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What are the Factors That Determine Home Building Prices?

Mary McMahon
Updated May 16, 2024
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Factors influencing home building prices can include home design, site, and local costs for labor and transport of materials. One important thing to be aware of is inflation over time; it is not a good idea to rely on an estimate from several years ago, as the numbers will be skewed. A reliable contractor will provide a reasonable estimate of home building prices, including a section for cost overruns, the unexpected expenses that always arise in the process of building a home despite the most careful planning.

In terms of home design, a number of things can push cost up. Materials are important; people building a home with high quality or luxury materials can expect to pay more. Hardwood floors are more expensive than carpeting, tile will cost more than linoleum, granite counters are more costly than fiberboard, and so forth. In addition, the size and shape of a home are factors. Unusually large homes are expensive to build, as are homes with odd shapes and special design features like hot tubs or pools.

The location is also an important factor in home building prices. Some lots are easy to work with. Minimal site preparation is involved, utilities already run to the site, and it is easy for people to reach while working on the home. Others may require construction of access roads, running utility lines, and extensive work to get the site ready for building, causing home building prices to increase.

Some areas are also more expensive than others, reflecting longer distances for transport of materials and other issues, such as local labor costs. In some regions, contractors have high labor costs because they must pay a living wage to their workers, and things like taxes and liability insurance can rack up rapidly. Remote areas tend to be more expensive, and in some cases, options may be limited by the area; for example, transporting heavy rock for construction may not be recommended or even possible, forcing people to choose different materials.

Building energy efficient homes usually costs more in the short term, but generates substantial savings in the long run. People can also save money by using salvaged and reclaimed materials in some cases. Some communities may offer benefits to people using local suppliers, such as discounts for builders sourcing materials locally, rather than out of town. It is also important to get competitive bids from multiple contractors to get an idea of the range of cost estimates for home building prices in a given region.

HomeQuestionsAnswered is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a HomeQuestionsAnswered researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By croydon — On Jan 09, 2015

@pastanaga - That's something that needs to be cleared with a qualified professional though. I don't think a layperson would be able to judge when a house is livable, and besides that I imagine the biggest factor would be making sure that people were out of the way for the actual building construction. You wouldn't want kids underfoot for that.

It sounds like your parents paid professionals to do most of the work and then just did the easier finishing parts by themselves, which is a very good way to save money. You don't need professionals to put up wallpaper after all.

By pastanaga — On Jan 09, 2015

@MrsPramm - It can be a gradual project though, once you get past a certain point. We built a house in Colorado when I was a kid and, while I don't remember all the details about how it worked financially, I do remember at one point my parents just moved us in even though there was still no carpet or paint or garden. One of the home building costs people might forget is the cost of living while you're waiting for the house to be built.

We were in a small rented house with all three of us kids in one room and I think in the end my parents just decided it was worth the mild discomfort of living in a partially unfinished house just to get us out of there and stop having to pay the rent.

Once the roof is on and the place is watertight you can take your time doing it up.

By MrsPramm — On Jan 08, 2015

Please over-estimate your costs before you start and make sure you have enough to finish. My parents built our home a couple of times over my childhood (we moved overseas) and home building almost always ends up costing a lot more than you intended. This is not the kind of project that you want to skimp on or start when you don't have the reserves to finish it.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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