Home builders aim to meet affordable housing demand in Mitchell
Soon, the frames of new homes will start to rise from empty lots south of West Norway Avenue in Mitchell, S.D.
Though small, the homes will be built with an eye toward affordability, even for potential first-time homebuyers, according to Bob Mueller, owner of Mueller Lumber Company, the firm in charge of the project.
"We're trying to develop property that will appeal to the types of people that need it," Mueller said.
Two or three homes could be built at the location this spring, with room for many more if the first few are sold. Mueller intends to keep the cost of the homes between $150,000 and $170,000.
"If we put up a couple and they sell right away, we'll just keep on moving," he said.
A study of the local housing market released in September 2012 named affordable home ownership one of the primary challenges Mitchell would face in the future. Mueller said the project is being done directly in response to the results of the study, which specifically recommended the construction of a subdivision of affordable homes.
"You have to start with an economical lot and, of course, build small homes," he said. "I think we can do it. I think we can get something to work."
Once the housing study was released, developers were quick to act on new evidence of the need for affordable rental housing in Mitchell. In less than two years, six projects added nearly 300 apartments or townhomes, with the potential for hundreds more if those fill up.
There hasn't been nearly as much development of homes being made available for purchase, particularly in the price range typical of people buying their first home, said Jacki Miskimins, regional workforce coordinator for the Mitchell Area Development Corporation.
The reason? Buying a home is a much more personal choice than renting an apartment, Miskimins said.
"You move into an apartment to rent it. You don't need it to be exactly your own," she said. "When you go to buy a home, that's a more personal investment."
With the added rental units, the pressure to build more housing in the city has been relieved, at least to an extent, Miskimins said.
"We really want to provide the opportunity for families to put down roots here," she said. "Purchasing a home is a very tangible investment in the community."
In Mitchell, where businesses have been hindered again and again by a shortage of skilled workers, expanding the single-family housing market could have a beneficial impact on the local economy, Miskimins said.
In her position, Miskimins has heard -- anecdotally, at least -- that "easily the most difficult part" of moving to Mitchell for a job is finding and buying an affordable home. That's a problem that needs to be addressed as soon as possible, Miskimins said.
"We don't want housing to be a barrier for people to come here," she said.
With many lenders offering rock-bottom interest rates, the timing is right -- financially, at least -- for many first-time homebuyers, said Elaine Robinson, a broker associate at Fischer, Rounds & Associates, a real estate firm in Mitchell.
"It's a great time to buy a house," she said. "When (buyers) do find the right one, they're very happy."
Right now, though, the inventory of homes for sale in the region is extraordinarily slim, Robinson said.
"There just isn't a lot of selection right now," she said. "And that's not particular to Mitchell."
The level of activity in the housing market slowed nationwide in recent months, according to the most recent data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development. In November, the pace of home sales of new single-family homes was at a seasonally adjusted annual rate of 438,000, down nearly 2 percent from a rate of 445,000 in October.
Paul Larson, a mortgage specialist at CorTrust Bank in Mitchell, agreed the choices available at the moment for homebuyers in the area are limited.
"It's definitely a seller's market right now," he said. "There are buyers who are prequalified and looking, but can't find a house because the inventory is so low."
The housing study encouraged the use of housing agencies, such as the South Dakota Housing Development Authority, that offer assistance to first-time homebuyers looking to finance a mortgage.
While there are multiple loan programs available for first-time homebuyers, Larson said the housing authority's program is especially beneficial because those who fall within a certain income range can get a 3 percent down payment from the state.
The interest rates for all the loans provided by the South Dakota Housing Development Authority are, for the moment, between 3.25 percent and 4.25 percent, depending on the options selected by the homebuyer.
"I'm optimistic that the rates will stay low for a while, but eventually we'll see an increase," Larson said. "So, right now is a great time to buy a house."