Help me understand the economics around building a house

Your comps were probably built at $110 square foot or less pre 2020. That’s your discrepancy. Your question comes down to can you find an existing house cheaper whose renovation would be less than your new build? Also, houses aren’t investments. They are the place you spend a majority of your life. If you can afford the new build price and the house you build makes you happy, that is a big part of the decision.

For a while there it was equivalent (even less expensive) to build than buy an existing home.

Never made sense to me.

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It's a half acre lot for $175k.

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Mineral rights?

I think building a custom home has become a huge luxury, extravagance.

Some odd responses here. On its own, $175K for a lot is not ridiculous, nor is $200/sqft. However, if a fairly new and similarly situated/appointed home is 25% larger than one you're considering, yet comps out at 80% of your planned purchase price, you should be very wary.

Also keep in mind, depending on your builder, and your propensity to change-orders during construction, you may end up looking at more money than you're calculating.

There are reasons one might commence to "overpay" for a house. Just know you're doing it, and know you can rationalize the expense/risk. e.g., Great location for schools (could save thousands over the years). Low tax locale vs neighboring communities. Time-saving convenience to work, activities. Etc.

If you choose to go that route, be as certain as possible you're looking at a long-term residence there. Being forced into an underwater home sale can really screw you up.

I make my money in new construction, and have never felt like it was worth the price tag. I have built and sold over 100 homes and have never lived in a new construction house. To each their own. If large numbers of buyers didn't prefer to buy new homes, I would be doing something else. I love each and every one of you.

I am surprised that cost/ft is $200 in your area. I live in a growing area that is very nice, and our cost is around $175/ft this year for 2500 sqft home. The price difference between new and existing homes has always been significant. The safest bet is to build new homes in new subdivisions where the other houses are comparable. You can run into problems selling a home that is newer/more expensive than surrounding homes.

I’m with you. The premium price for new home that are usually squeezed onto the smallest lot possible never made sense to me.

I bought a 3000 sq ft foreclosure in 2017 for $120,000. Lot alone was valued at $90,000. I put $300,000 into it going down to stud and new wiring and plumbing and landscaping but I got exactly what I wanted design wise. All my comps are $600,000 and have lots half the size. Looking for a good deal on an existing home and then renovating to taste is such a better bargain.

What?!?

Where in the world is this…?

I’m calling BS

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At $200/square foot, a 2000 square foot house (going with a modest sized house for a half acre lot) becomes a $575k purchase.

Comps in the area in the $400k range. One near the plot of land is $465k for a 2500 square foot house.

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I hope this is your forever home because this could be the issue for you down the road. 20% smaller house than surrounding stuff but 40% higher price is going to be a tough resell.

It's 1 thing to be a little more expensive but $575k compared to comps around $400k is a lot more frankly.