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Official shares data on South Dakota’s multi-family housing spree, tight labor market

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Official shares data on South Dakota’s multi-family housing spree, tight labor market

Jun 14, 2024 | 9:05 am ET
By Joshua Haiar
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Official shares data on South Dakota’s multi-family housing spree, tight labor market
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Houses under construction on Oct. 28, 2022, in Harrisburg. (John Hult/South Dakota Searchlight)

Six thousand five hundred new housing units worth $1.4 billion were built in South Dakota last year, a state economic development official said Wednesday, helping alleviate rising home costs.  

“Our building permits are notably concentrated on multi-family housing, with an average of 1.8 units per building,” Joe Fiala with the Governor’s Office of Economic Development told members of the South Dakota Board of Economic Development. “That’s the sixth highest ratio in the nation.”

In April, Dakota Institute Chief Executive Officer and economist Jared McEntaffer said communities should speed up the construction of multifamily housing units to mitigate the state’s “unheard of” rise in home values. 

The median home price in South Dakota rose by an inflation-adjusted 26% from Q2 2020 to Q1 2024, compared to a national average of 11%. Prices increased by $75,000, reaching $375,000 in February 2023. 

The rise especially impacts first-time homebuyers. A 3% down payment on a median-priced home in 2017 would result in a $1,270 monthly mortgage. By 2023, this increased to $2,325. A buyer who earns South Dakota’s median income would spend about 43% of their pre-tax income on an average house after a 3% down payment.

Rapid rise in South Dakota home prices is ‘not sustainable,’ economist says

On Wednesday, Fiala pointed to what he described as positive signs. He noted that South Dakota’s median price per square foot of housing is $215, which he said is 8% more affordable than the national average, and a slowdown in price increases for homes on the market.

“Additionally, our listing prices are very stable,” he said. “With 77% of the listings showing no price change from the previous month.”

Fiala also pointed the board to the Business Conditions Index for South Dakota, which factors in data like production, sales, logistics, inventories, and employment. In April, the index surged to its third consecutive high, reaching 61.4, surpassing March’s 60.8. Any number above 50 implies economic expansion.

“Our state’s index is highest in our region,” Fiala said.

He said the state budget looks good too. With a month left in the fiscal year, he said, the state is seeing about $120 million more in revenue than it had at this time last year.

“So, good news on that front,” Fiala said.

The biggest budgetary boost came through an uptick in lost financial assets – usually held by banks – turned over to the state as unclaimed property.

Fiala said the state’s unemployment rate remains “historically low” at 2%, and South Dakota has the nation’s sixth-highest percentage of working-age people participating in the workforce.