The answer to this question is going to vary regionally, and even within regions.

In certain parts of the country it is much cheaper to buy than build, simply because real estate prices are still depressed, and assets are trading well below replacement cost. In other parts of the country, the real estate market has not been hit as hard and it is cheaper to build than buy.

But the other thing to take in to account is that you may be comparing apples and oranges. New homes in some parts of the country are cheaper than old homes because of location. In many cases the old homes are in the more desirable and convenient locations. New homes by their nature are built in the less desirable locations - unless they are built on the sites of old homes. The best lots and sites are chosen first. You don't see many vacant lots on the water or with easy access to public transportation.

That's funny... I've always heard its cheaper to buy an existing home than to build a new one.

Having said that, we are in the unusual position of being able to build for less than the asking prices of existing homes - due to the current market conditions.

While I don't think of myself as having a "very different lifestyle from the rest of the world", I don't feel that the selections of (mostly older) existing homes in my area have the amenities we want (in-law potential, home office near the kitchen, etc.) at the right price. A custom build will give us that. We only hope its worth the hassle and the wait!

Really?? That's news to me. Where did you see that info? Like booksandpages, I've always heard the opposite; cheaper to buy existing.

I think it's a little more complicated than that...are you talking about buying a new home, older home that might need to be remodeled/updated, or new construction? Custom homes are always going to be expensive and if you just want a new home, there are plenty of new homes that are flooding the market, at least in our area.

Older homes have a lot of charm, but they usually need some updating and repairs...not to mention furnace issues, plumbing, electrical, etc. They often have better insulation and construction, since many of our 'new' homes are put together quickly and without the insulation/super good cents you would expect in a zone 5 climate. We live out of town, but the temps get down to -27 F. on our farm.

If you have a different floorplan/lifestyle and want a home that will reflect that, then a custom built home is probably your best choice. If you just want a home that no one else has ever lived in...there are plenty available, depending on where you live. If you want the charm of an older home, you can replicate some things in a custom home...for a lot of money, or spend money remodeling. No matter what you choose, it seems to cost a lot of money, doesn't it? :)

Let's not forget that when you build you also get exactly what you want with no remodeling costs. We always got "deals" on existing homes and then remodeled them, always wishing this was this way, and that was that way, and on and on. Plus you have to live in the middle of the remodeling construction!

I think in the long run we may come out ahead building over buying existing. I know I'll be happier. And that counts for something ;)

You need to talk to a realtor to find out what is available in your area for sale, as there are often some screaming deals for those that can take advantage of them. You might be surprised at what 1M can buy vs build in your area.

In my low cost area of the South, an older (10-20 years old) home in the most desirable upscale home section of town will run around $125 a square foot. You can find homes in OK but not luxury areas of town for $60 a square foot. To build a new upscale home will start at around $200 a square foot, and just a "regular joe" home starts at around $100 a square foot. The only people building are those who want exactly what they want where they want and who have the savings and income to be able to afford to dictate that because banks are not cooperating well with builders right now.

Homes older than the 10-20 years old are also available at lower cost per square foot yet, but most people who purchase those plan to remodel them with new kitchens, master baths, and other amenities that 50 year old homes didn't have. And those are the folks who end up spending more per square foot than if they had bought new. Luxury "rebuilds" often cost upwards of $350 per square foot to accomplish, which even an average home remodel will cost $150-$200 per square foot. When you have to update a home's systems like electrical and plumbing, and also want to expand/reconfigure the space, you are MUCH better off financially buying existing or building new.

chueh -- Where are you? How's the RE market there? In my town you can buy old, new, and everything in between for pennies on the dollar. (I exagerate, but there have been some true *mansions* sold here for bank costs in the last two years.)

The Chicago Tribune runs a Sunday feature in the housing section, detailing sales of homes owned by locally famous people. Nobody is making money; everybody is getting 20 - 30% less than they paid within the last ten years, not counting remodeling costs the seller had invested.

We built because we could not find the amenities we wanted, and get a smaller home. We wanted more land, less house, and certain amenities. Mass market homes wanted to sell us twice the Sq Footage to get these amenities, all with the 'bonus' of less land.
So we built custom.

Good luck!~

Builder just started spec house in our neighborhood so at least some people feel they can build and make a profit. A lot depends on land prices..

If you are doing a construction loan, you have to add the interest costs to the price of your home. We could have definitely saved money by purchasing an existing home...but it would have been a 10-15 year old home and not exactly what we wanted. We actually bought our lot and signed our contract with our custom builder at exactly the right time...things were extremely slow and we got a great deal on the lot. Now things have picked up and it costs more. Our house actually appraised for more when it was completed than when we got our construction loan.