In a year when many businesses struggled, residential real estate development has not. In fact, whether multifamily, single-family or even vacation development, the industry appears to be thriving.
Titus Williams, president of Prosperiti Partners LLC, projects that trend will continue into 2021. Williams says new construction is unlikely to keep up with Springfield demand.
“If I was projecting using a crystal ball, what I would see is that new developments in the multifamily and residential housing industries need to increase,” he says.
Even so, development in and around the city is robust, with new multifamily construction attracting students and young professionals, ages 55-plus and renters seeking outdoor trails, dog parks, pools, fitness centers and even dining.
It’s no wonder the city’s renter rate is nearly 60 percent, making Springfield the only Missouri city to have more renters than homeowners. According to data analyzed by internet listing service RentCafe, Springfield’s renter rate rose 11% between 2010 and 2019, ranking second in the nation for rate of growth, according to a recent article in the Springfield Business Journal.
Williams thinks the rent/own ratio reflects consumer motivation to get the most for monthly payment dollars with more limited disposable incomes, transient jobs and, for some, the desire to live in a close community with desirable amenities. In addition, renters don’t have to pay for property taxes, insurance or maintenance. It’s a national trend he says as a reflection of higher insurance costs, vehicle expenses, cost of living and student loan payments. Plus, many young professionals are not willing to commit to homeownership.
Yet, single-family home construction is booming, too. “If you are able to build a quality house at a good price, they’ll fly off the shelves. That’s what we’re seeing right now,” Williams says.
Blake Cantrell, of Blake Cantrell Real Estate at Murney Associates, works with single-family home development company Cronkhite Homes LLC in Springfield, Nixa, Ozark, Republic and Willard.
He says compared with this time last year, business is up 110% and he predicts that trend to continue in 2021. Out of 116 new construction single-family homes currently under contract, roughly 100 are set to close in early 2021.
Home sales have not been a problem in 2020, he says. The main obstacles for new construction have been workforce and, because of factory shutdowns, materials. But even those two challenges have been mostly resolved, he says. Another obstacle is locating land with the necessary infrastructure. That’s why for 2021 he predicts an explosion of new construction in Greene County between west Springfield and Republic, where water and sewer is available.
Another 2020 success trend that won’t slow next year, Cantrell says, is the vacation rental industry. Cantrell and Williams’ brother, Phil Williams, are part of a group that bought two Table Rock Lake area resorts. One is operational, and the other is under renovation.
While hotels lost business in 2020, the vacation rental industry experienced a boom, Cantrell says. From conversations with other owners, resorts were solidly booked in 2020 and are already booking out in 2021.
“You can social distance at the lake. You can have your own cabin and do your own thing, and you don’t have to worry about other people being around,” he says. “Anyone down around the lake area says it’s been a wonderful year for that.”
In addition, existing home sales have increased, too. Cantrell doesn’t see that declining. “Existing homes, as long as they are priced appropriately, are selling within day one on market. Sometimes, within the first hour,” he says.
Cantrell says he’s never seen a seller’s market like the one in the last 18 months Some sellers get up to 105% of asking price, he says.
Williams isn’t surprised developments are migrating outside of city limits makes sense. For every 1,000 new residents, 500 more units are needed if you figure an average of two people per unit. Springfield is growing by around 4,000 people a year, he says, so that would require 2,000 new habitational units. That’s simply not happening within Springfield city limits. But with more people renting, new multifamily construction will continue, including the rising rate of 55-plus communities – another type of development in which Cantrell has become involved.
Williams forecasts multifamily developments will continue to grow in 2021 and beyond, although not enough are being approved for Springfield. They should be, he says, to keep as many tax-generating residential units inside city limits, versus losing that revenue to other communities.
“It’s going to become one big metropolitan area,” he says. “They’re going to have to grow in those (rural) markets because it’s getting more and more difficult to build in Springfield.”
He also expects rental rates will continue to rise with the cost of construction. When they rise to the point it makes more financial sense to buy versus rent, Williams says the rent/buy ratio will flop-flop as construction costs grow and more homes become available. One trend he also believes will continue with scarce city land is the renovation of single-family rentals for conversion to homeownership.
Circling back to the type of residential units most lacking both locally and nationally, Williams says the dearth of affordable workers’ housing is a problem to solve.
“Every market needs it,” he says, adding especially if a community hopes to grow. “People move to a place that they feel welcome and they feel like they have a nice standard of living.”
This content brought to you by Prosperiti Partners LLC.
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