Demand for homes high, supply low

Apr. 1—Vigo County's housing market is stronger than it's ever been, at least from the seller's perspective, local real estate professionals say.

With a record low number of homes for sale, homebuyers are often facing tough competition from multiple bidders, driving up the cost of homes.

That, however, can become a no-win situation as a higher home price may not be supported by a bank loan, causing homebuyers to plunk down more cash up front.

So what about building a new home?

Material costs are also increasing, bumping up the cost of a new home as much as $20,000, according to one Vigo County homebuilder.

"It as much a seller's market as I have ever seen in 38 years, there is no doubt," said Troy Helman, president of Coldwell Banker Troy Helman Realtors in Terre Haute.

"However, our housing inventory is drastically low. It is below one month of inventory," Helman said. "A six-month inventory is considered an even-balanced market, so that is where we should be, so our housing inventory is ridiculously low.

It's not just in Terre Haute, Helman said. It's that way all across the country.

With a low inventory, homes often bring multiple offers, Helman said.

"It is not uncommon to see four or five offers at the same time," he said. "Then you get into a bidding war. And it is not uncommon for that to be between $5,000 and $20,000" over the original asking price of a home.

In such instances, stronger buyers — those with the ability to get more money — tend to get the home, Helman said.

"It really all depends on financing, or if there is a cash offer, or if there are inspections or not. So a person with cash, requiring no inspection or appraisal, a seller might take that offer even though it may be less than other offers that require all those contingencies," Helman said.

As of Tuesday, there were 115 homes listed for sale in Vigo County. That is 11 less than the 126 homes on the market at the start of March, said Brian Conley, president of Conley Real Estate Appraisals, Inc.

"This is the lowest number of listings since I started keeping records in 2000," Conley said. "It is the lowest number by far."

For comparison, from 2000 to 2002, Vigo County had 700 to 800 homes listed for sale. But after a national housing bubble in 2008, the county historically had 500 to 600 houses listed for sale, Conley said.

Over the past two years, the number of homes listed for sale has dipped to around 300.

"The last time we had 300 listings was in December 2019," Conley said.

Conley's appraisal firm "has been busy the last 12 months and right now we are busier than at any time and I would say more than half of those (real estate appraisals) are for refinancing," he said. "That tells me people are looking and saying, 'hey, let's just fix up our house and let's stay where we are.'" When homeowners stay put and remodel rather than selling, that contributes to there being fewer homes on the market.

One issue Conley said in home buying is having a supporting appraisal for a bank loan.

"When we do an appraisal, we are looking at history, at properties that have sold. What is happening, the prices being offered are going up, but we can't support those prices (in an appraisal) based on old sales," Conley said.

And that can result in banks not supporting higher mortgage loans, forcing homebuyers to put down more money up front to meet higher home prices, Conley said.

As of Jan. 31, the average price of a home in Vigo County was $145,618, while the median price was $124,000, Conley said. The median price represents a number in the middle, with half of the prices higher and half lower.

"Those are record highs for Vigo County," Conley said. "We have never seen this. That is high as it has ever been. I am just amazed at the market right now."

Average home prices, Conley said, are up 8 percent from a year ago, while the median home price is up 7.8 percent from a year ago.

"So we can say basically, prices are going up about 8 percent a year on what is going on right now," Conley said.

From a buying standpoint, Helman said the COVID-19 pandemic has had a direct impact on what people are looking for in a home.

"People are thinking more along the lines of 'being there' in the home, and working from home is a big deal now," Helman said. "So office space, a room to have a separate area to work, has become a higher priority. The pandemic has especially made an emphasis on the home office."

Also, outdoor living is important, Helman said, "hanging out in the backyard with the family and a lot more people are cooking at home so there is a little more emphasis on the kitchen, too."

Higher costs drag down new home construction

When it comes to construction, buyers are facing higher costs due to increased material costs.

Rick Jenkins, owner of Rick Jenkins Construction, has developed many subdivisions in Vigo County, including Idle Creek, Dutch Acres, Ellen Woods, North Pointe, Fruitridge Park, Old Erie and Richland Manor.

He is currently building homes in North Pointe, a subdivision located just north of Sky King Airport across from Roselawn Memorial Park. Jenkins started that subdivision in 2008 but had slow sales. That has changed. Jenkins is now constructing five new homes.

"There is a housing shortage," in Vigo County and nationally, Jenkins said. "We have plenty of business. The problem is I have people that are calling (about building in North Pointe) but I have to tell them; one, I don't know when I can start (on construction); two, I don't know what the cost is going to be" for the home, he said.

That's because material costs are on the increase, with most materials seeing an 8 percent increase in just the last few weeks, Jenkins said.

Jenkins said he has a floor plan for a new home construction in North Pointe for $195,000.

"But I don't know if I can build it for $195,000 when I get ready to start it," Jenkins said. That's because of material costs fluctuation.

As an example, in September, Jenkins said he paid $10 a sheet for 7/16th inch oriented strand board (OSB) plywood. As of Wednesday, that price is $31 a sheet, he said.

Another example is 3/4 inch flooring. Jenkins three weeks ago paid $39 for a 4-by-8 foot subfloor.

"I bought all that Lowe's had in Bloomington, Terre Haute and Danville, Ill., three weeks ago," Jenkins said. On Wednesday, that price was $57, he said.

"I can't give you a price and guarantee it when I don't know when I can start the house," he said.

"Building materials, for the framing package on a 2,000-square-foot house, are running close to $20,000 more than it was a year ago," Jenkins said. Other materials, such as dry wall, are seeing costs raise 2 cents per foot, and roofing up about $6, both which relate to about an 8 percent price increase, he said.

Jenkins said housing demand is up as interest rates have been historically low the past two years. As of Tuesday, the average 20-year fixed mortgage rate was 3.1 percent, with an APR of 3.2 percent, according to Bankrate's latest survey of the nation's largest mortgage lenders.

Yet Jenkins said there is also another contributing factor for his business — a lack of labor.

"It doesn't matter what I pay for building materials if I have no labor to use them. We have a big labor shortage," Jenkins said. As an example, Jenkins said he had a home prepared on Dec. 15, but roofing work was only finished this week.

Additionally, Jenkins said he has a speculation house to be built in Idle Creek. Word got out and that house now has been sold without construction even starting, he said.

"The reason it has not started is we are waiting on the basement people to show up," he said.

"We have a labor shortage in our market, in this market," Jenkins said. "Any place you go right now, you see a help wanted sign. We need labor and people who can use their hands. That is what is causing part of our housing shortage."

As the nation seeks to move past the COVID-19 pandemic with increased vaccinations, Helman summed up the start of 2021 amid a housing shortage.

"I saw a cartoon that showed a year ago people were fighting over toilet paper and now they're fighting over homes," Helman said.

Reporter Howard Greninger can be reached 812-231-4204 or howard.greninger@tribstar.com. Follow on Twitter@TribStarHoward.