Demand for new and existing houses will exceed availability for the foreseeable future, economist Matthew Gardner told a gathering of real estate agents Wednesday.
"Developers and home builders want to build — that's why they were put on the planet," the Windermere Real Estate chief economist told his audience at Rogue Valley Country Club. "But there are so many obstacles in their way right now that it's become a problem for them.
The obstacles are three-fold, he said.
"First, land and lack of land," Gardner said. "Any market where you have limited land supply — either naturally, topographically or artificially, which would be politically — that becomes an issue, because that pushes up land prices.
"Second, it's labor," Gardner said. "A lot of people got out of the construction industry back in 2008 when the Great Recession hit. They've gone on to do other things; they haven't come back. Therefore there are almost 200,000 job openings available (nationally) in construction that remain unfilled. So we have insufficient labor that pushes costs up, as well."
Laborers, for example, left home construction for the energy industry, where in North Dakota the median income is about $130,000 a year.
"Finally, material costs continue to rise, and entitlement costs — getting permits — continues to be remarkably expensive," he said.
Building permits aren't keeping up with population growth, he said.
"It's a really, really big issue," Gardner said. "It puts more pressure on the resale market."
There are 54,446 homeowner households in Jackson County, he said. That figure will jump by 7.5 percent over the next five years, creating demand for more than 4,100 new housing units in the next 60 months.
"When you put all those things together, building a home for less than $300,000 in America is remarkably difficult," Gardner said. "Yet an awful lot of markets out there do not justify homes of that price. What happens is that if we don't build enough homes for population growth, that puts additional pressure on the resale home market, because people have to live somewhere."
The problem is exacerbated because new households are forming faster than residential housing, he said. Homeowners aren't going to list their houses until they know where they are going to go.
Inventory levels are scraping along at a four-month supply level and will remain thin for at least another year.
"I can go anywhere in the country and the argument will essentially be exactly the same," Gardner said.
The median price nationally has already grown 5.5 percent this year, he said. That points to a median of $250,000 nationally in 2018, and it will be even higher in much of Jackson County.
Job growth has been as good as any time since the 1990s.
"We got back to pre-recession levels last year," Gardner said. "We're going to start seeing more business come. But educating the workforce is remarkably important; that's what we're not seeing. It's all about STEM subjects — science, technology, engineering, mathematics — in this generation. Yet applications at vocational schools are almost at all-time lows."
He said two-thirds of retirees would like to age in place and not move.
"The only thing that makes them move is that they want to get some money out of the house, because they are running out," Gardner said. "Or it's become too big and cumbersome for them."
He suggested homeowners locked into mortgages of less than 4 percent don't have the incentive to move on to a higher rate. As a result, he thinks remodeling will be a major trend in coming years.
"When people stay put, that's going to be a long-term issue," Gardner said, "unless you start seeing builders build an awful lot more and figure out how to build cheaper. You're not building enough — period. Unless you start seeing trucks coming in and start throwing up sticks and bricks — left, right and center — that's a problem."
— Reach reporter Greg Stiles at 541-776-4463 or firstname.lastname@example.org. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31.