Reno-Sparks Home Builders Struggle to Keep Up
With fast-rising rent costs and home prices, Nevada's housing issues are rising to crisis level. We get to the root of our area's supply and demand problem with housing...
You can see the signs of the steadily improving economy on just about every street. There's life on the old job sites again, home builders are hitting their stride…and not a moment too soon. Don Tatro with the Builders Association of Northern Nevada told us, "We're definitely trying to keep up, but with labor and the shortage of finished lots, you can't enough on the market quick enough."
Don, and everyone else involved in homes knows demand has far outpaced supply…that's why prices have gone up 9% in Reno-Sparks in one year, and up 14% the year before that. Experts expect those prices to rise steadily in 2017. So what's holding back builders from keeping up with supply? Local builder Jesse Haw, the president of Hawco Properties told us, "There's commodity challenges. Everything's going up, right?"
If you want a view from the front lines of the industry, talk to Haw. He's been in the industry since he was a kid. His grandfather was a home builder…father too. Today, he's discouraged by the rising costs of land and building materials, and a shortage of finished lots to build on: "It takes a while to get lands rezoned and get that built and then be able to build a house. So that finished lot supply is really tight."
Teresa Di Loreto's home building goes back generations too. As she told us, "Well I started out in home building as a little girl walking job sites with my dad, and there's nothing better than the smell of fresh-cut sawdust." Di Loreto's new company, Paradiso Communities, is building their very first home development project in Stead. Besides higher land prices and building materials putting a cap on construction, she says builders are not as eager to jump all-in after what they lost in the recession. As she put it, "We all have a little bit of, as builders, some hesitation of getting too far out in front of ourselves."
Haw agrees, "They just are still coming out of the recession. They don't want to take a lot of chances, they don't want to take a lot of risks...until they know they can sell that house."
Another factor putting the brakes on new homes is mortgage rates, which are expected to rise at least a half percent in 2017, making it more difficult for buyers to finance a home. Don Tatro with the Builders Association says, “For every $1,000 a mortgage goes up in the state of Nevada, 2,000 people are priced out of a new home."
Worse than all of that, is the home building labor shortage. The recession thinned the herd, with not enough to pick up the slack. Haw told me, "A lot of the qualified labor left, and trying to get them to come back has been challenging."
Haw and Di Loreto play a delicate balance: keeping up supply in those conditions, at the same time keeping up quality. A tough business in good times and bad. But Haw finds it all, so worth it, “In the end, all your labor, all your hard work, all your risk...a family moves in, and a dog's running around outside, they're planting a tree...it feels good. We helped somebody."