What does success and achieving the American Dream look like to you? For many, the answer would be owning a home – with or without the stereotypical white picket fence. Owning a house implies permanence and financial in a way that even long-term renting never could; it shows that a person has the financial ability and will to set down the roots that will allow them to provide a long-term home for themselves and their family. But for some, buying someone else’s house isn’t enough; no property looks quite right or feels quite like home. They decide to build their new property from the ground up, and bring the house they dream of into reality. But how feasible is this plan? Should you build – or would it be better to buy? Let’s take a look at the facts.
According to statistics provided by The United States Federal Reserve, the average sale price of a home sold in the first quarter of 2018 stood at $375,000 – a hefty sum, given that the Bureau of Labor Statistics puts the median wage for American workers as of 2017 at $44,564, and the average household income at just $73,298. To add yet another obstacle, the average American household is knee-deep in debt; the BLS further estimates that on average, households are responsible for repaying about $137,00.
Taken together, these financial barriers make it difficult – but not impossible! – for families to buy or build the home of their dreams. Prospective homeowners should consider the following points before they enter into the market:
Do you have the resources to build?
Americans that earn more than roughly $400,000 to $600,000 per year, possess relatively small debts, and have substantial nest eggs could reasonably build a home without too much financial risk.
Do you plan on settling down in an area for longer than a decade?
The longer one plans on living in an area, the more easily one can make one’s mind up regarding this tough situation. If there are any chances that one could move in the remainder of their working lives, renting is likely the best option available.
Odds are, you wouldn’t want to go to the time and trouble of building a home from the ground up if you foresaw yourself moving within five years. If you have an occupation that requires you to travel or move often, renting would by far be your best option. However, if you intend on staying in one area for years and want to live in one home for over a decade, building your dream home could be a great option. That said, if you plan on moving to a bigger home in a few years, buying might be your best bet.
Realtor indicates that the median home purchase price hovers around $223,000, whereas building one from scratch is roughly $289,415. Building could be cheaper in some cases, though buying is almost always the more affordable option.
*Originally posted on JasonCohenPittsburgh.org