Building a House in Florida: What to Expect (and what you'll pay)

Posted on Aug 19, 2021

Florida’s housing market is hot, and the high cost of homes right now has a lot of people wondering: is it better to build? According to the Sun Sentinel, sales for newly constructed homes in South Florida have surged 113% this year compared to last.

If you’re struggling to buy a home, is building one a viable alternative? Here’s what you need to know.

How much does it cost to build a house in Florida?

When it comes to building costs, estimates vary. It’s worth keeping in mind that estimates are based on last year's data, which won’t necessarily account for rising costs in the current year.

According to GoBankingRates, Florida is the 33rd cheapest state to build a home in - in other words, it’s fairly average among the states. They note that a relatively high average structure cost contributes to Florida's ranking - likely because buildings have to meet more stringent requirements for storm resistance.

HomeAdvisor’s 2021 Guide to Home Building details that the average cost to build a home in Florida is currently $240,000 - $350,000. That’s a pretty significant range, but it gives you at least a rough idea of what to expect.

If you live in a popular metro area, you’ll likely be on the high end of the estimate.

According to Redfin, the median sale price in Florida right now for all homes is $327,500. Among Florida’s most popular cities, the median sale price is:

Jacksonville: $265,000
Miami: $420,000
Orlando: $320,000
St. Petersburg: $306,500
Tampa: $320,500

The current price of wood and materials

It’s worth noting, though, that there are a few factors that can increase the cost of building your home in Florida right now.

The current shortages in the labor market: The U.S. is facing a labor shortage that disproportionately impacts low-wage jobs. If local fast-food chains, for example, raise their wages to $15 an hour, the cost of all other labor categories can rise, too - and it will be difficult to convince someone to build a home for less. GoBankingRates indicates that the rate for labor in Florida is $14 an hour, but that could go up.
The cost of lumber and other materials: during the pandemic, lumber prices spiked. They’ve started to come back down from their peak, but it could still be a while until prices level out. Ongoing trade disputes with China as well as wildfires out West have both impacted the cost of building materials this past year. There have been shortages of everything from windows to copper this year, leading to pauses in construction.
Competition for construction: COVID-19 put a pause on homebuilding activity across the country, meaning there is pent-up demand for home construction. And the pandemic encouraged people to move homes or update their existing homes to suit their needs - meaning it can be harder to find a home builder in the first place.

Is building a home more expensive?

Right now the housing market is so competitive that for some people, it may actually be cheaper to build a house than to compete against multiple buyers to get an existing home. There are so many factors that go into building a home, however, that it can be hard to say. The price of your new home, for example, is also dependent on how much you’ll need to pay for the lot it sits on. In Tampa, for example, lots go from $35,000 to several million dollars.

As we’ve covered in our Buy or Build? guide, buying a new home is generally more expensive: but a lot of the expense is due to increased square footage. Foot by foot, new homes are, on average, not that much more expensive than existing homes:

The median sales price of new single-family homes sold in 2020 was $336,900, while the average sales price was $391,900, according to the US Census. And the median size of a new single-family home sold in 2020 was 2,333 square feet.
By comparison, the median sale price of all homes sold in 2020 was $314,700, according to Redfin.

It’s also worth considering that, while the upfront cost of a new home may be higher, your overall annual expenses might end up lower. According to West Orange Roofing, asphalt shingles last a maximum of 20 years in Florida’s high-intensity weather - and tiles last for up to 50. When you buy an existing home, many maintenance costs will accrue within your first 5-10 years of living there. In a new home, though, you usually won’t have any major fixes needed right away.

Something to keep in mind: Florida requires all blueprints to be examined and stamped by a local engineer. Considering that this state often experiences extreme hurricane weather, this is a good thing to have - but it does represent an additional expense.

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Building a home in Florida allows for customization

One of the benefits of building your home, rather than buying an existing home, is that you can customize it to your specific needs - whether you need an in-law suite for your parents, or a one-floor model so that you can age in place gracefully.

According to SmartAsset, approximately 150,000 retirees move to Florida every year, and most of them end up buying a home. As we’ve documented in Aging in Place, it’s important to prepare now for your future needs - especially if you want to stay in the same home as you age. Building able to build a home with future accessibility issues in mind can save you a lot of trouble and money down the road!

So again, while it may sometimes cost more upfront to build a home, you may have fewer expenses later on if you don’t need to modify your existing home to be aging-friendly.

Financing for Florida home construction

When you’re building a house - as opposed to simply buying it - loan requirements by lenders are often a bit more stringent. You’ll be getting a construction loan first since you’ll have a lot of contractors to pay off upfront.

Most lenders will require 10% down at minimum (whereas with a conventional loan, you can often go a bit lower so long as you pay PMI) and some may even require 20-30% down. Once construction is complete, your construction loan converts or is refinanced into a traditional mortgage.

You may have also heard of new construction builders in Florida paying for all of the buyer’s closing costs. However, due to the extremely competitive nature of the current housing market, this incentive has basically disappeared.

"If you were buying new construction you could walk in with your 3% down, and as long as you went with the preferred lender from the builder, they would pay for the rest," explains Orlando-based buyer agent Daniel Robinson. "Because there are more buyers than there are homes, builders have just stopped doing it. They might credit you $1,500 toward closing - but when closing’s $10,000, that’s not helping too many people.”

So: does it make sense to build a house in Florida?

With building timelines pushed back months now due to the hyper-competitive market for real estate, it can be a difficult time to build a home in Florida. However, building - rather than buying an existing home - has its advantages. While you'll likely need a heftier down payment to finance your home's construction loan and purchase, you'll be able to get a home customized to your exact needs.

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