Orlando Homebuilders Face Pre-Construction Costs Per Unit, Pricing Out Starter Home Market

Written by:

Rudi Davis

Date:

02 Mar 2026

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Soaring land acquisition costs, infrastructure expenses, and permitting fees are adding $50,000 to $60,000 to the cost of every new home in the Orlando area before construction even begins, according to Brenden Rendo, Real Estate Broker at NextHome. These upfront costs are reshaping the economics of entry-level housing in Central Florida, pushing realistic starting prices for first-time buyers to $300,000–$350,000 — well above what many expect or can afford.

“When you see someone buy 47 acres for $27 million and start adding up infrastructure, permitting, and impact fees, you’re already at $50,000 to $60,000 per house before you break ground,” Rendo says. “How do you make houses affordable when the initial cost is that high?” This cost structure is forcing builders to focus on higher-margin products, particularly townhomes, even though buyer demand for them is weak. Rendo notes that in a recent townhome development, only three of 20 completed units sold, leaving 17 unsold.

Land Costs Push Upfront Expenses Higher

The $50,000 to $60,000 pre-construction figure includes land purchase, impact fees, and infrastructure development — costs that must be absorbed before any building starts. In areas like Clermont, where a 47-acre land deal closed at $27 million, developers must recoup these high costs through higher unit prices or by increasing density.

Rendo says this burden is especially acute in the Orlando metro, where land prices have surged over the past three years. In Winter Park, teardown lots now sell for $700,000, with buyers demolishing existing homes to build $3 million properties. While these luxury projects represent the top of the market, the underlying land cost pressure affects all segments.

As a result, builders are turning to townhome developments to achieve higher density and lower per-unit land costs. However, Rendo points out that townhomes are among the least-searched property types in Orlando, highlighting a disconnect between what builders are producing and what buyers want. “If you search real estate terms online, townhomes are one of the least searched,” Rendo says. “No one’s really looking for them, but that’s what’s being built.”

Buyer Expectations

The widening gap between pre-construction costs and what buyers expect is keeping many first-time buyers out of the market. Rendo observes that most buyers begin their search at price points they cannot realistically afford, often starting at $500,000 when their actual budget is closer to $300,000 to $350,000. “A lot of them start extremely high in value,” Rendo says. “My daughter started at $500,000. I told her, not for your first house. You have to see it as an investment.”

Buyers also expect move-in ready, like-new homes at entry-level prices — a combination that is impossible under current construction economics. Rendo says these expectations are not aligned with what is possible for first-time buyers today. “Everybody wants everything mint, but we can’t all afford that,” he says. “It’s champagne taste on a Budweiser budget.”

The problem is compounded as buyers stretch to the maximum debt-to-income ratio, ignoring the need for a financial cushion for repairs, emergencies, or rising taxes and insurance. Rendo notes that many focus solely on qualifying for the biggest loan, not on overall affordability.

“People have gotten used to stretching themselves to the brink,” he says. “Just because the maximum DTI is a certain number doesn’t mean you should go there. What if your car breaks or the water heater needs replacing?”

Builder Incentives

Builders are using rate buydowns and closing-cost assistance to boost sales in the Orlando market temporarily. Rendo explains that builders leverage their volume to buy down interest rates to 4.5% on 30-year mortgages, making $450,000 homes seem more affordable than they would be at market rates.

He says these incentives are “the only thing keeping the number of sales up” for new construction. However, these programs do not address the underlying cost structure that makes it nearly impossible to deliver homes below $300,000 in the Orlando area.

The use of incentives also creates information gaps, as some buyers are unaware of future tax increases or insurance adjustments after closing. Rendo says this has led to unexpected payment increases for buyers, which has fueled caution among first-time buyers. “There’s been negative news about some builders not being upfront,” Rendo says. “Buyers aren’t always told their taxes or insurance will go up, and then they get hit with a bigger payment.”

The combination of high upfront costs, inflated buyer expectations, and reliance on incentives has created stagnation in the entry-level market. Many buyers are delaying purchases, waiting for conditions that are unlikely to improve soon. “Getting them to pull the trigger is really hard,” Rendo says. “There’s nothing that fits what they want right now, and I don’t see it changing for a while.”

Building Smaller Homes

To address the affordability problem, Rendo’s firm is building smaller starter homes in markets with lower land costs. The company is developing 1,100-square-foot homes on quarter-acre lots in Inverness, priced at $247,000. This project aims to deliver true starter homes by accepting lower margins and building in less expensive submarkets.

“We’re working on delivering affordable, true starter homes,” Rendo says. “If I can give you a new, good-sized home at the same price you’re paying in rent, wouldn’t you rather own?” The Inverness project shows that delivering homes under $250,000 requires building outside the Orlando core, where land is cheaper. However, this means buyers must accept longer commutes or less developed infrastructure in exchange for lower prices.

Rendo says his firm is seeking more investors to replicate this model in other submarkets, but success depends on finding areas where land costs are still manageable. As land prices rise across Central Florida, the number of places where sub-$300,000 homes are possible is shrinking.

Looking Ahead

The Orlando starter home market is being squeezed by high pre-construction costs, weak demand for townhomes, and buyer expectations that no longer match market realities. Temporary incentives may support new home sales for now, but they do not address the underlying costs that keep entry-level homes out of reach for many buyers.

Efforts to deliver affordable homes increasingly require moving farther from Orlando’s urban core, trading location for price. Unless land and infrastructure costs stabilize, the gap between what first-time buyers want and what is available is likely to persist, making true affordability an even greater challenge in the years ahead.