Local Home Market Sees Many Challenges
Date Posted: November 30, 2021
Posted In: Discussion, News,
From West Newsmagazine: At the Progress 64 West luncheon on Oct. 27, those on the leading edge of new home construction discussed today’s challenges and trends as well as how new housing numbers reflect the region’s economic growth.
Celeste Rueter, executive vice president of the St. Louis Home Builders Association (HBA), tracks new home permits in the region that includes St. Louis and eastern Missouri. From Jan. 1 through Aug. 21, approximately 3,000 permits were issued in the St. Louis area, she said. As it has for years, St. Charles County is leading the way in new home construction, followed by St. Louis County and then Jefferson County.
Since 2008, there has been a slow and steady increase in single-family new starts. Although interest rates remain low, home prices are up 13% since 2019, mainly due to the tight supply and low interest rates, Rueter noted.
Currently, there is only a 1.5-month supply of homes on the market, where normally there would be a 6-month supply, Rueter said.
But a low inventory isn’t the only barrier to homeownership. National statistics show that for every $1,000 increase in the price of a new home, 154,000 families no longer qualify for a home purchase, Rueter explained. In Missouri, that number is 3,100 families; in St. Louis, it’s 1,700.
Then, there’s the challenge of regulations and zoning.
Jeremy Roth, president of Elite Development Services, said what’s unique to the St. Louis area is the disorganization caused by so many municipalities, each with its own zoning codes and ordinances. Elite Development Services is a land development company created by McBride Homes and J.H. Berra for land acquisition and zoning issues. Currently, Roth is working on 31 projects with 19 different municipalities.
“Zoning is tougher than ever,” Roth said.
He noted that it can take between 18 to 24 months with due diligence on zoning, feasibility and other issues to develop a subdivision. And those regulations come at a cost. Regulations, imposed by all levels of government, add roughly 24% to the current average sales price of a new single-family home.
The availability of land is another issue. In 2010 there were thousands of lots on the market, Roth said. However, in a survey by the National Association of Home Builders (NAHB) taken in September 2021, 76% of builders had indicated some type of problem with lot supply. In addition, the topography of the St. Louis region makes it difficult to get utilities to some sites.