The Big Housing Crunch

A lack of homes is freezing up the market in the upper Midwest and across the country

By Sam Easter

Larry Luetke knows all about the big housing crunch. As president of the Sioux Falls-area real estate association, he has his finger on the local market’s pulse – and knows just how tough the economy can be on homeowners.

In Sioux Falls – like in housing markets everywhere – a lack of homes is freezing up the market. Buyers are finding it harder to buy, and prospective sellers know that it might not be so easy to find a home of their own – even if they can easily sell the ones they’re in now.

"The market has been moving so quick. We have a lot of people that would sell their house in a heartbeat, but they can't find what they're looking for," he said. "There is a lot of inventory out there that's just not on the market.”

That’s true of most places in the upper Midwest and the country as a whole. It’s not a hard-and-fast rule, of course; as of December, Grand Forks, N.D., realtors said metrics appeared to be tilting back toward a buyer’s market. But in Sioux Falls, like in many other places, there’s consternation.

"The most common lot price in our city right now is about a $50,000 lot,” Luetke said. “If I look back to 2008, 2007, when we were at peak the last time, where we were at was about $20,000 to $25,000. A lot of it comes to labor costs, too.”

Luetke, who is also a member of the city of Sioux Falls’ planning commission, said one considered fix has been tinkering with zoning laws to help spur local development. And in early March, the City Council voted 7-1 to rezone a portion of office land to townhomes, KELO reports, to the consternation of the neighborhood.

“If we're going to get to the point where we start treating all residential (construction) as blighting on a neighborhood, we're in deep trouble,” Councilmember Greg Neitzert countered.

Sioux Falls is one of the places where prices are surging the fastest. According to data from the National Association of Realtors, the median price of a single-family home grew from $202,400 at the end of 2018 to $223,500 at the end of last year – a 10.4% surge, and among the highest in the country. But it’s far from the only place with price increases. Across 2019, Fargo saw a 2.9% increase; Bismarck, a 7.3% hike; and in the Twin Cities metro area, prices surged 5.8%. “(Tight supply) is rippling through all of our other metrics,” said David Arbit, the director of research and economics for Minneapolis Association of Realtors. “The fact that supply is so tight and inventory

Housing Price Hike

is so low, that is driving prices higher, days on market lower.”

Gay Cororaton, director of housing and commercial research for the National Association of Realtors, points out that the Midwest as a whole – which includes a swath of states beyond the Dakotas and Minnesota –is growing quickly, owing to comparatively low prices. Statistics from NAR show the median sale price for a Midwestern home at $212,900 in 2019; lower than any other region in the U.S., and drastically lower than western states, where the median price tops $400,000.

The trends in Sioux Falls, Minneapolis and beyond intersect with national debates about how to provide more housing for more people. Minneapolis famously moved to end single-family zoning in the city last year, freeing developers to build higher-density neighborhoods. Oregon leaders have moved in the same direction, though it’s unclear how soon neighborhoods will see those effects. And leaders in California, where housing crunches are particularly severe, are still struggling to find a path forward.

“America has a housing crisis,” journalist Conor Dougherty wrote in an essay for the New York Times. “The homeownership rate for young adults is at a multi-decade low, and about a quarter of renters send more than half their income to the landlord. Homelessness is resurgent, eviction displaces a million households a year, and about four million people spend at least three hours driving to and from work.”

There are bright spots ahead. Ironically, some real estate observers are bullish on the recent federal rate cut – the largest since the 2008 crisis – made as fears of coronavirus wrack financial markets.

Jill Beck knows all about the big housing crunch, too. As the CEO of the North Dakota Association of Realtors, she has a finger on the local market’s pulse – and she knows from direct experience how tough the economy can be on homeowners, especially when tough times for businesses come along.

She points in particular to recent layoffs in the state’s energy industry, which came along exactly when friends of hers didn’t need it. It’s a story right at the intersection of workforce and housing, throwing into sharp relief what’s at stake in a tight market.

“They got an offer on their home,” she said. “The next day they found they might be out of jobs in a month.” to celebrate the 2019 40 Under 40, 2020 Top 25 Women in Business and 2020 Leaders & Legacies Recipients!

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