Patience bitter, fruit sweet in housing market

The Lehigh Valley’s housing market is hotter than a Phoenix summer, and it will take longer than anyone wants to correct some of the challenges this creates for individuals and families, communities, lenders, realtors, developers and elected officials. While I’m apt to quote notorious 1980s commercial icon Crazy Eddie, because housing “prices are insane,” it’s important to understand what is causing what the region’s housing market is experiencing and what this means.

To unravel this complex market, we need to move beyond the shock and awe, and instead understand what is being done and what more we can do. While entertaining, Crazy Eddie is no substitute for where we really need to work, and that’s on patience, because much is being done.

Instead, let’s opt for philosopher JeanJacques Rousseau, who theorized over 275 years ago, “patience is bitter, but it’s fruit is sweet.” Translation: Pain before the gain.

Pain is a good way to describe what anyone trying to buy a home is going through right now.

Desperate buyers, most making the biggest investment of their lives are waiving inspections, paying cash and bidding tens of thousands of dollars over asking prices for homes that are sometimes selling within hours of hitting the market.

Crazy.

But the LVPC’s latest BuildLV Development Report shows that help is on the way. It’s just going to take patience. A lot of it, because backfilling this historic housing shortage is going to take years.

Within the nearly 500 development reviews we performed last year, 2,248 new homes were approved. It’s the most since 2007 and in those numbers is a lot of reason for optimism. There’s far more diversity in what developers are building these days, with a greater percentage being twins, townhomes and apartments. The 1,264 apartments approved in 2021 are the most we’ve seen in more than two decades. Single-family detached homes remain a staple for Lehigh Valley homebuyers, but they no longer dominate the regional market, and this new diversity and changing home preferences are saving space.

For example, the 811 single-family detached homes approved in 2021 will use about 450 acres of land. Compare that to 2007, when 866 such homes were built on nearly 1,300 acres of mostly farmland and open space — you know, the kind of land we’re all working hard to preserve.

The apartments were approved last year at roughly 22 units per acre and most of those will be built on already-developed urban and suburban lots.

That’s the good news. The bad news is that even at this intense rate of building, climbing out of our housing shortage is going to take years and these skyrocketing housing prices are likely to continue in the Lehigh Valley longer than the rest of the nation.

Consider that the analysis LVPC housing expert Jill Seitz did last year showed the Lehigh Valley was short about 10,000 available homes from having a healthy, balanced housing market. As more homes are built each year, pressure will gradually be relieved, but it doesn’t take high math to deduce that even the increased number of homes we’re seeing approved aren’t going to fill the void anytime soon.

Again, years. And consider that all those homes approved in 2021 still have to be built and are likely at least two to three years from hitting the market.

But why will this insanity period last longer than most regions? Because despite all we’ve said about this frenzied market, and despite a median homes sales price that’s increased 46% in just two years, according to Greater Lehigh Valley Realtors data, this region is still a relatively affordable place to live.

The median home price nationwide is now $350,300. That’s actually a 3% reduction from a year ago. When you compare that to the Lehigh Valley median price of $269,950, it makes this region a pretty attractive place for people looking to relocate in this new world economy in which some employers have gone to hybrid or fully remote work. And why not? We’re a beautiful region with lots of culture, history, open space and a unique charac

ter all our own, and we’re within an easy drive to world class destinations and the Atlantic Ocean.

That’s why many of these cash bids coming in are from workers relocating from outside the region, and outside investors seizing opportunity in a region that Barron’s Magazine, as recently as 2016, listed as the country’s most undervalued market.

But being affordable compared to the national average, or even to nearby regions in New York, New Jersey or Connecticut, doesn’t mean we’re affordable to people who live here.

Therein lies the biggest problem with all of this. These spiking housing prices are making it difficult for a lot of Lehigh Valley residents to move within their own communities, or even stay in the rental property they already occupy. Jill’s analysis last year showed that more than half of all Valley renters and a quarter of homeowners are paying more than 30% of their gross income for housing — a condition known as being cost-burdened that leaves families vulnerable to financial instability.

The answer is more for sale and rental housing at all price points of the market, because huge inventory shortages at the top and bottom of the market — homes priced above $350,000 and below $80,000 (or rent of $800 per month) — are forcing high earners to buy down, and lower earners to buy up, creating compression that has everyone searching for homes in the middle. Prices for all types of units go up and everyone needing or wanting housing is squeezed.

The answer is a lot more of what I like to call workforce housing — housing that’s appropriately priced to match the incomes of people who live and work in a given area, whether they be low, medium or high income. Other tools such as zoning, code and design regulation changes that would increase development flexibility and incentivize a greater mix of housing types will be needed to achieve such a balance.

But that brings us back to where we started — patience. It is said to be a virtue, but if you’re trying to buy in this market, it may be bitter. As Greater Lehigh Valley Realtors CEO Justin Porembo says, if you’re selling a home, you have a 100% chance of success right now. But if you’re bidding on one, your success rate is about 1 in 30.

Patience isn’t much fun, but it’s something we’re all going to have to deal with because this housing shortage will continue to test our resolve for the foreseeable future.

However, the development and lending communities, and even local and county governments are responding at a level unlike the region has seen in over a decade.

Housing is coming. We’ll just have to wait for it.