Lots are scarce as housing permits double in Sioux Falls

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SIOUX FALLS, S.D. (KELO) — Sioux Falls is experiencing a housing boom in the first two months of 2021. In February, building permits for single-family homes more than doubled compared to last year. With so many new homes going up, contractors are running out of places to build them.

“A lot of people wanting to buy without a lot of options to buy,” Joel Ingle with Harr and Lemme Real Estate said.  

The lack of houses available for sale is putting pressure on builders.

“If there’s no homes currently on the market, it leads people to look at building,” Jesse Deffenbaugh with Deffenbaugh homes said. 

With so many people looking to build, it’s leading to a shortage of lots.

“We’re operating at about 10 to 15 percent of what’s normally available,” Ingle said. 

“We’ve only got six left,” Dudley Deffenbaugh said. 

Deffenbaugh Homes started developing land for The Crown at Arbor’s Edge last March.

“You don’t know what’s going to happen with the market; we got in right when covid started, so it’s like, are we doing the right thing? But interest has really taken off,” Dudley said. 

What Deffenbaugh Homes originally planned as a long-term project has quickly accelerated.

“We were looking at maybe a five-year plan and we’re into that year and a half range now and we’re already looking for more property,” Dudley said. 

“It’s exciting to see how quickly it goes, but from our internal planning standpoint, we’re trying to plan and be ready for what the next years to come need to be, so that’s why we’re already working on future projects,” Jesse said. 

Planning to meet the increased demand has been a challenge for developers through the uncertainty of the pandemic.

“The exact opposite of what we expected to happen happened by May,” Ingle said. 

After a brief standstill in March and April of 2020, the Sioux Falls housing market took off faster than developers could keep up with.

“It’s a 12-to-18-month window that we’re looking forward to saying we’re going to start this inventory now, it’s going to be available a year to a year and a half from now,” Ingle said. 

Many developers and home builders are now increasing their plans for future growth, but how fast they can go is still limited.

“The issue that we’re seeing is that our labor force isn’t increasing as fast as demand. The labor crunch in our market is causing some problems because it’s drawing out the length of schedules it takes to build a project,” Ingle said. 

These developers say the tight labor market will likely mean the crunch on the housing market won’t be going away anytime soon.

“I really don’t see it catching up in the near future, so it’s kind of becoming the new norm,” Jesse Deffenbaugh said. 

Developers say more lots will be coming available mid-summer to help ease the demand, illustrating yet another hurdle that in South Dakota, there’s only about an eight-month window where land development can happen and only so much work that can be done in that time.

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