As Housing Prices Climb, How Can a Luxury Homebuilder Help?

Compass Homes Luxury Homebuilder

Originally published by Zachary Jarrell – Data Reporter, Columbus Business First on Sep 5, 2024

The price of homes in Central Ohio keeps going up and up. 

In July, according to the most recent Columbus Realtors data, the median home sale price sat at $327,250, a 3.9% increase year-over-year.

The month before, that number hit $334,900 in Central Ohio, an all-time high.

Just five years ago, the median sales price in Central Ohio was $181,500, according to Columbus Realtors.

The region needs more housing – that much is clear.

But how can a luxury homebuilder – a company focused on neither quantity nor affordability – help ease the strain?

Mark Braunsdorf, owner of Compass Homes Inc., has a theory.

Compass ranked as one of the top homebuilders in Central Ohio on Columbus Business First‘s annual list, ranking companies by their total gross sales volume of owner-occupied homes.

Though Compass only delivered 24 homes – much less than the top homebuilder, M/I Homes Inc., at 825 – the company still posted $27.71 million in sales volume, good for No. 8 on the list.

This interview has been edited for length and clarity.

Compass Homes Luxury Homebuilder

Just how big is the supply and demand gap?

When you look at the numbers of how many houses are getting built a year – if we doubled our output, it’s going to take somewhere between three and five years to catch up. Obviously, we can’t double our output nationwide.

Then you start looking at Columbus, where we’re having incredible growth in jobs – the Intel jobs haven’t even started yet.

We simply don’t have enough housing units. That’s the problem in Columbus. That’s the problem nationwide.

That supply and demand imbalance is what’s creating price pressure, across the board.

The FED is widely expected to cut interest rates soon. Will that have any effect on the price of homes?

People talk about housing being expensive, and say, ‘Well, interest rates need to come down.”

Sure, that would help, but realistically, we’re in a pretty normal interest rate environment – 6-7%, for decades, that was considered normal. Then, we had the Great Recession, and we saw these interest rates go down. I remember 10 years ago saying this isn’t going to last. But it just stuck around. Then, of course, Covid happened.

There’s a little bit of a reset now.

Lowering interest rates will increase the number of people that can afford a house, which is too few … But the more people that can afford a house, the more the demand goes up.

So, interest rates are not going to fix the issue; we have to build more houses.

On that point, though, how can you as a luxury homebuilder actually help?

All housing helps affordability.

If you think about it, during the pandemic, when you couldn’t get new cars, what happened to the price of used cars? They went through the roof. Why? Because the people that could afford the $70,000 new car went, ‘I can’t find one. Well, I’ll go buy this $40,000 used car. Oh, wait, there aren’t any. Well, I’ll pay $50,000 and get it.’ In other words, if you pour more new cars into the market, the price of used cars goes down.

Same kind of thing with housing. I’m not saying build all high-end houses, but housing affordability is more than building affordable houses; housing affordability is just building enough houses.

So, any house you add to the marketplace helps the overall cost of housing.

But I’m not going to solve the housing crisis myself – I can think about it; I can look at it; I can pontificate about it. But they’re big-picture issues, like zoning, that need to be addressed.

Original Article