How to Build a House in Hawaii

If the Hawaiian Islands are calling to you and you want to build a house there, be prepared to spend more money than you might in most of the mainland U.S. The average cost to build a house in Hawaii is $288,066, according to GoBankingRates, which is the highest among the 50 states. Hawaii also has the highest hourly labor costs in GoBankingRates’ survey at an estimated $27.01 per hour. 

While Hawaii’s natural beauty, climate, and lifestyle are appealing, nearly everything costs more there than on the mainland. The islands are more than 2,000 miles from California, which means many materials and parts required to build your home in Hawaii must be shipped long-distance. 

The state’s largest city, Honolulu, has approximately 340,000 residents, while the state has about 1.4 million residents. Hawaii’s population has been declining slightly over the past five years, but new homes are still in demand there.

Custom vs. Production Homes

Location and the style and size of your home will impact the cost to build a house in Hawaii. In addition, your costs will vary widely if you choose to build a custom home or a “production” home. Custom home prices depend on the cost of the land you buy to build your house, whether you need to pay to add utilities or a private road, the quality of the materials you choose, and the design of the property. Financing a custom home can require both a construction loan and a permanent loan. You may need to hire an architect as well as a builder. 

Production homes are constructed by a builder who typically offers several floor plans and builds multiple homes in one community. You may be able to personalize your home completely with a production builder or you may have a handful of optional upgrades available depending on the builder. Usually, you pay one price that includes the land and the house, although sometimes there’s an extra fee for a premium lot. 

This article discusses how to build a production home in Hawaii.  

Step-by-Step Process to Build a House in Hawaii

While it takes an average of seven months to build a house in most of the U.S., it may take longer to build a house in Hawaii. Many factors influence the timeline, including the permit process, which can take four to eight months in Hawaii. Your builder may have requested some permits in advance but typically cannot get the final permission to build until you’ve signed a contract. It can take longer to get some materials delivered to Hawaii, too, and to hire the skilled labor needed to build a house. Some builders will start to lay the foundation of a house or do other work to speed up the building process.

While the timeline may vary, you’ll need to tackle the following steps to build a house in Hawaii:

1. Determining a budget for your new home

Before you can begin looking for a new home community in which to build a house in Hawaii, you’ll need to make a financial plan. A lender can help you, but it’s best to start with your own budget to decide how much you want to spend on your monthly housing costs, including your principal and interest, property taxes, and homeowner’s insurance. Many new-home communities in Hawaii have a homeowner association that requires monthly, quarterly, or annual dues to include in your budget.

Next, meet with a lender to get preapproved for a mortgage. A preapproval letter doesn’t commit you to that initial lender. The benefit of a preapproval letter is that you can get a clear idea of your price range. If there are any issues with your credit report, you will have time to fix them before you fully apply for a mortgage.

The price per square foot to build a house in Hawaii ranges from $160 to as high as $900, which would be $400,000 to $2.25 million for a 2,500-square-foot house. Prices vary widely according to your location within Hawaii as well as land, materials, and labor costs. 

It’s no surprise that the overall cost to build in Hawaii is the highest in the U.S. Materials can cost twice as much as materials on the mainland. Typically, materials represent about 50 percent of the cost of building a home in Hawaii. Labor costs are also higher in Hawaii than on the mainland. One way to save on the cost to build a house in Hawaii is to see if your builder can use any local materials during construction. 

In addition to construction costs, you’ll need to budget for insurance, homeowner association dues, and property taxes. One of the few ways you’ll save money when you build a house in Hawaii is on your homeowner’s insurance.

Homeowner’s insurance in the state averages around $499 per year, the lowest in the U.S. compared to the national average of $2,305. 

The property tax rate in Hawaii is the lowest in the country at 0.28 percent. But because median home prices in the islands are so high, the average annual property tax bill is $1,871, according to SmartAsset. Still, that’s well below the national average property tax bill of $2,675. 

Amenities and the size of the community will impact your homeowner association dues. When you shop for a home, you can ask for an estimate of those costs. 

2. Choose your builder

Once your financial plan is in place, you can begin to search for a builder in Hawaii. Most buyers start online and narrow their choice based on the location of different communities and their preferred price range. You can visit websites for builders who are constructing homes in the communities you’re considering to gather information, then visit model homes. You may want to talk to residents in those communities about their experiences with different builders. You can also check reviews on a builder at TrustBuilder®. 

3. Line up your financing

When you’ve chosen your community and builder, you’ll need to apply for a mortgage and be ready to make a deposit. You may want to check out state and local homebuyer assistance programs in Hawaii to see if you qualify for a low-interest loan or down payment assistance.

Many builders request a specific sum for a deposit when you sign a contract to build a house in Hawaii. Your deposit could be 10 percent or less depending on the builder. You may also need upfront cash to pay for upgrades if you choose more expensive personalization than the usual choices in that community. You’ll make the rest of your down payment at closing. 

Even if you got preapproved by an outside lender, your builder may have an in-house lender or a list of preferred lenders. You can compare rates and fees with other lenders if you wish, but generally, you’ll benefit by working with the builder’s lender. Sometimes, the builder will offer incentives to work with a preferred lender, such as upgrades or paid closing costs. Even if incentives are not offered, working with the builder’s lender typically provides a more streamlined experience since the lender and builder will be in close contact while your home is being built. 

4. Choose your lot and your floor plan

Part of the process of building a house in Hawaii includes choosing a floor plan and lot. Your best source of information during this step is the builder’s on-site sales professional. In some communities, specific lots will require additional payment, and not every floor plan can be built on every lot. Sometimes a floor plan doesn’t fit on a certain lot or the builder may have designated certain lots for some models so that the community streetscape is aesthetically appealing. 

When you’re making these choices, make sure you ask a lot of questions about which features are standard and which are optional. You can also ask about plans for the community’s development that could impact your view and the surroundings of your house. 

5. Be aware of permitting and inspections

Your builder will oversee permits and inspections when you build a house in Hawaii, but you should be aware of the timeline for the permitting process. Hawaii has a statewide building code, updated in 2021, that mandates certain building standards such as energy conservation measures. Newly built homes in Hawaii must have solar-powered water heaters and be ready for solar panels. 

While numerous mandatory inspections will be done when you build a house in Hawaii, you can also hire an independent inspector if want one. If you do, you should check with your builder about the appropriate timing for the inspection. 

6. Consider the local climate

While Hawaii’s tropical climate draws vacationers year-round, the island weather can impact some of the choices you may want to make when you build a house in Hawaii. The proximity to the ocean of most island homes means you may want to choose materials resistant to damage from the salt air and winds. The state’s building code addresses some climate issues, and you can also talk to your builder about things such as the shape of your roof, the windows you choose to install, and other materials.

Construction Period 

While your builder is constructing your home in Hawaii, you should stay in close touch to track the progress. Keep in touch with your lender, too, to make sure you’re financially ready when your house is complete. Both your builder and your lender will be good sources of information during the process of buying and building a new home in Hawaii.