The Delaware Association of Realtors held its inaugural Real Estate Summit May 16, and if industry experts are to be believed, it doesn’t appear ever-increasing home prices and a shortage of inventory are going away anytime soon.
The four-hour-long summit was held virtually. At one point, nearly 200 people were watching the event, which featured experts from the residential, commercial and construction industries in all three counties.
Sussex County Association of Realtors President George Thomasson said attention must be spent on workforce housing, and not just housing for restaurant employees. There needs to be housing for hospital employees, police and other emergency personnel, he said.
“This is not sustainable,” said Thomasson.
Workforce housing isn’t just an issue in Sussex. New Castle County Board of Realtors President Chuck Lax said the problem in northern Delaware is that a lot of the space where people live – downtown Wilmington – is already built out. Attention is being spent on North Wilmington or Greenville, but most people don’t want to talk about where most of the people live, he said.
“I believe that everybody is entitled to a home. Our job is to help them find that place,” said Lax.
Thomasson said he and other Realtors are working with Sussex County officials to try to build affordable, new-construction homes that aren’t an hour away from where the jobs are. Building locally keeps the money in this area, he said.
In Sussex, Thomasson said seniors from neighboring states are the largest segment of people moving to the area. It’s a desirable place to be because everybody wants to be close to the beach, he said.
Kent County Association of Realtors President Steve Schmidt agreed. Taxwise, Delaware is great for retirees, which has always made it a great state to retire, he said.
In addition to agreeing there’s an affordable housing issue, all three Realtor association presidents agreed there needs to be more job creation to keep the kids who are growing up in Delaware.
There’s an aging demographic, with young people looking for better opportunities elsewhere, said Thomasson.
Another trend the Realtor presidents reported are homes going for well over asking prices, with no home inspections.
Time and time again, he has to warn buyers about purchasing a home for more than it’s being sold for and without an inspection. However, he said, the market is so hot and there’s a shortage.
“It’s buyer beware,” said Thomasson.
Lawrence Yun, National Association of Realtors chief economist, said the people who bought houses in the past two years are the ones who hit the market right. Now, the Federal Reserve is beginning to increase mortgage rates and they’ve indicated there will be many more rounds of increases, he said.
There’s sticker shock when having to buy a house for today’s client, said Yun.
Yun wasn’t predicting a recession, but he said if there is one, it will be unique for a number of reasons – there’s no subprime lending, jobs are plentiful and there’s a housing shortage, not an oversupply. Some of the statistics from 2008’s bubble look similar to the housing market now, but there’s a big difference in the background, he said.
Yun described 2022 as a year of transition, with home sales decreasing after a couple years of increases. He predicted roughly a 9 percent decrease in sales for 2022, but an 8 percent increase in the cost of those sales.
Sean O’Neill, University of Delaware Institute for Public Administration policy scientist, said housing affordability isn’t an issue that’s going away anytime soon, because household income has not kept up with the increases in home prices. There’s not enough being built, and what is being built is for the wealthy and retirees, he said.
It’s not an easy issue to address, but if it’s not addressed, it’s only going to get worse, said O’Neill.
One of the reasons it’s not going to be easy is because there continue to be supply chain issues, said Justin Olear, Builders and Remodelers Association of Delaware president. Right now, it’s almost as cheap to install concrete pipe as it is to use plastic pipe for infrastructure work, and the appliances customers want aren’t available.
“You can order what you want, but there are no guarantees,” said Olear, adding the cost of steel, drywall, lumber and concrete also continue to rise.
Mike Riemann, also a member of the Builders and Remodelers Association of Delaware, said navigating local government requirements is a lengthy and difficult process. Developers are ordering supplies – transformers, pipe – before projects are even approved because they know the approval process is going to take a long time, and so is the delivery of supplies.
There needs to be a streamlining of the permit approval process, because it’s too slow in Delaware, said Riemann.
Employment levels in Delaware are nearing pre-pandemic levels, said Kurt Foreman, Delaware Prosperity Partnership president.
Foreman said, on a percent basis, Delaware is the fastest growing economy in the Mid-Atlantic, which is always a positive sign, but that could change if companies can’t find the talent they need to fill jobs. The location close to multiple metropolitan areas and the low taxes are good incentives, but companies are also looking for a workforce to fill those jobs, he said.