Homeownership part 2: Experts say developing more affordable homes is biggest need in South Dakota housing market

A greater focus on increasing availability of affordable housing in South Dakota is needed to enable more young people to reach their dream of owning a home, according to a panel of experts on the state real estate and mortgage industries.

Steve Ennis, a senior mortgage officer at CU Mortgage Direct in Sioux Falls, noted that the goal of keeping college graduates from moving away from South Dakota is tied to giving them opportunities to invest in their future by being able to afford a house.

That challenge is present in the existing market, where the statewide median home sales price rose by 54% from 2018 to 2022, according to the South Dakota Realtors Association. Meanwhile, median household incomes in South Dakota rose by only 17% during that time.

“It’s difficult for anyone on a single income to make it work and have enough disposable income to afford a house payment,” said Ennis, who spoke as part of an online panel discussion hosted by South Dakota News Watch on Dec. 15. “In Sioux Falls, we could use a hundred units where we could have a monthly payment of $1,200 or less. That’s a big need here, to have rent-equivalent ownership opportunities.”

The discussion was the latest segment in the ongoing “South Dakota Matters” series of polls and panel discussions hosted by News Watch.

Brandon Martens, a Sioux Falls real estate agent and former president of the South Dakota Realtors Association, noted that changes to design and infrastructure ordinances in municipalities could lead to more affordable houses by using a smaller footprint and less square footage.

“When it comes to new construction, we’ve got to look at ways to increase density,” said Martens. “We’ve got to be able to build homes on smaller lots and work with the city on how we can do that. It’s about getting back to a smaller footprint. When you look back at the 1950s and 60s, there were homes that were built in that 600- to 700-square-foot range, with a couple bedrooms and a bathroom. That’s what people want and what people need. Give them a basement and let them finish it later.”

Such changes will take time, he admitted, which means more potential frustration for first-time home buyers. The median home sales price in the Sioux Falls metro area, which includes Lincoln and Minnehaha counties, was $265,000 in 2021 and has risen by 17% over the past year to $310,000 in 2022, according to the Realtors Association of the Sioux Empire.

Watch the panel discussion at your convenience

Viewers can CLICK HERE to watch a tape of the one-hour panel discussion, hosted by News Watch Content Director Bart Pfankuch.

Dick Werner, a former lawmaker and now president of Herreid Area Housing Development Inc., said rural communities present their own housing challenges. When the Herreid native moved back to his hometown in 2016, the school’s enrollment was just over 100 and was trending to fall below 90. Lack of housing opportunities was a problem for existing residents and new immigrant families who worked at several of the county’s largest employers, including area wind farms and the Pig Improvement Co. in Mound City.

Werner, who helped form a non-profit housing group, started with one “spec” house and kept building and branching out, helping families find homes that fit their needs and incomes while helping the town and school district prosper.

“Our population has gone from right at 400 to now we’re at 477,” said Werner, a former banking officer. “The school enrollment with the fall census was 140. Housing is critical to saving our rural communities. People want to live in those places, and they want to work there.”

Keeping college-educated young people from leaving South Dakota for brighter horizons, the so-called “brain drain,” has been a goal for decades, and Ennis said the answers can be found in better-paying jobs and more realistic housing options.

“Our state has to figure out how to pay living wages,” he said. “This isn’t a 10-year trend. This has been happening for a long time, where people leave this place and flood up to Minneapolis to go to college and stick in the Twin Cities. We’ve got to have jobs that pay more money, and we need to be able to manufacture more housing and have those opportunities. A lot of people who move to Minneapolis or Omaha or Fargo end up wanting to come back to South Dakota when they’re ready to raise a family, so how do we skip that medium step and keep them right here all along? That’s what we need to figure out.”

Also on the panel was Shaylynn Hurd, a 35-year-old Rapid City resident who shared her struggle to afford a home. Hurd said she and her boyfriend recently secured a contract on a property with land and a home but very little infrastructure and few amenities south of Rapid City, Hurd said she expects their hard work in developing the property will pay financial dividends now and well into the future.

Hurd also said she hopes the housing market can be managed to allow her 8-year-old daughter to aspire to homeownership in South Dakota when she becomes an adult.