Building a custom home in Central Iowa is still possible for less than $500,000 in 2026, but it takes realistic planning, smart trade-offs, and the right team. This guide walks you through exactly what under $500K can buy in the Des Moines metro, from square footage and finishes to land costs and location choices. You’ll learn where under $500K works best, where it gets tight, and when it makes more sense to adjust your expectations or explore other options. Whether you’re eyeing Waukee, Johnston, Ankeny, or somewhere more rural, this guide gives you the clarity you need before your first conversation with a builder.
TLDR: Building a custom home under $500K in the Des Moines metro is still possible in 2026, but expect 2,200 to 2,500 square feet with mid-range finishes in most areas. Land costs, construction expenses, and your finish choices all compete for the same dollars. The key is understanding the trade-offs between size, location, and finishes, and choosing which matters most to you. Read on to learn exactly how the numbers break down and where your budget goes furthest.
You’ve probably heard it from friends, family, or even builders: “You can’t build anything decent for under $500,000 anymore.” Maybe you’ve also heard the flip side: “Just buy an existing house and skip the headache.”
Both statements contain a grain of truth, but neither tells the whole story. The reality is more nuanced. Yes, construction costs have climbed significantly since 2021. Materials, labor, and land have all gotten more expensive. Interest rates spiked in 2023 and 2024, putting additional pressure on what buyers can afford. But here’s what often gets lost in the doom and gloom: Iowa remains one of the more affordable states to build in, and the Des Moines metro still offers real opportunities for budget-conscious custom home buyers.
In this guide, we’ll cut through the noise and lay out exactly what a $500,000 budget can realistically achieve in Central Iowa. We’ll cover the basic math, the trade-offs you’ll need to make, and specific scenarios for different parts of the metro. By the end, you’ll know whether building under $500K makes sense for your situation, and if so, how to make it work.
The Basic Math of a $500K Budget
Before looking at floor plans or visiting lots, you need to understand how your $500,000 gets divided up. A custom home budget isn’t just one big number. It’s a pie with several slices, and the size of each slice determines what kind of house you can build.
Here’s how a typical $500,000 custom home budget breaks down in the Des Moines metro:
Land: This is your first and often most variable cost. In the Des Moines metro, buildable lots typically run between $40,000 and $100,000 depending on location and size. The closer you get to West Des Moines or established Waukee neighborhoods, the higher your land costs climb.
Site work and utilities: Before construction starts, your lot needs prep work. This includes grading, driveway installation, utility connections, and sometimes tree removal or soil correction. Budget $20,000 to $35,000 for this in most metro situations.
Construction (the house itself): This is the biggest piece of the pie. In Central Iowa, quality custom home construction typically runs between $150 and $225 per square foot depending on finish level and complexity. For a $500K total budget, you’re looking at somewhere between $350,000 and $420,000 for actual construction.
Soft costs and contingency: Permits, surveys, engineering, and the unexpected issues that always seem to pop up. Plan for $25,000 to $40,000 here. Skipping your contingency budget is one of the fastest ways to blow past $500K.
According to the National Association of Home Builders’ 2024 Cost of Construction Survey, construction costs now represent about 64.4% of the average new home’s sale price, the highest share since NAHB started tracking this data in 1998.
Table 1: Example $500K Budget Breakdown
| Budget Category | Des Moines Metro Scenario | Outer/Rural Scenario |
|---|---|---|
| Land | $65,000 | $35,000 |
| Site Work & Utilities | $30,000 | $25,000 |
| Construction | $365,000 | $400,000 |
| Soft Costs & Contingency | $40,000 | $40,000 |
| Total | $500,000 | $500,000 |
The table above shows how the same $500K plays out differently depending on location. In the metro, higher land costs squeeze your construction budget. In more rural areas, cheaper land frees up dollars for a larger or nicer house.
Tip: Don’t fall into the trap of putting every dollar toward the house and leaving nothing for contingency. Unexpected costs are normal in construction. A 7 to 10% contingency keeps surprises from derailing your project.
How Much House Can You Actually Get Under $500K?
This is the question everyone asks first: “How big of a house can I build?” The honest answer depends on your land costs and finish choices, but here’s the general picture for Des Moines metro buyers.
Square Footage Ranges
Budget-focused builds (2,000 to 2,300 sq ft): This range works when you need to maximize space while keeping costs down. Think simpler rooflines, efficient layouts, and practical finishes. A well-designed 2,100 square foot home can still include four bedrooms, two and a half baths, and an open main floor, but you won’t have a lot of room for custom features.
Most common under-$500K range (2,200 to 2,500 sq ft): Based on projects Busy Builders has completed across Central Iowa, most under-$500K clients end up in this range at roughly $175 to $200 per square foot. This sweet spot offers a comfortable family home with room to spread out, decent finishes, and smart design choices.
Stretch range (2,500 to 2,700 sq ft): Getting into this range under $500K requires either cheaper land (think outer suburbs or rural lots), simpler design, or more basic finishes. It’s doable, but something has to give.
According to NAHB data on square foot prices, the national median for custom home construction reached about $166 per square foot in 2024. Iowa typically runs 15 to 25% below national averages, which helps local buyers stretch their budgets further.
What Do Different Finish Levels Look Like?
Budget finishes: Laminate countertops, builder-grade cabinets, carpet in bedrooms, LVP in common areas, standard plumbing fixtures, basic lighting packages. Functional and clean, but not Instagram-worthy.
Mid-range finishes: Quartz or solid surface countertops, upgraded cabinet lines, hardwood or higher-end LVP flooring, upgraded lighting and plumbing fixtures in the primary bath and kitchen. This is where most under-$500K builds land.
Higher-end finishes (tough to fit under $500K): Custom cabinetry, natural stone countertops, wide-plank hardwood throughout, designer lighting, high-end appliances. Usually pushes you over budget unless you go smaller or find exceptionally cheap land.
Table 2: Square Footage vs. Finish Level Under $500K
| Finish Level | Target Cost/Sq Ft | Approx. Square Footage | Typical Features |
|---|---|---|---|
| Budget | $150-$165 | 2,400-2,700 sq ft | Laminate counters, builder-grade cabinets, carpet/LVP, standard fixtures |
| Mid-Range | $175-$200 | 2,200-2,500 sq ft | Quartz counters, upgraded cabinets, hardwood in main areas, better fixtures |
| Stretch Mid | $200-$225 | 2,000-2,300 sq ft | Quartz, semi-custom cabinets, upgraded tile, premium fixtures in key rooms |
Pro tip: You can have one “wow” space even on a budget. Many under-$500K clients choose to splurge on the kitchen or primary bathroom while keeping other spaces more modest. This creates impact without breaking the bank.
Location Matters: Des Moines Metro vs. Surrounding Areas
Where you build determines how far your $500K stretches. Let’s break it down by area.
Des Moines and West Des Moines
These areas carry the highest land costs and construction pressure in Central Iowa. Building under $500K in West Des Moines or core Des Moines is challenging but not impossible.
What to expect: Smaller footprints (think 2,000 to 2,200 sq ft), simpler plans without a lot of architectural complexity, value-driven finishes, and careful land shopping. You’ll likely need to look at lots in less established areas or consider smaller, less prominent subdivisions.
Reality check: If your heart is set on a prime West Des Moines address with 2,600+ square feet and upgraded finishes, you’re looking at $550,000 to $650,000 or more in 2026.
Waukee, Johnston, and Urbandale
These growing suburbs offer slightly more breathing room than core Des Moines or West Des Moines, making them popular choices for under-$500K custom builds.
In Waukee and Johnston, you can often find buildable lots in the $50,000 to $75,000 range if you’re flexible on exact location. This leaves enough construction budget for 2,300 to 2,500 square feet with mid-range finishes.
Schools are a major draw in these areas, and you can still get a custom home that checks most boxes without pushing past $500K.
Urbandale sits in a similar position, though available lots can be harder to find in established neighborhoods.
Ankeny and Altoona
These eastern metro communities offer good value for budget-conscious builders.
Ankeny has seen rapid growth and has a range of lot prices. Some newer subdivisions push lot costs higher, but you can still find opportunities in the $45,000 to $65,000 range.
Altoona and areas east of the metro often offer even better land value. Under $500K here can realistically mean 2,500+ square feet with decent finishes.
Ames and Story County
Ames and surrounding Story County communities offer a different calculation. Land tends to cost less than Des Moines metro, and labor costs can be slightly lower too.
Under $500K in Ames can stretch to 2,500 to 2,700 square feet with mid-range finishes if you find the right lot. The trade-off is being 30+ minutes from Des Moines, which matters if your job ties you to the metro.
Rural Lots and Small Towns
This is where $500K goes the furthest. Rural lots in Boone, Guthrie, Marshall, or Warren counties can run $20,000 to $40,000, sometimes less. This leaves significantly more budget for the house itself.
The trade-offs: Longer commutes, potentially fewer nearby amenities, and resale considerations. Not everyone wants to be 25 minutes from a grocery store. But if you prioritize space and privacy over convenience, rural building delivers the most house per dollar.
Table 3: Under-$500K Feasibility by Area
| Area | Typical Land Cost | Typical SF Under $500K | Likely Finish Level | Key Trade-Offs |
|---|---|---|---|---|
| Des Moines/West Des Moines | $70,000-$100,000 | 2,000-2,200 sq ft | Budget to Low-Mid | Limited lot options, smaller footprint required |
| Waukee/Johnston | $55,000-$80,000 | 2,200-2,500 sq ft | Mid-Range | Good schools, requires lot hunting |
| Urbandale | $55,000-$75,000 | 2,200-2,400 sq ft | Mid-Range | Limited lot availability |
| Ankeny | $45,000-$70,000 | 2,300-2,500 sq ft | Mid-Range | Farther from west-side jobs |
| Altoona/East Metro | $40,000-$60,000 | 2,400-2,600 sq ft | Mid-Range | Distance from metro core |
| Ames/Story County | $35,000-$55,000 | 2,500-2,700 sq ft | Mid to Upper-Mid | 30+ minute commute to Des Moines |
| Rural (Boone, Guthrie, etc.) | $20,000-$40,000 | 2,600-2,800+ sq ft | Mid to Upper-Mid | Longer commutes, resale factors |
The Trade-Off Triangle: Size vs. Finishes vs. Location
Here’s the reality that every under-$500K buyer needs to accept: you can’t maximize all three corners of the triangle. You can have a big house OR great finishes OR a premium location, but not all three under $500K in 2026.
Think of it this way:
Want West Des Moines + 2,600+ square feet? You’ll be in basic finishes, or you’ll go over budget. Period.
Want premium finishes + 2,500 square feet? You need to look at Ankeny, Altoona, Ames, or rural, not Johnston or Waukee.
Want great finishes + West Des Moines location? You’re looking at 2,000 to 2,100 square feet max.
Which Corner Should You Let Go First?
Based on years of working with Central Iowa homeowners, here’s what Busy Builders has seen:
Location is often the smartest compromise. A well-built home in Ankeny or Altoona will serve your family just as well as one in West Des Moines. Schools are good across the metro. Commute differences are often 10 to 15 minutes. And you get significantly more house or better finishes for the same money.
Finishes are the easiest to upgrade later. You can replace countertops, upgrade fixtures, and refinish floors down the road. You can’t easily add square footage or move your house to a different city.
Size is hard to compromise if you need the space. A family of five simply needs more bedrooms than a couple. Don’t sacrifice rooms you need just to stay in a specific zip code.
Pro tip: Before you start, rank your priorities honestly. Write them down. Share them with your builder. This clarity makes every decision easier.
New Build vs. Buying Existing in 2026
Is building new the right call, or should you buy an existing home? This is a fair question, especially when you can find nice existing homes under $500K in many Des Moines metro neighborhoods.
New Build Advantages
Layout tailored to you: No compromises on room sizes, kitchen flow, or closet placement. You get exactly what you design.
Energy efficiency: New construction in Iowa must meet current International Residential Code standards, which means better insulation, more efficient windows, and tighter construction than homes built 20+ years ago. Many builders also offer ENERGY STAR certification, which means homes exceed code requirements by at least 10%.
Lower immediate maintenance: Everything is new. No surprise roof replacements, HVAC failures, or plumbing issues for years.
Modern systems: New electrical, modern HVAC, and radon mitigation built in from the start. This matters in Iowa, where 71.6% of homes test above the EPA’s action level for radon according to Iowa HHS data.
Existing Home Advantages
Established neighborhoods: Mature trees, known neighbors, and proven property values.
Immediate occupancy: No waiting 8 to 12 months for construction. Close and move in.
Negotiating room: In a cooling market, sellers may accept lower offers or include credits.
Potential for strategic remodel: Buy under budget and use the remaining funds for targeted upgrades.
Which Path Makes Sense?
Build new if: You have specific layout needs, want maximum energy efficiency, plan to stay long-term, and can wait for construction.
Buy existing if: You need to move quickly, find a home that already fits your needs, or prefer established neighborhoods and are willing to handle some future maintenance.
Consider both if: Your budget allows for a smaller new build OR an existing home with remodel potential. Busy Builders works on both new home construction and remodeling projects across Central Iowa.
Real-World Example Scenarios
Numbers only go so far. Let’s look at four specific scenarios that show how under-$500K actually plays out in the Des Moines metro.
Scenario 1: The Waukee Family Build
Profile: Young family with two kids, both parents work in West Des Moines, schools are the top priority.
Location: Waukee, in a newer subdivision with good but not premium lots.
Square footage: 2,550 sq ft (4 bed, 2.5 bath)
Budget allocation:
- Land: $62,000
- Site work: $28,000
- Construction: $370,000
- Contingency: $35,000
- Total: $495,000
Finish level: Solid mid-range. Quartz counters in kitchen, laminate in bathrooms, LVP flooring throughout main level, carpet in bedrooms, builder-grade cabinets with soft-close upgrade, standard lighting package.
Trade-offs made: Simpler roofline (no dormers or bump-outs), smaller primary closet, no built-ins in living areas.
Outcome: Family got the space they needed in their preferred school district. They plan to upgrade lighting and add built-ins in the living room in a few years when budget allows.
Scenario 2: The Johnston Couple
Profile: Professional couple, no kids yet, want to be in Johnston for future schools and commute reasons.
Location: Johnston, infill lot in an established neighborhood.
Square footage: 2,380 sq ft (3 bed plus office, 2.5 bath)
Budget allocation:
- Land: $68,000
- Site work: $32,000
- Construction: $358,000
- Contingency: $37,000
- Total: $495,000
Finish level: Upper-mid in kitchen and primary bath (quartz, upgraded cabinets, tile shower), mid-range elsewhere.
Trade-offs made: Slightly smaller footprint than originally hoped, three bedrooms instead of four (using one as a dedicated office), smaller garage (2-car vs. 3-car).
Outcome: Happy with the location and quality. Plan to finish basement in 3 to 5 years for additional space.
Scenario 3: The Altoona Value Build
Profile: Move-up buyers with three kids, currently in a cramped starter home, want maximum space for the money.
Location: Altoona, newer development area.
Square footage: 2,720 sq ft (5 bed, 3 bath)
Budget allocation:
- Land: $48,000
- Site work: $25,000
- Construction: $390,000
- Contingency: $35,000
- Total: $498,000
Finish level: Budget to low-mid. Laminate counters, builder-grade cabinets, all LVP and carpet flooring, standard fixtures throughout.
Trade-offs made: Basic finishes throughout, simpler architectural design, 15-minute longer commute to downtown Des Moines.
Outcome: Got the five bedrooms their family needed. Plan to upgrade kitchen counters and lighting in 2 to 3 years. The extra commute time hasn’t been a major issue.
Scenario 4: The West Des Moines Attempt That Didn’t Work
Profile: Couple wanted to be in West Des Moines, had their hearts set on 2,500 sq ft with nice finishes.
Initial budget: $500,000
What they wanted:
- West Des Moines location
- 2,500 sq ft
- Mid to upper-mid finishes
- 3-car garage
The reality: After pricing lots ($85,000 to $95,000 for buildable options) and getting construction estimates ($420,000+ for their wish list), they were looking at $550,000 to $580,000.
What had to change: They had three options: increase budget to $560,000, shrink to 2,100 sq ft in West Des Moines, or shift location to Waukee or Urbandale.
Decision made: They chose to shift to Waukee and got 2,500 sq ft with mid-range finishes for $498,000.
Lesson: West Des Moines premium comes at a real cost. Being flexible on location opened up much better options.
Table 4: Example Under-$500K Scenarios
| Scenario | Location | Square Feet | Finish Level | Total Budget | Key Trade-Off | Outcome |
|---|---|---|---|---|---|---|
| Waukee Family | Waukee | 2,550 | Mid-Range | $495,000 | Simpler design, smaller closets | Happy, plan future upgrades |
| Johnston Couple | Johnston | 2,380 | Upper-Mid (key rooms) | $495,000 | 3BR instead of 4BR | Happy, will finish basement later |
| Altoona Value | Altoona | 2,720 | Budget | $498,000 | Basic finishes, longer commute | Got needed space, planning upgrades |
| WDM Attempt | Shifted to Waukee | 2,500 | Mid-Range | $498,000 | Gave up WDM location | Better value, happy with decision |
Financing, Rates, and How to Stretch Your $500K
Understanding how construction financing works helps you plan realistically and avoid surprises.
How Construction Loans Work
Building a custom home typically requires a construction loan, which is different from a traditional mortgage. According to the Consumer Financial Protection Bureau, construction loans are short-term loans that cover the cost of building or rehabilitating a home.
Construction phase: Your lender releases funds in stages (called “draws”) as construction progresses. You typically pay interest only during this period.
Permanent financing: Once construction is complete, you either refinance into a traditional mortgage or your construction loan converts to a permanent loan (called a “construction-to-permanent” or “one-time-close” loan).
In Iowa, construction loan rates in early 2026 typically run 5.5 to 6.5%. Permanent mortgage rates are hovering around 6 to 6.5% for well-qualified borrowers.
Budget-Stretching Strategies That Work
These approaches save money without creating long-term regret:
Standardize window sizes: Custom windows cost more. Using common sizes from your builder’s standard options can save $3,000 to $8,000.
Simplify rooflines: Every hip, valley, and dormer adds labor and material cost. A clean roofline with one or two simple features saves money without hurting curb appeal.
Keep footprint compact: A two-story 2,400 sq ft home costs less to build than a one-story 2,400 sq ft home because you need less foundation and roofing.
Defer non-structural upgrades: Consider leaving the basement unfinished (but plumbed and wired) or deferring a bonus room finish. You can complete these later when budget allows.
Value-engineer finishes: Spend on what you touch daily (countertops, flooring in main areas) and save on what you don’t (bedroom carpet, utility room finishes).
False Economies to Avoid
Some “savings” cost you more in the long run:
Cheap windows: Iowa winters demand quality windows. Buying bargain windows means higher heating bills and earlier replacement.
Under-sized HVAC: An undersized system runs constantly, wears out faster, and never keeps your home comfortable.
Poor insulation: This is not the place to cut corners. Iowa’s temperature swings from sub-zero to 90+ degrees demand proper insulation.
Skipping radon mitigation: Given Iowa’s high radon levels, building in passive radon mitigation during construction costs a few hundred dollars. Retrofitting later costs $1,000 to $2,000+.
According to the Department of Energy, investing in energy efficiency during new construction pays dividends for decades through lower utility bills and better comfort.
When Under $500K Is Not Realistic, And What To Do About It
Honesty builds trust. Here are situations where under $500K simply won’t work in the Des Moines metro:
You want a premium West Des Moines lot plus 2,600+ square feet plus upgraded finishes. This combination requires $575,000 to $700,000 in 2026.
You want complex architectural features. Curved walls, multiple rooflines, oversized windows, vaulted ceilings throughout, and custom millwork push costs significantly higher.
You want fully custom everything. Fully custom cabinets, imported materials, designer fixtures, and high-end appliances add $50,000 to $150,000 over standard specs.
What Are Your Options?
Adjust expectations on size: A well-designed 2,200 sq ft home can feel spacious and serve your family well.
Shift to a different suburb: Moving from West Des Moines to Waukee or from Johnston to Ankeny can free up $30,000 to $50,000 in your budget.
Phase your project: Build a smaller but complete home now, with plans to finish additional space later.
Increase your budget if preferences are truly non-negotiable: If location, size, AND finishes all matter deeply, you may need a $550,000 to $600,000 budget. That’s okay, but know it going in.
FAQ Section
Q: What’s the most common square footage range for under-$500K custom homes in the Des Moines metro?
A: Most under-$500K custom builds in Central Iowa land between 2,200 and 2,500 square feet with mid-range finishes. This range balances space, quality, and budget effectively.
Q: Can I build under $500K in West Des Moines, or do I need to look at Waukee, Johnston, or Urbandale?
A: You can build under $500K in West Des Moines, but expect a smaller footprint (2,000 to 2,200 sq ft) and more modest finishes. Waukee, Johnston, and Urbandale offer more room to maneuver for the same budget.
Q: How much should I plan to spend on land if my total budget is $500K?
A: Plan for $40,000 to $80,000 depending on location. Lower land costs (rural, Altoona, outer suburbs) leave more for the house. Higher land costs (West Des Moines, prime Waukee lots) squeeze construction budget.
Q: What finish upgrades blow up budgets the fastest?
A: Kitchen cabinets, countertop materials, and flooring choices have the biggest impact. A jump from builder-grade to semi-custom cabinets alone can add $10,000 to $20,000. Hardwood throughout versus LVP adds another $8,000 to $15,000.
Q: Can I start with a basic plan and upgrade later?
A: Yes, and this is a smart strategy. Focus on structural quality and layout now. Countertops, lighting, flooring, and fixtures can all be upgraded later more easily than adding square footage.
Q: How do change orders impact an under-$500K budget?
A: Change orders are budget killers. Every change during construction costs more than it would have at the design stage. Finalize your decisions before breaking ground and resist the urge to upgrade mid-build.
Q: Are build costs likely to go down if I wait a year or two?
A: Unlikely. Material costs have moderated from 2022 peaks but remain elevated. Labor costs continue rising due to skilled trade shortages. Waiting rarely saves money in construction.
Q: How do construction loans work for a $500K build?
A: You’ll get a construction loan that funds the build in stages. During construction (typically 8 to 12 months), you pay interest only on the amount drawn. Once complete, you convert to a permanent mortgage or refinance into traditional financing.
Q: What are some red flags in ultra-low builder bids?
A: Watch for bids that are significantly lower than others. Red flags include vague allowances, unclear specifications, missing items (permits, surveys, site work), and pressure to sign quickly. The lowest bid often becomes the highest final cost.
Q: How does Busy Builders help keep under-$500K projects on track?
A: Busy Builders provides detailed, line-by-line estimates before construction starts. We walk through every trade-off honestly, help you understand where your money goes, and provide regular updates throughout construction to prevent surprise overruns.
Ready to Explore Your Options?
Building a custom home under $500K in the Des Moines metro is still achievable in 2026, but it takes honest planning, smart trade-offs, and the right building partner.
Busy Builders has helped over 1,000 Central Iowa homeowners navigate custom builds and remodeling projects since 2020. We specialize in transparent, no-surprise construction, and we know the Des Moines metro market inside and out.
If you’re exploring a custom home in the $400,000 to $550,000 range, here’s what we can offer:
- A free planning consultation to discuss your goals, budget, and priorities
- Honest feedback on what’s realistic for your target areas and finish expectations
- Line-by-line estimates so you know exactly where your money goes
- Knowledge of land availability and subdivision options across Central Iowa
- A transparent process with no hidden costs or surprise change orders
We serve Des Moines, West Des Moines, Waukee, Johnston, Urbandale, Ankeny, Altoona, Ames, and communities throughout Central Iowa.
Bring your wish list, your target areas, and your budget questions. We’ll give you straight answers.
Call: 844-435-9800
Website: https://busybuildersiowa.com/
Busy Builders | Full-Service Construction and Remodeling | Serving Central Iowa Since 2020
