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New Construction Crunch

Posted on March 28, 2017 by Carlee Spritzer

At a recent National Association of REALTORS® conference that I attended, there was good discussion about the tracking of home ownership rates.  Though still near a 50 year low, there was a small upsurge in the last quarter of 2016. Many anticipate that the number would continue to increase if only inventory levels could as well. The supply of available single family homes is still too low to keep up with current buyer demand, most notably in the West and the Midwest. This has led to a slowdown in pending sales in January for the first time in about a year. Buyers are essentially lining up for homes to purchase when they reach the market, while keeping rising prices and mortgage rates in consideration. According to Lawrence Yun, chief economist for the National Association of REALTORS®, "interest in buying a home is the highest it has been since the Great Recession." Finding a better balance between this desire to find a home and the availability of a property which meets both criteria and budget is the key to a truly successful 2017.  To quote Robert Dietz, chief economist for the National Association of Home Builders, "We can expect the multifamily sector to continue to stabilize and single-family production to move forward at a gradual but consistent pace in 2017." Construction permits nationwide increased 4.6% in January overall; however, the breakdown was due to a large increase in multifamily permits and a small drop in single family permits. To keep up with the demand of building these new homes, construction companies are scrambling to hire qualified workers to take advantage of the current building needs. When the housing bust occurred several years ago, a large number of those in the construction industry were led in the direction of choosing other fields of employment, and now the shortage of labor is apparent. Some home builders have chosen to concentrate on high-end homes with higher profit margins versus starter or spec homes, which further leaves a segment of the market under served. Until the scarcity of labor issue has been resolved or alleviated, the pent up buyer demand of having "no place to go" will continue. To bring the topic to a local level, in January of this year alone there were permits issued via the City of Bozeman for 30 single family homes and 4 duplexes. This compares to 15 single family homes and 3 duplexes in the same month the previous year. The 34 total housing units is the highest number in January since 2006. Our local news headlines for the past couple of years have included talk about the limited availability of both skilled and unskilled laborers, so the increased demand to hire employees continues on. As with any basic economics, this supply shortage will lead to higher wages and therefore increased overall home cost to the consumers. In the cyclical boom or bust fashion, the Southwest Montana building sector is booming. This is a pivotal phase in the overall real estate market. It is a time to decide upon priorities, and a chance to choose whether to be satisfied with continuing as a renter or press on with the pursuit of becoming or remaining a homeowner. The American dream of home ownership is a concept our nation was built upon, and I still believe in the merits that it inspires. There is a pride of neighborhood, community, schools and more that goes hand in hand with owning a home. Because of these and a myriad of other reasons, I believe that in our Southwest Montana community, we will resolve the roadblocks that are slowing the progress of housing growth.

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Agents: Robyn Erlenbush
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