There are a few reasons why many people are struggling to buy a home. For one thing, mortgages are expensive. Mortgage rates are sitting at around 7% as of this writing. Also, home prices are generally much higher than they were several years ago. Making matters worse, there’s not a lot of inventory to go around.
In fact, low inventory explains why home prices are up. Any time there’s not enough supply of a given item to meet demand, that item’s price tends to rise. It can happen with cars, the hottest toys of the holiday season, and homes.
As of April 2024, there was only a 3.5-month supply of available homes on the market, according to the National Association of Realtors. That might seem like a decent supply, but it can easily take six months’ worth of inventory to fully meet buyer demand.
If you’ve been looking for a home for quite some time but have yet to find one that meets your needs and price point, you may be inclined to go another route. It’s possible to buy a plot of land instead of an existing home and hire a builder to construct one for you. But there are benefits and drawbacks to building your own home.
The pros of building a home from scratch
The main benefit of buying a home is clear — you can have that property built to your specifications. Want an open floor plan? Your builder can do that. Want built-in shelving and bay windows in your family room? Just have it added to your design plans.
When you build your own home, you may also have more say over what you spend. Maybe you don’t care about granite countertops and are fine with less expensive laminate. Maybe you don’t give a hoot about hardwood flooring and are fine with an option that’s way cheaper.
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When you buy an existing home, you don’t get to make those decisions. And if your seller had more expensive taste than you do, guess what? You still have to pay for those upgrades in the form of a higher purchase price. But when you build a home, you call the shots and can, to some degree, choose to give up certain features to keep your costs down.
The cons of building a home from scratch
On the flipside, buying land and building a home can be risky. First, you risk having to pay more all in than you would for an existing home because the cost of materials is higher today than it was years ago.
When you buy an existing home with a roof that’s in good shape, your cost for that roof is locked in as part of your purchase price. With a new home that’s being built, you’re running the risk that roofing prices will be exorbitant.
Of course, the roof is just one component. The point is that building may not be less expensive than buying a home that already exists, even if you’re OK with a no-frills property, and a relatively small one at that.
Also, unless you’re hiring a builder from the start to help you find the right plot of land, there’s a lot of research on your part that may need to go into it. Not every plot is equally suitable for construction.
Plus, there are lots of factors that could delay a new home build, from weather-related issues to a lack of available supplies. If you’re on a specific timeline for moving, you’re taking a big risk by purchasing land and waiting for your home to be move-in ready.
Buying land for a home build might seem like a good idea. And it’s a move that might work out well for you. But consider the pros and cons carefully before moving forward. Also, if you do decide to take this approach, make sure to vet your builder thoroughly before signing a contract. And make certain to get on the same page about a budget so you don’t wind up spending more than you can afford.
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