Demand is High, Supply is Lagging

By: Ron Austin, Sable Homes General Manager

The demand for homes is expanding in Michigan, however the construction of new homes has been lagging behind. Why is this? City officials note, “construction is about to come to an abrupt halt not for lack of demand –but lack of vacant lots” (Mlive). So then, the demand for homes is still there, but the infrastructure development is costly, and the availability of vacant lots is dwindling.

In Michigan, the cost of developing the sites is an obstacle for many home builders as the municipal requirements are expensive and require extensive permitting.  Home builders and developers are hesitant to jump into infrastructure for lots due to the lack of inventory as well as the risk involved with development.

The costs to build the housing infrastructure can vary. “At the local level, jurisdictions may charge permit, hook-up, and impact fees and establish development and construction standards that either directly increase costs to builders and developers, or cause delays that translate to higher costs” (NAHB).These higher costs translate into hesitation for new constructions and new developments that have the potential to provide more risk than reward.

There is a level of uncertainty involved with the home development market. This risk stems from “competition from sales of distressed existing properties, uncertainty about the health of the overall economy and labor markets, and difficulty in qualifying prospective buyers for mortgages” (NAHB).  However, developers are still interested, but they are paying close attention to commercial and job growth as well as trends in the housing market. The development investments must strike a balance between the cost of the investment, the current housing demand, and the existing government regulations.

Sable Homes took a gamble on the Central Park Property in Sparta, and the market was in our favor as 20 new homes were built on the property to serve the needs of the developing economy and bustling community. There is most certainly a risk that was tied in with the purchase and development of the Central Park Property, but with community ties and help from the village in purchasing the property the risk was well worth it.


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