Sioux City metro homebuilders in high demand: 'We're as busy as we've ever been'

"We're as busy as we've ever been, and it doesn't look like it's going to be slowing down anytime soon," said Andy Hovey, who runs Jefferson, South Dakota-based Hovey Construction. The homebuilder is currently in the process of putting up a series of homes in a new development in South Sioux City. 

In a normal year, Hovey said, his firm builds seven to 10 houses a year. This year it might hit 12 to 15. "Right now we're getting one or two calls a day -- at least six or seven calls a week, on new construction," he said. 

Housing demand sizzled nationwide this year. This was in part due to rock-bottom interest rates: the Fed's rate has been essentially zero for the past year. In some instances, particularly during times of low interest rates, monthly mortgage payments are less than renting. Mortgage rates, however, have ticked up slightly in recent months. 

"I think people are concerned that interest rates will rise," said Bart Connelly, the developer whose firm specializes in Dakota Dunes and North Sioux City-area properties. "So if anybody has been contemplating buying lots or building, the threat of rising interest rates and inflation and continued rise of cost of materials are pushing a lot of people that were, maybe on the fence about doing it or not. I think people are trying to take advantage of the low interest rates." 

Early in the pandemic, some wealthier residents in large cities fled to smaller communities and to the countryside. And because everyone was stuck at home or in an apartment for months on end, it's likely that some people took a hard look at their surroundings and decided they wanted a new place to live. 

"We're seeing homeowners who are able to step up to the next level, because the rates are affordable," said Terri Schelm, executive officer with the Home Builders Association of Greater Siouxland. "That makes it a little easier to go from your starter home to the next level up." 

And for one reason or another, the existing housing supply in the Sioux City metro isn't quite keeping up with demand. This further drives up demand for new homes. 

"The lack of housing -- just existing houses on the market, there are very few houses," Hovey said. "I'm friends with a lot of Realtors on social media, and every one of them is posting messages saying, 'We've got a backlog of buyers with nobody to sell houses.'" 

All that demand for houses, coupled with the many people who opted to renovate their homes during the pandemic, led to a surge in material prices. Lumber in particular has gone through the roof -- the National Association of Home Builders has reported that lumber is up 200 percent from a year ago, which adds more than $24,000 to the price of a new home. 

"It's not just lumber prices that we're being affected with -- copper wiring has tripled in the last year, PVC is up, we just got a notification that our drywall supplier that those prices are going up," Hovey said. 

All this has driven up prices to some extent, depending on the degree to which a given contractor is willing to eat the added expense. 

"Prices are up between 10 and 15 percent, but that's driven by material prices mostly," Connelly said. He added that subcontractor prices -- electricians, plumbers and the like -- have also increased, but that's in part due to increased prices of the materials they work with.

His firm is building "spec" (speculative, built without a specific buyer lined up) houses along McCook Lake in North Sioux City and in Dakota Dunes. 

"And they're all selling before we get them done," Connelly said. "There seems to be continuous growth here."