Bulldozing the Barriers

Local developer The North Eastern Group remains optimistic and successful amidst the current housing market challenges.
Mar 3, 2023
Heather Herron
Tim Brumbeloe

Anyone in our region who’s tried to buy a house in recent months knows it’s not easy. Combine high prices and low inventory with the elevated interest rates, and it’s created what Ric Zehr refers to as a perfect storm. Still, he says there’s reason to be optimistic.

“Everything we’ve talked about is coming together, but the good news is that we’re creating jobs — we have a need for housing. Yes, it’s difficult to supply it right now, but we’re working on that,” he says reassuringly.

As a developer with The North Eastern Group, Zehr’s focus is finding land and building new homes. As the president of the Indiana Builders Association, his priority is removing barriers that make homebuilding more difficult. He admits that the headlines seem bleak, but maintains that our region is poised to overcome the current challenges in the housing market.

Just what are those challenges? Land is more expensive, there’s a scarcity of lots on which to build new homes, and government regulations can slow down the process and increase prices as much as 25%, according to Zehr. Add a shortage of tradespeople to actually do the work, lingering supply chain and materials issues, elevated interest rates and fewer older homes for sale, and it’s no wonder many are calling it a crisis.

“We didn’t build during the Great Recession, and now 10 to 15 years later we don’t have that aged inventory. Inventory is very low. In Allen County we’re seeing just under 400 homes on the market. There are normally 2,500 to 3,000 homes in a healthy environment,” Zehr explains. 

Given current interest rates, even those who can find a home may have trouble securing financing for it. “The national new home price average was $470,000 at the beginning of 2022, and with a 3% interest rate, the mortgage payment was $1,925 a month. In November, at 7% interest or more, it was $2,900 a month. It raised $1,000 a month,” says Zehr. “That’s going to eliminate buyers. Every $1,000 of price increase eliminates 3,217 buyers in Indiana. They no longer qualify for a mortgage.”

Thankfully, interest rates have begun to fall, so those who didn’t qualify for a mortgage several months ago may be able to now. In our area, developers are working hard to alleviate the shortage of available homes, which provides an additional boost to the economy through job creation. Statistics show that the construction of 1,000 new single-family homes produces more than 4,000 full-time jobs.

“When you look at northeast Indiana, we have a really good story. We have net inmigration now for the first time. What that means is Illinois, Michigan and Ohio are all losing people. Illinois lost more than 122,000 people in 2021 just from residents fleeing the state. We had positive growth. From 2010 to 2020, we averaged .8% per year in growth. Right now, it’s about 1.5% so we’ve almost doubled,” Zehr says. 

While that influx of people is great, Zehr says, they’ll need places to live, which is why he and other members of the Indiana Builders Association are working with legislators to ease red tape and provide resources that will spur more development. One example is House Bill 1005. The Bill will help provide low-interest loans to municipalities so they can extend infrastructure that supports new housing.

They’re also tackling the shortage of workers entering the building trades head-on by going into schools and encouraging students to consider those types of careers.

“Everybody’s retiring. Everybody’s aged out of the trades and nobody

has backfilled it. Shop class was done away with and so now we’re paying for it,” stresses Zehr. “We don’t have kids who are going into the trades, and the narrative that you need a post-secondary education to be successful is really not valid in today’s environment.”

Just how soon will we see trends start to change? Zehr estimates it could be eight to ten years before inventory is back up and prices level out. He remains positive, though, that we’re headed in the right direction.

“Unfortunately, if you listen to the news every day, it’s doom and gloom; talking about a housing crisis, declining values, all of those things. But when you look at northeast Indiana, it’s a really good story.” 

The North Eastern Group

Address: 10808 La Cabreah Lane, Fort Wayne, Indiana 46845

Phone: (260) 489-7095

Website: northeasterngroup.com

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