case they decide to start a family and need more space at some point. It is a homebuyer’s responsibility to research the costs of home construction to protect themselves from getting ripped off.
Homebuilders have been known to overestimate home prices because they know that there is a high demand for homes, especially after it has been advertised as having enough room for expansion or renovation without too much hassle. What homebuyers should do is to price home construction costs themselves instead of taking the home builders’ word for it.
However, home construction projects are truly expensive projects that homebuyers need to prepare for. After all, the prices of labor, materials, and equipment are continuously rising. Therefore, it comes as no surprise that home construction projects often end up costing homebuyers more than they expect.