Why Families Are Often Choosing To Build A Home Rather Than Buy in 2025
1️⃣ Pricing Differences in New vs. Old Homes
A home is technically a depreciating asset. Although the age-old argument says homes appreciate over time, that is actually not true. Instead, the house itself loses value over time with age, wear and tear.
What often increases in value over time is the land underneath the home as an area develops as demand increases and inflation rises. Also bringing up prices is the cost of materials having significantly increased over time. Because we see home prices go up every year, we think that the home is appreciating in value. However, hidden beneath these inflating prices, the home itself is depreciating in value.
As things like the roof, HVAC, siding, and systems of the home degrade with time, the value of the home decreases. In the same way a 20 year old car sells for less than the new one, a house built 20 years ago sells lower compared to a new house built on the same lot.
Note: Rising material costs also drive up home prices. For example, even after cooling off from COVID, lumber prices are still more than double what they were just 10 years ago.
➡️ How does understanding depreciation help you choose whether to buy or build?
Depreciation helps you understand the tradeoffs between buying an older home vs. building a new one. Buying an older home may come with relative savings compared to buying a new home or building your own. If you are looking for a temporary home, or are betting on the market to go up and are aiming to resell the house in the future, an older “fixer-upper” might be the right choice for you.
However, if you are looking for a “forever home,” a custom home is an investment to consider.
When you build a custom home, you’re investing in brand new materials and systems. These will, of course, last longer than those of an older home. Longevity makes custom homes a great option for those intending to live in their home for the long run, whereas older homes are suited better for shorter timeframes.
Not to mention that something you build yourself is designed specifically around your wants and needs. You aren’t adapting your life around someone else’s design, or weighing concessions you need to make because the rest of the home is “close enough.”
Spec homes vary, but we will discuss that next.
2️⃣ Custom Homes vs. Spec Homes
When considering whether to buy a home or build a home, you will want to understand the difference between a custom home vs. a spec home. Both are new homes, but each is built with a different philosophy.
A Custom home is built for a homeowner on their lot specifically to their liking from start to finish. A speculative (spec) home is a home a builder creates on a lot with the intent to place the home on the market to be sold to a prospective buyer. You will see these often in large neighborhood developments with lots of identical or similar houses.
There are several reasons the costs between custom homes and spec homes will differ, but here are the three major factors:
➡️ New Home Standardization vs. Custom Home Optionality
One key factor that drives up the cost of building a custom home versus a spec home is “optionality,” or ability to choose.
When buying a spec home on the market, you have no (or very little) control over the floor plan and features going into the home. At most, people get to choose a package that the builder offers, such as flooring and countertops. These are usually available before the builder has started construction
If you purchase the home after it is built, you’re working with someone else’s vision. Any compromises or cut corners are now things you need to spend more money to resolve, including remodels.
When building a custom home, you get to choose every detail room to room, from where you want a wall to what faucet goes on your sink. And if you’re not sure about a specific area, your builder can explain different ways to tackle it so you’re certain you’re designing in a way that will suit your family in the most ideal sense.
Custom built homes often involve higher quality materials and finishes than what a random builder would choose themselves. This is true for almost every selection in a home, which adds up quickly when you have upwards of 100 selections to make.
Lastly, building a one-off house is always going to cost more than buying a house in a development because building multiple houses of similar specs right next to each other is more efficient and therefore less expensive. A custom home is built once and it’s built for you on your lot that also needs to be developed so that it is suitable for a home, driveway, septic system, etc.
➡️ Style of Project Management
For custom builds, the quality and collaboration of project managers is often very high. This allows for a higher personal ROI if you plan to live in the home long-term while creating increased cost in the short-term.
Why does this increase costs? In a spec home, a builder can make quick decisions and less expensive choices since they aren’t responsible for a homeowner’s best interests.
When building a custom home, the project manager runs each decision by the homeowner. The project manager is also consistently in conversation with the homeowner making sure the scope and expectations that have been set are happening. This requires a great level of coordination and communication, consuming a lot of time - literally adding sometimes tens of thousands of dollars to a project’s cost!
➡️ bad project management Reduces value
Working with a bad-communicator can significantly reduce the value of a project. A great communicator can keep the project organized and on schedule. The ideal custom home project manager relieves stress by being organized, having superior job management, and being detailed. Below is what one homeowner had this to say about their experience building a custom home with KSC:
“Our project manager, Holden, was so detail oriented and often caught issues before we could even see them. Holden's attention to detail built a sense of trust between us, which allowed us to thoroughly enjoy the building process and the final product is a truly beautiful home.”
We’re not saying you have to build with us! But whoever you build a custom home with should absolutely have reviews that sing the praises of project managers.
3️⃣ High Quality Systems vs. Low Quality Systems
Did you know that there are many hidden systems in your home? We discuss this in great detail in our Hidden Costs Article, but here what you need to know about them as it relates to the decision to buy or build.
The systems and materials that are used when building a home are meaningful, but often not prioritized in spec homes where flashy helps move the units. Most homes that are being constructed are being built the way they were built decades ago, not factoring in anything that we have learned about modern building science.
Building science has vastly improved many of our homes hidden systems, such as:
Waterproofing of showers
Whole house dehumidification
Encapsulated Crawlspaces
Framing materials and exterior waterproofing
Building airtight homes to create healthier environments inside the home
Custom homes often incorporate these advances in building science at a higher rate than your average spec home on the market. These higher-quality systems work invisibly to create much healthier, longer lasting homes.
➡️ Do NEW spec homes incorporate modern building science in their hidden systems?
The trouble with spec homes (and old homes) is that it is simply difficult to tell what systems they’re made of. Some projects have quality materials overseen by focused, skilled project managers, while other development projects have a multitude of project managers and are incentivized to cut costs as much as possible.
Remember: With a custom home, you get to decide which systems you want to invest in with modern building science at the cost of, well, paying for it. You get to decide which tradeoffs you prefer when it comes to comparing the pros and cons of buying or building.
4️⃣ Short Timeline vs. Long Timeline
One of the most important factors when deciding whether or not to build is: can you wait a year to have your house drawn, designed, permitted, and built, or do you need a home sooner?
The Design and Planning of a custom home usually takes a minimum of 3 months. The build itself is usually completed in 7-8 months. Altogether, planning, designing, and building a home can take 10-15 months. That can be a valid reason not to build a custom home! If you have a child being born in the next 5 months, you may opt to buy a home or wait to build once you’re out of the infant stage. Or, if you are not in a rush and can wait for a “forever” home that meets every one of your needs/desires, then building a home could be a great option.
Key Takeaways
Spec vs. Custom Build Price:
Buyers need to understand that while the market price of new homes might be high, building involves a different pricing model due to factors like custom options, project management, and better materials & systems.
Timeline:
It takes time to build a custom home and that isn’t feasible for everyone’s situation. Some can afford to wait a year to move into their new home while others may need it in the coming months.
Value:
Ultimately, it comes down to what is valuable to you. For some, purchasing a home that is already built, has basic finishes, and cost less is more valuable than spending more money to have a higher quality home with full customization and the experience of building with a contractor that cares about the customer.
What would you prefer to do? Buy or Build? Would you like to have a conversation about what it would cost to build a custom home or what it would take to remodel a home on the market? Set up a Ballpark Estimate by clicking the button below!