Montevideo’s housing market, like housing markets across the country, is facing many challenges, both for prospective home buyers and renters
Montevideo’s housing market, like housing markets across the country, is facing many challenges, both for prospective home buyers and renters. A combination of low supply and high demand is driving prices for homes and rental units beyond the reach of a growing number of Americans. Throw in spiking construction costs and the outlook for affordable housing looks bleak.
Gwen Nelson, realtor for Kuhlmann Realty, commented on the housing market in Montevideo. “It’s a real sellers market not only locally, but especially for realtors who are begging for inventory,” she said. “There are only 41 listings on the market right now in Montevideo; that’s for all realtors. That’s the way it is all over right now. That’s why if you put your house on the market at the right price, it will sell.”
That being said, the lack of inventory makes the decision to sell a home a difficult one. Nelson said: “There are people who want to sell their homes, but they are afraid to put their house on the market. They are afraid that, if they sell their house, they may not be able to find another one.”
Houses currently for sale in Montevideo are available in prices ranging from very inexpensive to very expensive. “An average house around here will be between $75,000 and $120,000. That seems to be a common range,” said Nelson. “Of all our houses for sale, we even have houses for as low as $14,000, so if you want a house, you can afford a house.”
As with everything, when it comes to buying a house, you get what you pay for. “An average rambler for a starter home is around $100,000 to $120,000. If you have children and want a little bigger home, you are looking at $140,000. An upper middle income home is about $180,000. Then there are bigger homes that go for $200,000 and up,” explained Nelson.
Generally, according to Nelson, homes that are priced above that have been on the market a long time. “Those are the types of homes that are purchased by company executives or perhaps big farmers,” she said.
The lowest priced houses tend to be the ones that sell the fastest and sell for cash, but they also tend to need the most work. “Most of the homes that are $50,000 or under are bought to be used as rental properties,” Nelson said.
The market for rental housing is even more tight than the housing market. Nelson stated: “People come in and tell us they have a home to rent, and by the time two days have passed, they have a renter. Rent in Montevideo on average starts at $700 and goes up from there.”
Part of the housing problem, according to Nelson, is that contractors are reluctant to build homes unless they are already sold. With construction costs soaring, building spec homes simply is not a viable option for many contractors.
Nelson, however, sees an opportunity for contractors in the low supply of housing. “If contractors would build duplexes, they would sell so fast. The baby boomers are retiring and looking for homes where they don’t have all of the expensive upkeep to maintain their homes,” said Nelson.
Asked whether she felt if these are exciting times to be a realtor, Nelson said: “I’m fairly new at being a realtor, but I have heard that this is a scary time.”
Angie Steinbach is Montevideo’s Assistant City Manager, and she acknowledges that, while the housing market is tight, the city is doing all it can to address the situation. According to her, the city is currently working to secure grants to build duplex units. She said, “We are working with the Southwest Minnesota Housing Partnership on that, but it takes time, and grants are limited.
“We are looking at possibly building 12 to 24 units depending on what we can financially afford. We need a grant to get this done since construction costs are too high to build without one,” Steinbach continued.
Construction costs are a factor in the lack of housing in Montevideo. “People wonder why there is not a lot of new construction going on in the city. For a lot of people, building a new home is simply not an option,” said Steinbach.
Looming on the horizon is the construction of the new special education school in Montevideo, which is set to begin this fall. When it opens in the fall of 2019, the school is expected to employ 30 people. A little further down the road, the Veterans Home will be built and bring even more jobs to Montevideo. All those people will need housing, and the housing market is already stretched thin.
With the growing need for housing, the city is in communication with contractors. “We talk to builders who come to Montevideo, as well as our local contractors, to make sure they are knowledgeable about what is happening in Montevideo, and what is upcoming. So if they would be interested in building spec homes or other developments, they have the opportunity and knowledge to do so,” Steinbach said.
“I talk to contractors often.” said Steinbach. “When the new school project was announced, we made sure to let them know this project was coming up and stressed that this would be an opportune time to begin construction projects. I’ve also talked to them about the veterans home, which although is a long way out, is another opportunity for them,” continued Steinbach.
At one point the city was considering investing in prebuilt modular homes. Steinbach said: “I was told that some of them were $275,000-plus just to get them out of the lot. Who can afford that?”
Compounding housing woes is the fact that banks are walking away from low and moderate income buyers.
In a recent report by Lydia DePillis of CNN Money, federal data on mortgage lending from the Consumer Financial Protection Bureau shows that low to moderate incomes comprised only 26.3 percent of borrowers in 2017, which is down 36.6 percent since 2009.
The data also suggests that banks across the country are moving away from mortgage lending, and are being replaced by independent mortgage companies.
At least for the time being, the housing market in Montevideo and throughout the country will continue to be tight. Perhaps the only thing certain about finding affordable housing is the uncertainty in the market.
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