Omaha Metro New Home Prices Continue to Rise, New Study Offers Understand Why
OMAHA, Nebraska (Nebraska Examiner) — The median selling price of a newly built home in the Omaha area has reached the half-million dollar mark, and a local non-profit group is stepping up building cost-cutting efforts that helped record prices.
Formed about a year ago, the Welcome Home coalition of housing and business leaders based in Omaha has grown and met with government officials to discuss how to make the American Dream more accessible to more Nebraskas.
Analysis to start a conversation
At the same time, however, prices for new single-family homes continued to rise, as did talk of affordable housing needs across the state.
New housing is being built near 204th Street and Harrison Street in Douglas County. (Cindy Gonzalez/Nebraska Examiner)
Now Welcome Home is armed with new survey-driven analysis that executives hope will help pave the way for dramatic policy changes that will benefit builders, who in turn can pass the savings on to homebuyers.
Commissioned by Welcome Home and conducted by the University of Nebraska at Omaha, the study examined the cost of government regulation introduced during the construction of new single-family homes in the Omaha metro area.
The researchers found that regulatory spending at the local level accounts for roughly 32.8% of total building costs — compared to the national average of 21.5%, the National Home Builders Association recently reported.
A team from the United Nations College of Public Affairs and Community Service, led by John Bartle, dean of the college, and Xiaowei Song sent out a two-page questionnaire modeled after the NAHB survey to 34 construction workers, and five responded.
Jason Thiellen, president of Welcome Home, said builders have been affected by tightening regulations since about the time of the 2008 housing and financial crisis. According to survey respondents, the most costly blow came from changes in building codes and architectural design standards.
“Unintended Side Effects”
Thiellen, also an executive director at E&A Consulting Group, said he expects the UN report to focus more on how communities can improve area codes by allowing for delays and other government actions that have “brought unintended adverse effects.”
“Over the past 10 or 12 years, our industry has felt and seen the impact of the good intentions of government officials when they tightened the rules for home builders by $500, $1,000, or $2,000 at a time,” he said.
Builders have adjusted their prices to keep up with rising costs, including land, labor and construction, Tillen said.
Jason Thiellen of E&A Consulting Group is President of Welcome Home. (Cindy Gonzalez/Nebraska Examiner)
Many families, in turn, were pushed out of the home ownership market.
Prices today have reached a point, he and others said, where Omaha residents can hardly find a newly built house to buy for less than $300,000.
On the rise
Take a look at the latest report from the Great Plains Regional Multiple List Service:
- In January, the median price of newly built homes sold this month in the Omaha area jumped to $500,363.
- During the past year, that average selling price was around $455,000; and for 2021, just under $400,000.
- Going back a decade, a brand new home in the Omaha area averaged for sale in 2012 for about $260,000.
- In the Lincoln area, the average selling price for a newly built home in January reached nearly $450,000. The median selling price in 2022 was around $432,000 and in 2021 it was $366,000.
- Experts say higher prices, combined with inflation and high interest rates, resulted in a 14 percent drop in the number of homes sold in the Omaha area last year compared to the previous year. This drop reflected sales of both new and existing homes.
Safety
Of course, local governments do not control all factors that drive up construction costs, including the cost of labor, lumber, and other materials.
Planning officials say rules tend to be driven by safety and that some are non-negotiable.
“We usually adopt codes because there is a life safety factor,” said Dave Fanslau, director of planning for the city of Omaha, which is just one of several organizations that Welcome Home seeks to partner with.
Other rules may be driven by efficiency or federal mandate, Fanslau said. Occasionally, Omaha will adopt a local version of a federal requirement based on local conditions.
New housing in Elkhorn near 204th Street and F Street. (Cindy Gonzalez/Nebraska Examiner)
Omaha’s city planners are constantly adjusting practices to improve efficiency, he said, and “welcomes talking” with the leaders of the “Welcome Home” coalition, whom he met several times.
“We are already addressing this issue on many fronts,” Fanslau said, citing the city’s affordable housing action plan, which should guide the creation of more options for both renting and buying.
starting houses
According to its executives, Welcome Home has focused its efforts exclusively on the listing market, with the specific goal of lowering the cost of buying a home for starters.
Thielen believes that more developers and builders want to produce housing for sale at lower prices, but he said that often requires flexibility, cooperation or policy changes from local governments.
He gave the example of a row house area under construction in the Elkhorn neighborhood near 207th Street and Q Street, which will have more than 200 houses when completed.
Rows in Coventry, 207th and Q Streets, a row housing development for sale. (Cindy Gonzalez/Nebraska Examiner)
Developer Ben Katt said he was able to offer three-bedroom, two-car garage units for just under $300,000, largely through the maximum amount of living space on the Rows at Coventry campus.
But this required some tweaking of the rules. Thiellen, who is helping Cutt iron out regulatory issues, said he needed to get approval from Omaha officials for 13 waivers of existing rules.
“Unlimited Demand”
He said the Welcome Home team is looking for a more streamlined process that would allow other high-density suburban projects to bypass certain stages, such as hearings before an appeals panel. It will save time and money, he says.
Omaha’s planning officials passed similar changes a few years ago to spur redevelopment of hard-to-build downtown areas. Fanslau said the city is also considering measures that could encourage denser, more affordable housing further west.
At least one cost-saving measure that Thielen took in the row house project was rejected. He said that the representative of the municipal service, citing the sanitary code, would not allow water pipes to be laid in the same way as in apartment buildings. It could save about $14,000 in housing costs, he said.
Katt sees himself as one of the developers and home builders interested in offering a more affordable product that could bring down average home prices. Terms need to be agreed upon, he said, including the purchase of land at the right price and rapid construction.
“It’s hard to get to that price point.”
Meanwhile, it has also directed development efforts to rural areas — even RV parks — because lower property taxes and other factors combine to make life there more accessible and attractive to consumers. He said it was tempting for builders as well.
“You have unlimited demand,” Katt said. “Units are selling fast.”
Comparison of the standard cost in the price of a house during construction (courtesy of the University of Nebraska at Omaha, College of Public Affairs and Public Works)
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