What exactly does "my grandfather built this house" mean?

When someone says that "my grandfather built this house", say now or even 20-30 years ago, do they mean their grandfather literally built that house from ground up?

Foundation, framing, wiring, plumbing, stucco, roofing — the works?! Or do they mean it to say "My family has lived in this house for 3 generations since my grandfather [paid someone to] build this house?" Potentially based on grandfather's design/vision. Sure maybe grandpa put in the floors or a custom bookshelf, but did grandpa literally build the house?

It means the grandfather invested blood, sweat, and tears to bring it to fruition. Maybe directly through construction, or maybe through some equivalent sacrifice, such as working three jobs to pay for it.

The phrase wouldn't be used for contracting construction for a price which is easily within the means of the buyer. One would tend to use a verb like "commissioned" in that case.

It could mean either. In some way, he was responsible for the house being built, either by constructing it himself, or just paying for it. There's no way to tell in this context. It's not typically meant to be taken literally, but more as hyperbole meant to create some emotional context for whatever it is the speaking was talking about.

In a similar way, various groups are often claimed to have "built this county". The particular group will vary depending on the person speaking and the point they are trying to make.

Surprising as it may seem, quite possibly yes. Of course it all depends where you live and what kind of house we are talking about.

As a rule of thumb, the most agrarian the culture the most probable that would be. In older times, building a house was very much a friends and family matter. Everybody would participate and the beneficiaries would return the favour when the opportunity would present itself.

It is also very much how it still happens today in many developing countries. Taking it to the extreme I know of cases in remote parts of China where the future proprietary sets a date and everybody comes in to give a hand and the house is completed in a few days. This way of doing was still in use a few centuries ago in many Western countries.