Don’t tell local homebuilders and real estate professionals that the economy is in a disease-prompted slump. The only pandemic they’re seeing is the rapid spread of home-buying and the resulting rush to build more houses.
“The pandemic didn’t slow anything down,” said Barrett Hammer of Bowling Green’s Hammer Homes construction company. “I’m continuing as normal, trying to put up as many homes as we can.”
Hammer, who is developing the 42-lot McLellan Crossings subdivision and a nearby 215-lot subdivision along Morehead Road, is hardly alone in a manic rush to stand up new houses.
Cory Henon of Bowling Green’s Tony Henon Construction said demand for houses like the ones he is developing in the South Glen Gables subdivision near South Warren High School continues to be strong.
“It (2020) was definitely one of the busiest years we’ve seen,” Henon said. “We had a down year in 2019, but then it ramped back up.”
The City-County Planning Commission of Warren County showed a jump in single-family lots approved from 591 in 2019 to 823 in 2020. Year-end numbers provided by the Realtors Association of Southern Kentucky show even more dramatically how the local real estate market has thrived in a time when many segments of the economy have suffered.
Statistics from RASK show units sold, sales volume, average price and median price for 2020 were all well above previous records.
In the eight-county region served by RASK, the 3,224 residential units sold in 2020 represented a 7.6% jump over 2019. The region’s total sales volume of $671,206,986 was up 16.14% over 2019.
“Builders can’t build fast enough,” said Kenny Cravens, general manager at Bowling Green’s Coldwell Banker Legacy Real Estate and 2021 president of RASK.
The record-breaking numbers came despite a downturn in the spring after Gov. Andy Beshear declared a state of emergency in response to the coronavirus pandemic.
“We saw a slight decline in the market for a couple of months as we all adjusted to the restrictions, but Realtors and our business partners found safe and effective ways to help their clients,” Cravens said. “The demand for homeownership was not kept down for long.”
That demand, driven both by the relative strength of the local economy and by historically low interest rates now well under 3%, has created an environment in which real estate is coveted.
As a result, the average sales price for a house last year in the region was $208,190, an increase of 7.93% from 2019.
In Warren County, which accounts for the bulk of the home sales in the RASK region, the average sales price jumped from $231,087 in 2019 to $245,100 in 2020.
That rise is driven largely by what RASK CEO Jim DeMaio called a “record low inventory” of houses in the area. The current inventory of about 500 homes is about two months’ worth, a sparsity of choices that leads to pressure on prices.
“The good news is that we have a thriving housing market and sellers often have multiple offers,” Cravens said. “We see that driving prices higher. Typically in Warren County we get about 97% of the asking price on houses. In the last four or five months I’ve seen that go up to 101% as buyers get into bidding wars.”
That upward pressure on prices may continue, partly because of outside forces.
The price of lumber started climbing during the pandemic and hasn’t stopped. The National Association of Home Builders said lumber prices increased by 110% from April through August. After a dip in the fall, they rose again by 20% in December.
Such a trend makes it hard to meet the local demand for the moderately priced houses desired by first-time homebuyers, Hammer said.
“It’s definitely difficult to build a home for less than $200,000 with the price of materials and lot costs,” Hammer said. “We have to pass those costs along to the buyers.”
While acknowledging the price inflation, DeMaio said: “We don’t have the affordability issues that some places have, especially on the West Coast.”
The region’s sizzling real estate market has led to inflation of another kind, DeMaio said. The number of Realtors in the region has grown from “around 350” to more than 600 over the past six years.
That growth only heightens the need to boost the local housing inventory.
Cravens sees hopeful signs.
Land sales in the region were up by 59.5% from 2019 and sales volume was up 60.49%. There were 579 land sales with $64,929,002 in sales volume in 2020, with much of that being property bought for potential housing developments.
Such developments are sorely needed, Cravens said.
“We’re at historic lows for interest rates, and I’m hearing that the Federal Reserve isn’t going to raise rates until 2022,” he said. “Your money is buying more, even with home prices rising.
“Now we just need to get more listings.”