In recent years, real estate prices have exploded across the country, but in the Sunshine State, these price increases have taken on a whole new dimension.

Check out: Florida’s 5 Worst Cities to Buy Property in the Next 5 Years, According to Real Estate Agents

Learn more: 7 Reasons You Need to Talk to a Financial Advisor Before Spending $50,000 or More

Consider this: According to Norada Real Estate Investments, Florida home prices have increased 80% in the last five years. According to South Florida Agent Magazine, they increased an incredible 164% in the 10 years between 2013 and 2023.

“That $30,000 house in Florida from the ’80s? Today it’s easily worth $300,000 or more,” says Dutch Mendenhall, co-founder of RAD Diversified.

The driving forces are population growth, inflation and demand for Florida’s warm climate, he added.

“The market is booming,” he said, “and what once seemed like a modest investment has now turned into great wealth.”

The average home value in Florida is $399,130, according to Zillow, up 1.8% in the last year. For comparison, the national average price for a home is $362,481.

See what the Florida real estate market looks like this year.

Earning passive income doesn’t have to be difficult. You can start this week.

From $70,000 in the 80s to over $800,000 today

This trend is even more pronounced for houses near the shore.

For example, Kristen D. Conti, broker and owner at Peacock Premier Properties, cited a waterfront home in Englewood, Florida, on a canal with Gulf access. The home was built in 1982 and sold for $70,500.

“Today’s value is at least $835,000 because that is just the county’s fair market value, which is usually less than the actual market value,” Conti said, citing estimates from the county’s assessor.

Conti said waterfront properties have increased in value eight to ten times since they were built.

“Often nothing has changed in the houses, because many do not even renovate,” she says, “and yet the property values ​​continue to rise.”

Find out: The 6 best Florida suburbs to buy property in the next 5 years, according to real estate agents

Alex Blackwood, CEO and co-founder of alternative real estate investment platform Mogul Club, also pointed out that a typical home in Florida cost about $45,000 in 1980, equivalent to $172,000 in today’s currency.

“Today, however, homes in Florida cost an average of $399,000,” Blackwood said, adding that this indicates that real estate serves as an inflation hedge, meaning that on average it increases in value faster than inflation.

“House prices are simply determined by supply and demand,” said Blackwood. “As the population ages and grows, demand increases, and supply remains limited because we are not building houses fast enough.”

The story continues

Real estate prices in Florida outpace national growth

This trend is felt throughout the state and has been going on for quite some time.

In fact, annual home price growth in Florida has outpaced the nation every year since 2001, with the exception of the housing crisis, says Hannah Jones, senior economic analyst at Realtor.com.

For example, she said that a typical home in Florida sold for $120,000 in 2001. In 2023, that price has more than tripled to a staggering $374,000.

According to Jones, Florida has seen booming demand but a rather poor supply over the past decade, leading to rapid price increases.

However, she noted that while rising prices and mortgage rates have slowed demand and allowed housing inventory to recover by 2024, state-level home sales prices have not yet fallen.

“In fact, the median home sale price in Florida reached a new high of $395,000 in May 2024, according to the latest data available – 3.3 times the price in May 2001,” she said.

Jones also added that in addition to the strong price growth of the past two decades, high demand and low inventory have pushed home prices to new heights during the pandemic.

“Buyers took advantage of low mortgage rates and flexible working arrangements to secure their dream home in the sun through 2020 and 2021 and even 2022,” she said, “before pulling out when the combination of rising prices and mortgage rates made buying a home less attractive.”

Some challenges

While real estate prices have increased, which is beneficial to equity, Florida homeowners also face numerous challenges that can put a heavy strain on their wallets.

As Jones noted, the equity of many homeowners in the state — especially those who bought in the 1980s or 1990s — has grown impressively. Yet life in the state has become increasingly difficult.

“Hurricanes, floods and extreme heat pose a threat to property,” Jones said, “and the cost of property insurance reflects these risks, increasing the burden on homeowners.”

More from GOBankingRates

This article originally appeared on GOBankingRates.com: A typical Florida home cost $45,000 in 1980—what’s it worth today?