LIMA — The dream of home ownership will have to jump a few hurdles before it becomes the norm for the next generation of Lima residents due to a low supply of middle-market homes, rising costs of construction and steep permitting fees.
The national economy may be booming — unemployment is low, wages are rising and stock market has reached unheard of heights — but the housing market has been shouldered with the problems of the past. Although demand is high, especially for $100,000 to $200,000 homes, the local housing market has yet to recover to pre-Recession levels. Nationally, the number of homeowners have actually dropped by 1.1 million between 2006 and 2016, according to the Pew Research Center.
“We have tons of buyers and not enough inventory, and that’s the biggest problem we have,” Dino Guagenti, owner/broker of Real Living CCR Realtors, said. He’s seen the number of MLS listings halved from roughly 600 to 1,200 in the last year as more people decide to purchase new homes and pick up anything that might fit their needs.
When houses in the $100,000 to 200,000 range are put onto the market, they get swept up in days with seven to eight families attending showings and sending in competing offers. That level of demand is unheard of in the past, he said.
Individuals looking to buy and can’t find a property that fits their needs are presented with few alternatives. They either buy something cheaper, renovate, rent or construct something new.
New construction, however, is becoming a unique event within the City of Lima in part because of its cost. No single-family dwelling was built within city limits in 2017, and only one was constructed by Habitat for Humanity in 2016. Instead, almost 100 percent of residential construction in the city has been concentrated in the rental market, which reflects national trends.
Brian Baker, vice president of Burden Construction Co., estimates the standard build for an average single-family dwelling has increased to $350,000 because of high demand. Material costs have risen by five percent in the last year alone. Labor costs have also bumped up to draw back the workers who ran from the housing crash.
“You talk to anyone worth hiring in our market, because we have a low supply of quality contractors, we’re swamped and we haven’t even hit the spring rush,” Baker said.
Instead, many current and future property owners are relying on renovation, which can cost 30 percent less per square foot as a new build, Baker said. An estimated $1.18 million worth of residential renovations were permitted by the city in 2017.
That being said, there are more and more buildable lots in the city, but they aren’t where people with funds want to build. Shawnee, Bath and Elida are watching demand skyrocket, but other parts of the city — those where lots are becoming more common due to efforts to knock down dated housing — are being largely ignored by homebuyers.
If homebuyers are looking outside those three areas, they most likely are looking at Lima’s satellite communities in the surrounding counties. Phil Buell, president of Superior Credit Union, said surrounding communities have created tax abatement programs for first-time home builders, which also pulls individuals away from living in Lima when they may work there.
Buell also points to problems caused by Allen County’s and Lima’s water and sewer tap-in fees, which can be thousands of dollars above competing municipalities.
Allen County Sanitary Engineer Steve Kayatin said those fees are higher near Lima because Allen County, the Allen Water District and the City of Lima charge more up front than ask for higher monthly sewer and water rates. The payment structure reflects the increased capacity of the system each time a new customer is added, he said, and the municipalites are talking to see what they can do to lower the combined sewer and water tap fee for individuals looking to build.
“We have been wrestling between the district, county and city about that concern. We’re going to work with the city to maybe adjust some fees,” Kayatin said.
As the construction season begins in earnest, current and future property owners can get a leg up on what’s available during the Home & Garden Show held this weekend at the Allen County Fairgrounds.
“A lot of people aren’t (constructing homes) or they’re holding tight, maybe renting,” Susan Fantz, broker with Alexander Realty Services and president of the Lima Noon Optimist Club said. “A lot of things are happening, and we’re not exactly sure how it’s happening that way.”
Reach Josh Ellerbrock at 567-242-0398.