Is It Cheaper To Build or Buy a New Home?

With the current state of the market, you might wonder what would be more affordable when looking for a new home. Is it cheaper to build a home or is it cheaper to buy a new home? There are many things to consider when it comes to cost relating to home construction and each choice has its pros and cons.

The National Association of Home Builders published a study recently covering the Cost of Construction of new single-family homes. The Survey shows varying percentages of components that contribute to the overall cost, interestingly, the overall cost of these components have been reported as staying relatively consistent in recent years.

According to the 2024 survey of home builders, the biggest single component or factor of a new home’s total sales price in construction costs. Not surprisingly, this cost accounts for about 64.4% percent of the total home sale value.

An example,, the sales price of a $665,298 house would likely factor in construction costs of approximately $428,215 (64.4%).

Breaking down the construction costs per trade

Construction costs for a new single-family home or just about any type of residential home construction requires numerous trades and disciplines to complete the project. Trade such as interior finishes, electrical, HVAC, plumbing, framing, and so on. With the construction cost being 64.4% of a total home sale’s value, which are the most expensive contributors? According to the NAHB survey conducted, the breakdown of construction costs per trade are:

• Interior finishes (e.g., cabinets, drywall, flooring): 24.1%
• Major system rough-ins (e.g. electrical, HVAC, plumbing): 19.2%
• Framing: 16.6%
• Exterior finishes (e.g., roofing, windows): 13.4%
• Foundations: 10.5%
• Site work (e.g., architecture, building/permit/impact fees): 7.6%
• Final steps (e.g., driveway, landscaping): 6.5%
• Other costs: 2.1%

Other Factors Affecting Home Building and Construction

Labor shortages, fluctuations in building material prices, and delays in local municipal permitting have emerged as major pain points for homeowners and contractors alike. According to the National Association of Home Builders (NAHB), the share of construction costs as a percentage of a new home’s total price is now the highest it has been since NAHB began tracking this data in 1998.

While these challenges might seem unexpected, they reflect long-term impacts from the COVID-19 pandemic and the remodeling boom that followed. Across the U.S., construction prices have surged, affecting everything from home additions to new custom builds.

Labor Shortages and Permitting Challenges

Following the pandemic, the construction and housing sectors experienced a sharp decline in skilled labor availability and workforce participation. This labor shortage continues to burden the industry nationally—and locally.

In Denver, the Neighborhood Planning and Development Department has faced significant delays in processing permits. The sudden increase in residential construction alone was overwhelming the department staff and the result was lengthy plan review times and astronomically high permitting delays. Even recently, Denver;s Average Plan Review Time for a Major Residential Construction Project (Custom home, home addition, whole home remodel, ADU) reached an upwards of 351 days. The increase in demand has made the department struggle to recruit and retain qualified staff. In 2023, the department failed to issue permits on time for 81% of submitted plans.

There is some hope however for Denver residents specifically. Mayor Mike Johnston recently signed an executive order (EO 151) to streamline and overhaul the permitting process. He has created a brand new department called the Denver Permit Office (DPO) which combines all the departments required for plan reviewing and permitting into one. He also promises a 180 day review time or your money 

On the labor side, builders throughout the Denver metro area report a growing demand for skilled tradespeople, with fewer available professionals to meet the need. This mismatch slows project timelines, raises labor costs, and places added strain on contractors and clients alike.

Volatility in Building Material Prices

Over the past year, the cost of building materials has begun to stabilize, but recent history paints a different picture. During the pandemic and its immediate aftermath, material prices were highly volatile, causing disruptions across the construction industry.

Prices for essential materials like OSB (oriented strand board) surged to nearly $100 per sheet at one point. Copper piping and electrical wiring also experienced dramatic, months-long price spikes. This kind of volatility left contractors scrambling to revise budgets mid-project, and clients uncertain whether the next phase of construction would trigger costly change orders.

When Homeowners Seek What Money Can’t Buy

In the Denver area, many families are choosing to expand or remodel their existing homes rather than enter the competitive real estate market. Clients of Sustainable Design Build (SDB) frequently express frustration with what’s available on the market—homes that don’t offer meaningful upgrades or justify the cost of moving.

Many of these clients value things that money can’t easily buy: established communities, walkability, access to good school districts, and neighborhood familiarity. When the market fails to deliver on those fronts, homeowners often turn to SDB to create more livable space where they already live—through additions, pop-tops, or whole-home remodels.

Custom Home Building Remains Viable

According to the 2024 NAHB survey, the average single-family home in the U.S. features 2,647 square feet of finished floor space—an increase of 86 square feet from 2022. This marks a reversal of the trend from 2015 to 2022, during which average home sizes shrank as builders adapted to affordability concerns.

Despite rising costs for labor, land, and materials, building a custom home remains a feasible option for many homeowners. While costs can vary widely depending on location and complexity, national averages continue to show that strategic design decisions—like optimizing square footage—can help balance quality and budget.

Finding the right path to your dream home

The post-pandemic construction landscape remains complex, shaped by workforce gaps, material pricing trends, and strained permitting systems. However, for homeowners committed to creating their ideal space—whether through an addition or a ground-up custom build—there are still many viable paths forward.

Sustainable Design Build continues to help clients navigate these challenges with insight, transparency, and creativity. Whether adapting an existing home or starting anew, thoughtful planning and the right construction partner make all the difference.