New home prices continue their ascent in Omaha metro, and a new study offers peek at why

OMAHA — The average sale price of a newly built home in the Omaha area has hit the half-million-dollar mark, and a local nonprofit group is ramping up efforts to stem construction costs that have helped to drive record prices.

Formed about a year ago, the Omaha-based Welcome Home coalition of housing and business leaders has been growing and meeting with public officials about ways to make the American Dream more accessible to more Nebraskans.

Analysis to spark conversation

During that same timeframe, though, new single-family home prices continued to escalate, as has talk about affordable housing needs across the state.

Now Welcome Home is armed with a new, survey-based analysis its leaders hope will help pave the way for pivotal policy changes that benefit builders, who in turn could pass on savings to homebuyers.

Commissioned by Welcome Home and conducted by the University of Nebraska at Omaha, the study examined the cost of government regulation imposed during construction of new single-family homes in the Omaha metro area.

Researchers found that regulatory costs account locally for an estimated 32.8% of total construction costs — compared to the national average of 21.5%, as reported recently by the National Association of Home Builders.

The team from UNO’s College of Public Affairs and Community Service — led by John Bartle, dean of the college, and Xiaowei Song, —sent a two-page questionnaire, modeled after the NAHB survey, to 34 area builders and five responded. 

Jason Thiellen, Welcome Home president, said builders have felt the impact of mounting regulations since about the 2008 housing and financial crisis. The costliest punch, according to survey respondents, has come from building code changes and architectural design standards.

‘Unintended adverse effects’

Thiellen, also chief executive of E&A Consulting Group, said he expects  the UNO report to turn more attention to how communities can improve zoning codes, permitting delays and other government practices that have “yielded unintended adverse effects.”

“Over the last 10 or 12 years, our industry has felt and seen the impact of public officials’ good intentions as they increased regulations on homebuilders $500, $1,000 or $2,000 at a time,” he  said. 

Builders have adjusted their pricing to keep up with rising costs that include land, labor and construction, Thiellen said.

Many families, in turn, have been nudged out of the homeownership market.

Prices today have reached the point, he and others said, where Omahans can hardly find a newly constructed home to buy for under $300,000.

On the rise

Consider the latest report from the Great Plains Regional Multiple Listing Service:

• In January, the average price of newly constructed homes that sold that month in the Omaha area shot up to $500,363. 
• Throughout last year, that average sales price was about $455,000; and for 2021, it was just under $400,000.
• Going back a decade, a brand-new Omaha area home, on average, sold during 2012 for about $260,000.
• For the Lincoln area, the average sale price of a newly constructed home reached nearly $450,000 in the month of January. The average sales price in 2022 was about $432,000 and for 2021, $366,000.
• Experts say elevated prices, combined with inflation and soaring interest rates, led to a 14% drop last year in the number of homes sold in the Omaha area compared to the year before. That dip reflected sales of both newly constructed homes and existing ones.

Safety driven

To be sure, local government officials don’t control all factors influencing rising construction expenses, which include the cost of labor, lumber and other material.

Planning officials say that regulations typically are driven by safety and that some aren’t negotiable.

“We adopt codes usually because there is a life safety factor,” said Dave Fanslau, planning director for the City of Omaha, which is just one of several entities Welcome Home seeks to partner with.

Other regulations might be driven by efficiency or a federal mandate, said Fanslau. At times, Omaha has adopted a locally tailored version of a federal requirement, based on local conditions.

Omaha city planners, he said, are continually adjusting practices to improve efficiency and “welcome the conversation” with Welcome Home coalition leaders, with whom he has met multiple times.

“We’re attacking this issue on many fronts already,” Fanslau said, citing the city’s developing affordable housing action plan that’s to guide creation of more options, both for rental and purchase. 

Starter homes

Welcome Home has focused its efforts solely on the for-sale market, its leaders said, with a particular aim to reduce starter home costs.

Thiellen believes that more developers and builders want to produce for-sale housing at lesser price points, but he said that often requires flexibility, cooperation or policy changes from local governments.

He offered an example of an Elkhorn-area row house neighborhood under construction near 207th and Q Streets, which, when done, will feature more than 200 homes.

Developer Ben Katt said he was able to offer three-bedroom, two-car garage units for just under $300,000 in large part by maximizing the number of dwellings at the Rows at Coventry campus.

But that took some rule tweaking. Thiellen, who is helping Katt iron out regulatory issues, said he had to get approval from Omaha officials for 13 waivers to existing rules.

‘Unlimited demand’

He said the Welcome Home team is seeking a more streamlined process that would allow other high-density suburban projects to bypass certain steps, such as hearings before an appeals board. That would save time and money, he said.

Omaha planning officials several years ago adopted similar changes to encourage redevelopment on hard-to-build-upon areas of the urban core. Fanslau said city officials, likewise, are considering actions that could spur denser and more affordable housing sites farther west.

At least one cost-saving measure that Thiellen pursued at the row house project was rejected. He said a public utility official, citing the plumbing code, would not permit water service lines to be installed in a manner similar to apartment buildings. It could have saved about $14,000 a dwelling, he said.

Katt counts himself among housing developers and builders interested in offering a more affordable product that could bring down average home prices. Conditions have to align, he said, including buying land at the right price and moving swiftly through construction.

“It’s challenging to get to that price point.”

Meanwhile, he also has turned development efforts to rural areas — even in RV parks —  because lower property taxes and other factors combine to make living there more affordable and attractive to consumers. He said it’s a venture alluring to builders, too.

“You have unlimited demand,” Katt said. “Units sell quick.”