California has one of the highest costs of homes in the country. With the typical value of homes in the state being well over $700k, many consider building their homes instead of buying. So, is it cheaper to build a house in California?
Building a home in California can be cheaper than buying if you’re going to handle most of the labor. Even then, it’s still tricky. If you’re thinking of building your own house, you should consider the following: land, labor costs, material, how to get financing, and the rules and zoning laws.
Regardless of the challenges of building your house yourself in California, it can still be a nice undertaking. There are tips to guide you in saving costs. Here, we discuss whether building a house is cheaper than buying in California and factors to consider.
Cost Of Building House in California
Only estimates exist on how much it’ll cost to build a house in California. Home Advisor estimates that it’ll cost an average of $387,500. Of course, this doesn’t include the cost of land you’ll need to build the house and the cost of permits, engineering, and design fees. The cost of construction per square foot in San Francisco and Los Angeles is one of the highest in the country. While it might seem low, the overall cost of building a custom house in California will depend largely on the location and size. Regardless, there’s a high likelihood that building a house will exceed the cost of buying one in California unless you’re doing most of the labor yourself.
If you’re thinking of cutting down on construction costs, the best option is to go for the prefabricated house, which is easy to build and faster. This option may save costs by cutting down on labor and time. With the variation between the cost of construction and the factors that might come to play, it’s usually better to buy a house than build one. But if you already own land and have some of the skills needed for construction, you might save on construction costs.
What To Consider When Building Your Own House in California
You need to carefully think about several things before building your own house in California. They include:
Homes in California didn’t just get expensive overnight; they’re expensive because certain things needed for construction are expensive. The land is the number one of such things, and it’s quite expensive in California. The average cost of land in California is one of the highest in the country. The desirability of the land will usually determine how much you’ll pay for it. If you’re looking to buy land in high-end or mid-range areas, you can expect tens of thousands or even hundreds depending on the size.
2. Labor Costs
You’re not going to build the house yourself. Even if you have sufficient experience and home-building skills that make you not require a contractor, you’ll still need professionals to handle certain parts of the job. For example, if you’re an experienced mason, you still need electricians, HVAC specialists, carpenters, etc. All the professionals you need will require payments and the scarcity of construction workers means you’ll most likely have to pay a lot. This is especially true since it’s one project rather than multiple projects, putting you at a disadvantage in negotiations. Also, the labor cost in the state was 20% above the national average as of 2015. With prices of homes now higher, the cost hasn’t been reduced.
The cost of building materials is a major reason for the rise in prices in recent years. Construction companies are spending more money on building materials, leading them to sell them for higher prices. If you’re planning to build your home, you have to deal with the cost of materials and negotiate with sellers appropriately. This isn’t as simple as it sounds, especially when you’re not buying in bulk like a regular contractor. When you add this to this cost of building, you start getting a picture of how much it’ll cost to build the house.
4. Getting Financing
Another major problem for you as a private builder is getting financing for the construction. Unless you have millions saved or inherited or want to spend multiple years before you complete the house, you’ll need to borrow. But taking out a mortgage to buy a house is simpler and easier than getting the financing to build your house. The lender wants assurance that they’re financing a project that meets all criteria and won’t fail. So, they’ll usually ask you for a contractor or building designer. Unless you’re an expert in these professions, you’ll have to hire someone for that purpose, increasing the cost you’ll bear in building the house.
Also, consider the time it’ll take to build the house. This might come to play if you have to move into the house within a specific period. It takes between 7 months to a year to build a house in California, starting from getting the authorization. So, if you’re in a hurry to move in, it might be a better option to buy since you can’t rush the construction process too much. Saving time is also essential as it invariably cuts down the cost of building homes by reducing labor costs.
6. Regulations And Bureaucratic Hurdles
There are also several conditions you’ll need to meet before you can even think of building your own house in California. You’ll need zoning approvals, which means crossing several bureaucratic hurdles. If you’re not a licensed builder with experience in how to do this, you might spend months or even more than a year to get the approval.
Tips for Cutting Costs on Custom Homes
You can reduce the cost of home building by:
- Choosing the right contractor based on experience, integrity, licensing, and understanding of what you want
- Ensure the size of the home isn’t too big because a larger house means more cost, which can be wasteful if you don’t use it. Better to have an open floor with the appropriate size and layouts
- Use efficient and cost-effective building materials rather than high-end finishes avoiding overspending on aesthetics to the detriment of quality.
- Adopt a simple low maintenance design rather than a complex one to ensure an efficient building process
- Get multiple estimates from different contractors to have a watertight and accurate budget and stick with the budget throughout.
It’s possible to build your own house in California, but there are restrictions as a non-licensed owner-builder. If you’re willing to take on the labor, this is where you can save the most money when building a home yourself. But you also want to be careful not to sacrifice quality for the price.