The housing market took a huge hit during the COVID-19 pandemic.
The housing market has been affected in more ways than one, and David Ware, a homebuilder here in Denver, was a great resource in finding the ins and outs of the market. Ware has worked in the homebuilding industry for over 20 years. He is the president and CEO of a private homebuilding company based here in Denver called McStain Neighborhoods; he is certified with a degree in engineering from Clemson University. Ware stated, “The biggest impact of COVID overall in the housing industry [is] people looking for housing that would meet their new work habits.” Families want more room to have dual offices so both partners can work at home, but also want enough room in the house for living; therefore, there have been many transitions from townhouses and apartments to larger single-family homes. Moving patterns also include many people moving out of urban cities like downtown Denver to more suburban areas to get away from all the people and acquire yards and space.
McStain Neighborhoods has been impacted individually in the sense that when COVID-19 began to spread, the business had to learn how to work remotely, like most companies, which took them a couple of months. Another challenge they experienced was trying to figure out how severe the change was going to be, from shutting down financial systems to being able to build homes at all. Their banking relationships became very rocky, so the company took a two month pause in homebuilding, which affects a small private business on a large scale. “As an owner of the company, the hardest thing has been working remotely and not having the strategic conversations and planning with the other owners and the leadership team on a day-to-day basis,” Ware explained.
On average, about $10,000 to $15,000 a home is being lost as a result of the pandemic. Last year, many companies were worried about how the virus was spreading and how it was contracted, deciding if sales models could remain open and how to keep workers on site safe, remaining COVID-19 free. This year, the result of the virus has ultimately been a supply and demand issue. Lumber has seen a significant increase in price, appliances are very difficult to get, and there are a number of other factors contributing to short supply of materials. When these materials are in short supply, prices inflate, which has made it much more challenging for businesses to predict how much homes are going to cost when they are sold to buyers.
The cost of houses has gone up drastically as a result of the pandemic. On average, the cost of a home has gone up approximately 10 percent. For example, if a home was $500,000 before the pandemic, now it is at least $550,000. With an increase in prices of commodities like lumber, appliances, plumbing, and electrical mechanisms, houses being built are taking longer than before. Ware reflected, “The prices are going to rise, but hopefully at a declining rate; the price of homes will flatten. Typically, we see three to four percent a year is normal housing inflation. That is considered good for the economy and stable.” The 10 to 15 percent increase affects affordability as houses get priced so high that many people are priced out of the market. Before the pandemic, a house could be built in about five or six months, but now it takes about seven or eight months.
Even though the pandemic made McStain Neighborhoods go almost completely virtual and the prices of homes change frequently, the company is still building homes and job sites are still open. The company continues to manage all their processes and reporting on a weekly to monthly basis as they have always done; it is simply more in a remote setting. Ware states that through the pandemic, “you have to be resilient, creative, learn to be fluid, and be a good communicator with your team members.” Being able to adjust and adapt quickly to surroundings is another big takeaway from this pandemic.