The latest report from the Greater Springfield Board of Realtors says average home prices are up 5% compared with a year ago, but sales are down 25%. Talk about the demand you’re seeing in the industry and how prices are impacting that.
We still have a supply and demand issue, and we still have demand in our area because we live in a good area. Everyone’s still busy and the market is still strong, so it’s supporting those higher prices. It seems like we have hit a plateau compared to one or two years ago. Prices are still high and that’s due to people still moving to our area and demographics. Millennials are still expanding their family. They’re still wanting to buy homes or move into a second home, build a dream home. I’ve been asked for 10 years if prices are going to go back down, and it’s not happened yet.
What’s increasing costs for you as a builder? Materials, labor?
All the above. When you look at housing prices from pre-COVID to now, it’s a real struggle because they’ve risen so much, both material and labor, that people’s minds and expectations have not caught up to the reality of what things cost. We spend a lot of time as a builder wearing a lot of hats: moms, firemen, marital counselors. But we – a lot of times – are educators because people can very easily go online and see what a house costs that’s listed. But you really have to talk to a builder to see the current prices of what it costs today to build. I can give a very good example of a house that we finished late in 2019 that was $475,000. Same house is $750,000 today.
You previously were involved in rehabbing affordable homes. We have a housing crisis in Springfield. City officials have said we’re short close to 9,000 housing units and affordable single-family housing is a need. What are the challenges for builders in that space? It sounds like margins are probably pretty slim.
That’s true. I don’t do production building or spec building, but I know lot costs. We don’t have the lots like we did in the last boom. When lots are already expensive and then you look into the price of the other materials, it is a shortage.
What are opportunities to fill that gap?
Smaller lot dimensions. I was talking to a developer and builder just last week and so many municipalities still have bigger lot requirements. But you can reduce the size of a lot, which reduces the size of utilities and development. Not so much even less of a size of a house, just a deeper house. I was talking to Jeff Kester with GSBOR and he was saying in other markets they’ve done multiunit ownership – condos. We have (few) condos in Springfield. That allows people to at least have ownership and start to build equity on a smaller scale. We’ve got to do something to allow this next generation to capitalize on the dream of home ownership.
Your business is in custom-built, higher-end homes. What are the design trends and desires you’re seeing from homeowners in our area?
The modern farmhouse has been huge for the last six, eight years. The modern mountain is making its way out here. Everybody wants big, wide-open spaces. People are wanting timeless with a touch of modern flair. We’re seeing more outdoor living. We see a lot of garage space for gear rooms and for the bikes and the kayaks. Some don’t want the bigger houses, some want smaller, more intentional houses because their parents – the baby boomers – have these huge houses and they filled them with junk. For a while, they were saying millennials want to live downtown and ride a bike and never get married, never have kids. Maybe millennials just delayed that a little bit. Now, we’re seeing that it’s not really the case. Most of my clients are 30s and 40s. Most of my jobs are local people, but I have usually one going at a time that (the clients) have sold property elsewhere and they’ve relocated here because it’s affordable. They can get twice the house for the same cost.
Are more people asking about a dedicated home office space post-COVID?
It always comes up now. It’s a necessity. Of all the houses that we have going now, half the people or more work from home part of the time.
The International Energy Conservation Code will update its International Building Code next year. The last updates came out in 2018 and were later adopted by Springfield City Council. One concern at that time was around affordability. How might this update impact the industry?
In 2018, the energy code was an option. From what I understand, the 2024 energy code is the standard. There’s a lot to review when those codes come out and then local jurisdictions will decide whether or not they want to adopt all or part of them. We’re looking to work together with local municipalities on whatever changes are coming down. We have a codes committee at the HBA which reviews those things. Does this work in our area? Does it change the affordability of the home? At the HBA, our first and foremost value is that we want to keep housing affordable.
General aviation terminal expansion is set to wrap by August.