If you’re not a current homeowner, we don’t blame you if you’d prefer that to change. Renting can feel like an endless pit of throwing your money away all without anything to show for it — especially in markets where, along with home prices, rents have skyrocketed over the last decade.

But with home prices how they are, buying one can feel too frighteningly expensive to consider. For that reason we love showing people that there’s another alternative: building your own home. On first thought it can sound overwhelming, but along with the end result being a custom place to call your own, you can actually save quite a bit of money this way, too.

For one, home prices are making it harder to just buy one

You’ve likely already considered the most obvious reason why building your own home could be less expensive than buying an already-standing one: simply put, the housing market today is nuts. Per USA Today Money, home prices nationally have increased over 60% since the end of 2012, while incomes have only increased by 20%.

While there can be a sense of glamor and excitement about an expensive home-buying market, the reality is that, unless you happen to own a home from past eras when doing so was more financially feasible, buying a home is becoming less accessible. For many people, homebuying can feel like a far-off dream.

Lumber, interest rates, and other important factors

Critically, the lumber industry is one that’s been heavily affected by COVID. According to CNBC, as of February 2021 softwood lumber prices were 112% higher than their price a year prior. Even before the pandemic in the early months of 2020, supply was already down in reaction to the lumber purchasing of 2019 and the assumption that those 2019 patterns foreshadowed the following year. Then, the pandemic hit and, after a few months housebound, many homeowners ended up turning to housing projects that used up a lot of wood. The physical necessities of the pandemic made it more difficult to adapt for the production and distribution segments of the supply chain, who could neither process wood nor get it out to the consumer as quickly as they could pre-pandemic.

This of course affects the costs of building a home and, in many cases, the cost of buying a home, since so many that are affordable include a certain amount of fixing up with wood products.

Despite this increase, building a custom home can still be the less expensive option. There’s a couple reasons for optimism that lumber costs should come down in the near-ish future. As the supply chain adapts to our new reality and the increase in demand, prices will reflect that. And it should be considered that there’s a decent chance the Canadian-American tariffs of the last four years will be reduced within a reasonable timeframe, giving American builders greater supply that couldn’t be achieved when relying on just American wood sources.

We’re also seeing the lowest interest rates since Freddie Mac has been recording them in the 70s. December 2020 saw record low interest rates, and ultra-low interest rates look like they’ll be the case for at least a while. This makes loans to buy a home far more accessible — but that’s also brought a lot more people into the housing market! This has added to more demand, bidding wars, and further increasing home prices.

But more on those interest rates…

In short: when you take out a loan to purchase land and build a house, the savings on such a low interest payment is greater than house and lumber pricing. You get a super low interest rate to save money, but you don’t have to deal with the subsequent mega-bidding for pre-built homes that most of these low-interest loans are going towards. (Of course the price of land you purchase isn’t invincible to the housing market, but in comparison it’s much less crazy.)

When we consider all of this, it’s a net positive that makes custom home-building far quite appealing — for the vision you have for a home, and for your wallet!