South Dakota Housing Market Strong as Other Parts of Nation Struggle

Darl Woolf  sold his Rapid City, S.D., house six years ago and moved to Laramie, Wyoming. Now, according to the Rapid City Journal, he wants to come back home.
Six years ago, the Woolfs sold their Rapid City house for just under $100,000 - $30,000 less than the equivalent house in Laramie.

Now, Woolf isn’t sure how much the South Dakota housing market has changed since he moved away. But between selling in Laramie and buying in Rapid City, he hopes to come out ahead financially.

His timing, according to Realtors, is good. After the grim uncertainty of 2005 amid fears that Ellsworth Air Force Base would be closed, home prices in the Black Hills have leveled off in 2006.

The median price for homes sold through the Black Hills Board of Realtors last year was $147,900, up just 2.7 percent over 2005’s median price. The average price, just under $164,000, was up about the same.

More good news — for Realtors, anyway — is that the total value of homes sold ($384 million) was up about $6 million. And the better news is that houses were selling faster: 73 days on market, on average.

In 2005, it took 112 days to sell a house. Now, South Dakota mortgage demand is picking up and houses are moving faster. But is a modest 2.7 percent increase in home prices — about the same as inflation — cause for concern among Black Hills homeowners?

“We’ve heard all kinds of horror stories from other parts of the country, so I’m pretty proud of this market,” Marty Wilcox, sales manager at Heartland Real Estate, said.

Meanwhile, mortgage rates are favorable; a 30-year mortgage last week was 6.125 percent, down from as much as 8 percent six years ago.

Realtor Faith Wendt conceded that the market leveled off in 2006. But with prices falling and people unable to sell homes in other markets, realtively low home loan costs and stable prices are probably a good thing.

“We’ve been climbing for a number of years now. At some point, you’ve got to hit a nice level or you’re going to end up like the eastern and western sides of the country,” she said.

And so far, 2007 looks like it could be a good year, Wendt said.

“This is usually the time of year when we take vacations and our desks are very neat. But I have three listing appointments today,” she said.

Sellers with two mortgages and virtually no home equity might have cause to worry about the slow growth in home prices, Wendt said. “But for the overall market, I think that stabilizing out was needed,” she said.

New construction last year was down substantially. According to building permit figures, Rapid City and Pennington County had 440 housing starts last year, off 79 from 2005.

Experts say some of the blame for the home construction slowdown was the rising cost of copper, steel, cement, drywall and other materials. That also might have kept housing prices for existing properties from dropping.

For example, copper prices have increased about five-fold in the past five years. The average new home uses about 400 pounds of copper in water pipes and wiring. That item alone would have added $1,000 to the price.

“The cost of a new construction home — with the same square footage, same number of bedrooms — could cost $5,000 to $15,000 more,” Wilcox said.

That might have led people to shop instead for an existing home, which would be available for a smaller home mortgage loan than a new home in almost all cases.

SOURCE: Rapid City Journal