Message from the President

To say the residential housing market has been on a tear would, until recently, been an understatement. According to the Federal Housing Finance Agency, from 2019 (Q4) to 2021 (Q1) the price of single-family homes in Delaware increased from 25% to 32.9%. That increase, while substantial, placed us in the lower third of the increase ladder nationwide. Ten states experienced increases of over 40% during that same period. Today, with higher mortgage interest rates, we are seeing some cooling effects. For perspective, the average sales price of a single-family home in July 2020 was $266,022 at an average mortgage rate of 2.98%. The monthly principal and interest payment, after putting 5% down, would have cost you $1,063 per month. Fast forward two years later to July 2022, your interest rate would average 5.22%, the average sales price would be $363,762, and your principal and interest payment, after a 5% down payment, would be $1,902. That’s a 79% jump in payment costs each month!

For a historical perspective, I purchased my first home back in 1987, put down 5% and had an interest rate of 10.5%. I was very happy with that rate given that many of my “older” friends who bought homes six or seven years earlier, had mortgages of 17-18%! Today, rents are also up and housing affordability for many people is a growing issue. At the same time, wages and hourly earnings have increased sharply, so where exactly are we? Forbes Senior Contributor Jack Kelly authored an article titled, “We Need to Talk About the Worker Wage-price Spiral Before It’s Too Late.” As wages increase and labor costs rise, businesses charge more for their goods and services. As the theory goes, this is like a dog chasing its own tail. Others from Forbes and The Cato Institute say the wage-price spiral explanation of inflation is “a dangerous myth.”

In comparison to surrounding states, we are quite affordable and, in some cases, an outright bargain. We do have a need for more affordable housing and even seasonal housing so that temporary workers have options within proximity to transportation and places of employment. So while prices are higher and borrowing costs have ticked up, wages—for now— seem to have addressed this challenge for many. However, this all deserves our attention. Our workforce needs are growing rapidly, and most businesses need more workers. As greater numbers of people figure out that the First State is an affordable option to “live, work and play”, we’ll feel even more pressure in the housing market. To meet demand, our partners in local government might consider zoning changes that open more opportunities for everyone to call Delaware home.