South Bend area housing market remains hot
Any worries about the possibility of higher interest rates and an economic expansion that might eventually fizzle haven't been enough to soften the housing market throughout the South Bend, Ind., region.
Moving into the home-buying season, about the only thing local Realtors are still complaining about is the continuing lack of inventory, especially in the more moderate price points of $100,000 to $250,000.
Through the end of the first quarter, the median sale price of homes rose 0.4% to $125,000 in St. Joseph County compared to $124,500 in the first quarter last year with the average seller getting 96.5% of their listing price. The average time on the market — from listing to closing — was 77 days compared to about 100 only a couple of years ago.
The story is similar throughout the region.
"The market is pretty exciting right now, but inventory is still constrained with more buyers than there are sellers" said John De Souza, president of Cressy & Everett Real Estate and immediate past president of the Indiana Association of Realtors.
"We have about two or two-and-a-half months of inventory," said De Souza. "If we had about a six-month inventory, things would be more balanced."
Others involved in residential real estate echoed those sentiments.
"We had a very bad January because of the Polar Vortex, but things really started picking up in March," said Paul Gjemre, branch manager of the South Bend office of Coldwell Banker. "It's definitely still a seller's market. Houses are selling really fast if they're priced right and in reasonably good shape."
With interest rates expected to remain relatively stable through the remainder of the year — hovering just above and below 4% depending on the type of mortgage — no one is expecting the market to slowdown anytime soon.
"We've had borrowers getting outbid on multiple offers," said Danny Conroy, residential mortgage manager at 1st Source Bank. "The process can move extremely fast on a desirable property."
So fast, in fact, that some prospective buyers are authorizing their Realtors to raise their offer within set limits if they get into a bidding war with another buyer, said Conroy, who pointed out that the housing market is strong throughout most of the bank's coverage area in northern Indiana and southwestern Michigan.
And except for the prospect of a recession or some event that creates an economic shock, no one is expecting that to change any time soon.
Through the first quarter of the year, there have been about 47 permits taken out for single-family homes in South Bend and another 55 in the county, said Charles Bulot, St. Joseph County building commissioner.
That's a pretty fast pace, but the problem is that most of the new construction is for homes that generally cost well over $250,000, according to those involved in local real estate.
Andy Place Jr., vice president of Place Builders, said his family-owned business once built homes for under $200,000 but that's become considerably more difficult because the red-hot economy has caused strong demand for lumber and other building materials, as well as labor.
Tariffs also have had some impact by pushing up the cost of some materials and products.
To some degree, home builders are competing for skilled workers and materials with commercial contractors -- an area that's even more super-heated than homebuilding, said Bulot.
And local builders are also competing against contractors in other parts of the country, which also are incredibly busy because of the expanding economy.
Because of the depth of the Great Recession, many people got out of the trades — retiring or deciding to move to RV factories — and fewer new people were attracted to the field, said Pace and David Sieradzki, vice president of Century Homes.
"We know there is a ton of demand for houses priced at $300,000 and below," said Sieradzki, whose company has historically focused on custom-built homes. "But the inputs have been going up every year, so it makes it harder to make a profit at the lower price points."
Because the housing industry was particularly hard hit during the recession, the entire industry deteriorated for five to seven years, said Sieradzki — not just the loss of skilled workers but even some of the businesses that provide materials to the industry.
Some of the problem for the rising cost of new construction also falls at the feet of consumers who want lots of solid-surface countertops, wood floors, stainless steel appliances, tile and other luxuries that drive up costs, said Place.
"People watch shows and see the cool things out there," he said. "They want granite and custom showers, but those things add to the cost."