As home buyers continue to demand new homes at $300,000 or below, Jenna Kimberley of Kimberley Development says developers will need to seek new ways to meet that demand. “It’s a unique situation. Municipalities are typically not allowing smaller lots, which is what the market needs right now since development costs continue to rise. The zoning and stormwater regulations make it extremely difficult to meet the price point buyers are looking for.”
She says 25% of the price of a new home used to be land-related costs. Now that cost is closer to 30%, which drives up the price of the home or reduces the amenities builders can offer. Because the majority of buyers are in the midrange market, inventory levels in that range will continue to remain low while homes over $400,000 are sitting for as long as six months.
“I don’t see that situation changing in the year ahead,” she says. “But builders and developers will continue negotiating with municipalities to get those regulations in line with what the market demands.” While some local communities are beginning to recognize the changing needs of both developers and homeowners, the cost of development and the struggle with regulation will remain an ongoing challenge for builders in the years ahead. Kimberley doesn’t anticipate the November elections will have a major long-term effect on the housing industry, however.
“Elections typically cause a kneejerk reaction, but over the long term, they don’t have a significant effect. Trade agreements, especially the U.S.-China agreement, is much more significant. A positive result there can really help the market.” In general, Kimberley says, “You can ask a dozen economists what they think will happen with interest rates and markets, and you’ll get a different answer from each one. No one can really predict what’s ahead. As a company, we look at the trends and the overall economic situation, and then we continue to adapt to meet those demands as best we can.