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Why Are Houses In Florida So Cheap? 6 Reasons For This

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Contrary to popular belief, houses in Florida are actually fairly cheap. There are areas in Florida where housing is extremely expensive, but overall, the state remains affordable when it comes to overall housing costs. It might surprise you to learn that Florida has cheaper houses than states like Wyoming, Alaska, Arizona, and Montana. When it comes to prices, the Sunshine State is actually in the middle of the road despite the postcard-like appeal.

So why are houses in Florida so cheap? What makes the housing market in America’s favorite tourist hotspot fair and affordable? There are a variety of reasons that contribute to this phenomenon. Here are six reasons why houses in Florida are so affordable.

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The 6 Reasons Why Houses In Florida Are So Cheap

1. Above Average Insurance And Property Taxes2

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When it comes to home insurance costs and property taxes, Florida is higher than most. There are many areas in the state that are prone to natural disaster risks, such as hurricanes, sinkholes, and severe thunderstorms. Florida also does not have an income tax, so much of the state’s revenue is derived from tourism and property taxes. The result is escrow costs that are higher than the rest of the country. That actually helps to keep home prices down.

With high escrow, homebuyers cannot afford larger and more expensive houses as in other states. That depresses the buying power of prospective buyers, which keeps the overall costs low, even if escrow is high.

2. Smaller Homes

Florida also features smaller than average homes. The average size of a typical American home is just over 1,700 square feet. The average size of a Florida home is 1,650 square feet, which is slightly below the national average. Smaller homes do not sell for as much as larger homes. Many homes in Florida are also older, which plays into the smaller home sizes and the lower costs. Even the new houses being built in the state today are not as large as in some areas of the country.

3. Abundance of Undeveloped Land

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Florida’s coasts are extremely well developed, but large swaths of the state remain rural and undeveloped. The plethora of undeveloped land has made expansion relatively easy and affordable for home builders and land developers. Areas around the college town of Gainesville remain sparsely populated. As does the Panhandle. Much of the central part of the state from Orlando south is still made up of large farms featuring cattle, hay grass, sugar, and citrus crops.

Florida is in the top half of the United States in terms of area, and this continues to fuel affordable land development.

Some areas, like Miami and Jacksonville, are very urbanized, but much of the state remains an untapped asset for home builders.

4. Historically Good Supply

The availability and affordability of undeveloped land have helped keep Florida’s supply of houses very healthy. A healthy home supply leads to lower overall prices. Some areas of Florida are facing a tighter housing supply than in days past, which has caused a recent spike in housing prices. The new supply crunch is due to an influx of out-of-state buyers plus slowdowns due to the recent global pandemic.

Despite the recent supply shortages plaguing some Florida markets, historically, Florida has maintained a healthy number of homes on the market. When supply keeps up with demand, prices remain stable and generally lower. Prices are always lower in these areas than in areas with low supply. For example, states like Hawaii and California have notoriously low housing supplies and notoriously high housing costs.

5. Lower Median Income Than Other States

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According to recent census data, Florida has the 37th highest median household income in the United States. The median household income is just $55,000. Lower levels of income lead to lower home prices. A market cannot support high prices if the general buyer cannot afford it. For this reason, Florida continues to have lower than average home prices statewide. Until the median income starts to rise in Florida at a pace that will allow it to catch up with the rest of the country, home prices will also continue to lag.

6. Boom Or Bust Market

Lastly, Florida is a notoriously volatile housing market. Starting all the way back in the 1920s with the Florida land boom, the state has seen wild swings in housing fortunes. The market has been subject to extreme periods of speculation and popularity. This has caused prices to spike for some years before plunging in others. This trend of volatility continues to be a part of the Florida housing market in the 21st century. Florida was one of the largest benefactors of the housing market bubble that emerged after 9/11. Then, in 2008 Florida was one of the hardest-hit states by the resulting housing market crash.

Today, areas of Florida are experiencing an intense boom as speculation and out-of-state buyers once again move in.

This up and down motion of the market has prevented the state from climbing steadily in price as in other areas of the country. Florida has not enjoyed as much stability in home equity as other places, which, in the long run, acts as a check on steady price growth.

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Are Prices In Florida Going To Remain Low?

Florida is projected to have a short-term housing boom. The Tampa Bay area and Miami continue to drive explosive price growth and are some of the hottest housing markets in the country. Those prices are largely being driven by increased demand and low supply. Both of those issues are scheduled to start stabilizing but that might not take place until 2023. These rapid increases in price are driving an overall rise in the market.

However, Florida is slated to remain affordable overall but the most desirable areas of the state are going to have elevated home prices until supply can rebound after the COVID-19 pandemic.

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What Areas Of Florida Are The Most Affordable?

The counties with the lowest home prices in Florida are all in the Big Bend region and the Panhandle. These counties are sparsely populated and inland from the coast. They represent the undeveloped, rural, parts of Florida that have yet to be targeted for big investments in development. If you are looking for a great deal on a home in Florida today you are going to want to look in these regions. The cheapest county is Dixie County followed closely by Lafayette County.

Other affordable counties that are closer to Florida’s biggest population centers include St. Lucie County north of Palm Beach, Hernando County north of Tampa, and areas of Clay County west of Jacksonville.

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Cheap land, stable supply, and small homes have always been markers of an affordable housing market. As of now, Florida still possesses all three of these key factors which help to keep the overall housing costs in the state lower than expected. In addition, Florida also has some economic factors unique to the state that continue to feed into an affordable housing market. The Sunshine State continues to come in below average in terms of home prices, especially when compared to places like Illinois, New York, and California.

Featured Image Credit: Radovan1, Shutterstock


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