Costs of Building a Home in Texas

In Texas’s current real estate market, low inventory and high demand from buyers means that finding a decent resale home is nearly impossible without entering into a crazy bidding war. To avoid the frustration of today’s housing market, buyers are turning to the idea building.

Whether you're in Dallas, Waco or El Paso, building a custom home might be a great option.

While it is certainly more convenient and less expensive to purchase a resale (used) house, that isn’t stopping buyers who want to build their own home. Building a home provides you with a rare opportunity to create and customize a home from the ground up that perfectly fits your lifestyle and needs.

How Much Does it Cost to Build a House in Texas?

Building a home comes at a cost and includes several additional expenses that aren’t usually involved in the purchase of an existing house. If you are considering building a new construction home in Texas, keep reading to learn more about all of the costs involved to build a house and important factors to consider.

Building a home doesn’t happen overnight. The homebuilding process is long and includes several crucial steps. As you can probably imagine, each of these building steps comes with a cost. Let’s take a look at what these exact costs are to give you an idea of what to expect.

Cost to Buy Land in Texas

Before you can start building, you have to purchase land to build it on. The average price per acre in Texas has increased steadily each year, to about $4,000 per acre in 2022. Keep in mind that the costs for land vary greatly depending on the location of the land, the type of land, and how much land you plan to purchase. Considering the average single-family lot average about half an acre, it’s a good idea to search for lots that are at least that size, if not larger.

One acre lots in Texas isn’t usually hard to come by, except for perhaps in urban areas of places like Austin and Dallas. However, the heightened interest in building new construction has led to a shortage in home lots. This means those looking to build might have to wait longer periods of time for available lots or look outside of city limits and into more rural areas.

In the cities, you are likely to find finished lots in existing subdivisions or other areas specifically zones for residential housing. While finished lots are much more convenient when it comes to utility hookups, sometimes they are not an option. If you purchase raw land, be prepared to pay extra to clear the land and prep for construction.

Cost to Grade Raw Land in Texas

If you choose to purchase larger agerages of rural land, make sure you are well prepared for the extra steps involved. This often includes confirming acreage, clearing timber, and working around topographical features like creeks or lakes. For those who purchase raw land, expect to spend between $6,750 and $12,643 to clearing and grade an acre of land.

Obtaining Permits

Another important step to cross off the list before building a new home is obtaining the correct building permits. On average, you can expect to spend between $1,200 to $2,000 on building permits. However, this price can be higher or lower depending on local regulations.

Building permits are official, written forms of approval issued by a local government agency that allows contractors to begin construction on a home. These permits are required for new construction projects to ensure the safety of the work, as well as its compliance with local codes for land use, zoning and construction. This way you don’t build a home that is structurally hazardous or poorly suited for inclement Texas weather.

In most cases, you will want to apply for a permit after blueprints for the home are obtained. After the permit is received, you will typically have about six months to begin construction for the permit to be valid for however long it takes to build.

The permit process can often feel daunting to first-time home builders, but it is a crucial step to avoiding hefty fines, lack of insurance coverage, or even the demolition of the home if it does not meet area standards.

Home Construction Costs in Texas

Construction costs will make up a large portion of the overall building budget. If you are building a home in Texas, prepare to pay between $150 and $350 per square foot.

Based on our survey of local builders, the average cost to build a house in Texas is $225 per square foot. Keep in mind that in certain parts of the state, construction costs can approach $400 in more affluent markets. Luxury finishes and premium fixtures tend to increase the price per square foot costs as well.

With these estimates in mind, you should be able to gauge costs and create a budget for your home’s construction.

Another factor to consider in construction costs are the continuing ripple effects brought on by the pandemic. During your build process, you might run into temporary supply chain issues brought on by the spike in lumber prices. However, lumber prices have recently began to sink.

Finishing Costs

Selecting the finishes for your new home is by far one of the most exciting parts of the building process. In fact, this customization aspect is why so many homebuyers choose this to build new. Unfortunately, while this building step may be fun, it also happens to be the most expensive.

As a general rule, plan to set aside about 25% of your construction budget towards interior finishes.  Not only do you have to factor the interior features like flooring, cabinets, lighting and appliances into your total costs, but you also have to consider the exterior features. These include details such as roofing, shutters, trim, siding and more.

The quality of the finishing materials has a huge impact on the overall look, functionality and value of the home, as well as the overall construction costs. While builder grade finishes (avg. $90/square foot) certainly do the job, upgraded (avg. $175-310/square foot) or luxury finishes (avg. $525-1,110/square foot) will add desirable appeal and value to the home.

Should You Buy or Build in Texas?

If you are unsatisfied with the current selection of pre-sale homes in Texas and can afford the costs, longer wait times and potential complications of building a home, then go for it! Also, keep in mind that new construction prices can be negotiated meaning costs might end up being less than what you expect. While building a new home might be a bit of a challenge, you’ll have the special opportunity to build the home of your dreams.

If you are considering building a home in Texas, you are not alone. Texas continues to lead the country in building permits. In the first four months of 2021 alone, 88,209 permits were issued for single family homes in Texas. But the demand for new construction is outpacing supply meaning if you want to build, you will want to start the process soon.

Is building a new home in Texas the move for you? If so, you will want a knowledgeable real estate agent to help you through the process. SimpleShowing is the smartest way to buy a new construction property. Along with receiving the guidance from one of our experienced local agents, you will also receive an average of $5,000 towards closing costs. Contact us today to get started!