2020 was an extraordinary year. While this comes as no surprise to anyone anywhere, it is an understatement for the home building and real estate industry in Idaho’s Treasure Valley. The year started with a demand for new homes at or near record high levels, with inventory of existing homes at near record low. Once the COVID-19 pandemic reached the area, anyone planning a future move here in the next few years decided “now’s the time.”
The perception is that home building and real estate industries are realizing record revenues, and for the most part that is true. However, it’s not fair to blame rising home prices solely on those moving into the area with a lot of cash from elsewhere. If there was an ample supply of homes, both existing and new, those buyers would not have to outbid another prospective buyer. There would not even be a need to do so.
What is less obvious are the multiple pressure points making it very difficult to fulfill that demand while keeping home prices affordable for all Idahoans, whether they have lived here for decades or moved here recently.
In addition to demand, there are three other issues applying pressure on new home prices. The first is construction material costs, and the biggest of those is lumber prices. Within two months of the pandemic hitting the U.S, lumber prices nearly doubled thanks to tariffs on lumber from Canada and workforce reductions at U.S.-based lumber mills due to illness. Prices came down through August but have climbed back to near-record level in recent months. In addition to lumber, shortages created by COVID-19 include appliances, windows, and lighting fixtures.
Another area creating upward pressure on home prices is infrastructure. The cities and counties of the Treasure Valley are experiencing very real growing pains as roads and highways, utilities, emergency services, and other services essential to our community struggle to keep up. Residential developers and builders are expected to extend this infrastructure, which they are willing to do (within the state’s laws) to ease the pressure of demand. However, infrastructure costs ultimately impact home prices just as increased costs for other manufactured products bump their price to the consumer.
Related to infrastructure is the movement by some counties and cities toward greater population density. This is being done to better leverage existing infrastructure as well as preserve open space, both attractive end goals, and part of responsible development of our community. County and city zoning codes are being reviewed and adjusted with these responsibilities in mind, and this will take time. In the meantime, some residential developments are being delayed or rejected. Due to the pandemic, the immediate demand for new and existing homes is for less density, which most of the rejected or delayed developments address. Many people moving into the valley are getting away from more densely populated areas to escape the effects of the pandemic. So, given the above, not only is there a shortage of new and existing homes for sale, but there is also a shortage of land on which to build new homes.
In 2021 and beyond it is crucial that all parties providing affordable homes in responsibly developed neighborhoods work together. This will ensure the homes are delivered in a timely manner while being of good quality. The more these parties know and understand about the challenges faced by the others, the more likely they will be to create balanced solutions that address those challenges.
Editor’s Note: Bill Rauer is the Executive Officer of The Building Contractors Association of Southwestern Idaho (bcaswi.org,) a non-profit organization dedicated to promoting the responsible development of our community.
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