Key Takeaways:
- Florida’s population growth, job opportunities, and warm climate continue to fuel demand for housing.
- New construction homes offer modern features, energy efficiency, and fewer maintenance costs.
- Today’s interest rates and builder incentives make investing more attractive.
- Strong rental markets and appreciation potential enhance long-term ROI.
- Working with a trusted Florida builder like Carlson Harris ensures quality and value.
Florida has the highest population growth rate in the country, with the state adding 1.8 million new residents between 2020 and 2024 for a growth rate of 8.24%. The state leads the country as the top destination for domestic migration from other states, and draws significant numbers of global migrants, particularly from Latin America and the Caribbean. All evidence indicates that this robust population growth remains in play this year and that it will continue for the rest of the decade.
With so many newcomers, Florida needs more housing. While its housing market has been on fire since 2020, it’s currently cooled, as statewide median home prices are flat or trending down. Given this apparent pause, you might wonder if now is the best time to consider investing in new construction homes in Florida. With decades of luxury custom homebuilding experience in the Naples, Florida area, the owners of Carlson Harris General Contractors, Inc., will advise you that, yes, now is an opportune time to start investing in new construction homes in Florida. Let’s examine the reasons why.
Population Growth & Economic Expansion
Florida’s robust housing market has stalled in many areas due to excess inventory and high mortgage rates. However, we believe this represents a temporary pause rather than the start of a long-term downturn. With more than 900 newcomers migrating to the state daily, the current excess housing inventory will turn into a deficit without more new home construction. Additionally, the Federal Reserve is expected to start easing its benchmark interest rate soon, which will foster lower mortgage rates, encouraging home buyers to reduce housing inventory further.
Thus, despite the state’s stalled housing market, its robust economy and continuing population growth ensure renewed growth in the imminent future. By getting in now, investors can get ahead of the inevitable increase in new home construction costs.
Why New Home Construction is a Smart Investment
Real estate has long proven to be a lucrative investment option, with most people considering their primary residences as an investment as well as an abode. New construction homes offer investors greater potential returns than older homes for several reasons, including:
- Newly constructed homes don’t require immediate repairs or renovations, enhancing their longer-term value.
- New homes are built with modern appliances, electronics, plumbing, HVAC units, and “smart” technologies, typically under warranty, reducing maintenance expenses for up to 10 years.
- Investors can customize their new home to meet their unique preferences, incorporating modern designs, energy-efficient materials, and smart technologies that can boost resale value.
- Many contractors offer warranties with their new home construction, giving investors greater peace of mind.
- Financing options such as construction-to-permanent mortgage loans make the investment more affordable.
- Home construction materials costs are currently stable, but will likely rise again with increased housing demand.
Financial Incentives & Market Timing
With Florida’s current housing market lull, homebuilders are offering significant incentives to homebuying investors. This includes price cuts that are averaging 5%, below-average mortgage rate offers, and mortgage rate buy-downs.
Florida also offers compelling tax benefits for new home construction investors. With no state income tax, investment-related income, such as rental income and capital gains, is free of state taxes, enhancing overall returns compared to states with income taxes. The state also does not impose estate or inheritance taxes, which can advantage long-term real-estate investors.
From a federal perspective, investors in new home construction can deduct mortgage interest, property tax, and depreciation from their annual U.S. taxes. Additionally, the new construction home’s energy-efficient features may qualify for valuable federal tax credits, including a 30% credit on solar energy systems.
With mortgage rates relatively stable and projected to trend down, savvy investors can help finance their new home construction with strategic mortgage options that can reduce future costs. These options include:
- Adjustable-rate mortgage.
- Construction-to-permanent loan.
- Non-qualified mortgage.
- Spec construction loan.
- FHA and VA one-time close loans.
Long-Term Appreciation & Rental Potential
As an investment vehicle, new home construction delivers returns in two primary ways: resale and rental income. Florida’s housing market has long experienced cycles of boom and bust, though with marked appreciation. For example, the median home price for a Florida home increased by 132% between 2014 and 2024, for an average annual growth rate of 8.8%, which is a respectable return from an investment perspective. Add in the previous 10-year span, and the yearly growth falls to just under 4%; however, this period was marked by the 2004-2006 housing bubble and the 2008-2009 market crash.
Overall, newer homes weather the dips much better than older homes due to energy efficiency, storm-proofing, and other modern features. Out-of-state homebuyers, in particular, tend to seek out turnkey properties.
Given the state’s powerful economy and robust population growth, Florida has a thriving rental market, which guarantees respectable returns for renters. New homes with modern amenities command premium rents and, after accounting for costs, a new home construction investor should be able to easily net 5-6% from their investment.
Choosing the Right Builder
To ensure the best investment potential from your new home construction, you should work with an experienced general contractor with a reputation for building high-quality custom homes. Whether from renting or selling, the quality of your investment home’s craftsmanship will enhance its return on investment. You also want your contractor to excel in communications, knowing that effective communications and transparency throughout the building process are instrumental in keeping costs in check and the project on target to fulfill your vision.
Carlson Harris General Contractors has established a decades-long reputation for building exquisite, custom, luxury homes in the Naples, Florida area. We work closely with owners and architects through all phases of the project, providing personalized attention to every financial and design detail to develop an exceptional home on time and within budget.
To learn more about our homebuilding process and how we can help you turn your new home construction investment dream into reality, contact us today at 239-352-2460.
FAQ: Investing in New Construction Homes in Florida
Is investing in new construction homes in Florida a good idea right now?
Yes. Florida’s population growth, strong job market, and limited housing inventory make new construction homes a wise choice for both appreciation and rental income potential.
Are new construction homes more expensive than existing homes?
While upfront costs can be higher, new construction homes often save money over time through lower maintenance, energy efficiency, and builder incentives.
What are the tax benefits of investing in new construction homes?
Investors may benefit from deductions for mortgage interest, property taxes, depreciation, and certain expenses related to managing the property. Consult a tax professional for specific advice.
How long does it take to build a new construction home in Florida?
The timeline varies by builder and scope but generally ranges from 6 to 12 months. Carlson Harris provides transparent timelines and regular updates.
Can I rent out a new construction home immediately after purchase?
In most cases, yes. Once the home is complete and local regulations are met, you can list it for rent right away to start generating income.
