Realtors seeing rush of relocations to South Dakota amid pandemic

Realtors in South Dakota have seen a steady influx of people seeking more affordable housing and more personal freedoms by moving to South Dakota amid the pandemic, even as the state has seen a sharp rise in the number of active COVID-19 cases, hospitalizations and deaths.

Many new home buyers have been lured to the state, real estate agents say, by traditional benefits of South Dakota living such as the lack of a state income tax, relatively low property taxes and home prices, safe neighborhoods, a small-town vibe and access to wide open spaces. A new, pandemic-driven trend of employers allowing or requiring employees to work remotely from their homes has also boosted the ability of homeowners to relocate to South Dakota without changing jobs.

But agents say the rise in relocations has also been fueled by the refusal of state and local government officials in South Dakota to impose mask mandates and business closures during the COVID-19 pandemic. A state government effort to recruit people and businesses to relocate to South Dakota from Minnesota has also contributed to the strength of the state housing market, realtors say.

The two biggest housing markets in South Dakota — in Sioux Falls and Rapid City — have seen a rise in interest by potential home buyers from all across the U.S, local agents say. The average prices paid for homes have risen in both markets; houses are spending fewer days on the market; and there are as many as 30% fewer homes for sale due to increased demand.

Some eager out-of-state buyers are making offers on homes sight-unseen.

“I heard the other day that there’s an agent that wrote up three offers where, basically, the client has never seen the property because they know the market is so hot,” said Larry Luetke, president of the Realtor Association of the Sioux Empire, based in Sioux Falls. “There’s just a lot of people looking at our state right now.”

The association tracks home sales in the Sioux Falls region and said home sales are strong.

The average time on the market for homes has fallen to 75 days recently from a more typical 90 days before a sale, Luetke said. Average sales prices are also up, having risen more than 7% since September 2019, from $210,000 to $225,000. Meanwhile, the number of homes on the market has fallen by more than 36% in the Sioux Falls area, from 1,980 in September of 2019 to 1,259 in 2020.

"There's an agent that wrote up three offers where, basically, the client has never seen the property because they know the market is so hot ... there's just a lot of people looking at our state right now.” -- Larry Luetke, president of the Realtor Association of the Sioux Empire

Home sales are also up in Rapid City and the Black Hills, said Steve Anderson, president of the Black Hills Association of Realtors. Realtors in the region have sold about 100 more homes during the first nine months of 2020 than they had during the same period in 2019, he said. The average sale price in the region is up more than $18,000, from about $252,000 in 2019 to more than $270,000 in 2020.

The Black Hills region has long attracted people outside of South Dakota as a retirement or lifestyle destination, so there has always been movement to the area. The pandemic, though, appears to have pushed more people to take early retirement or look for a less-crowded place to live.

“We are absolutely seeing a little bit more action coming from the West Coast and even from down further south,” Anderson said. “I think this pandemic has maybe made people just kind of sit back and realize there is a simpler life.”

The South Dakota Association of Realtors normally collects monthly housing market statistics for the whole state but is between third-party data collectors and does not have reliable current statistics.

South Dakota Gov. Kristi Noem, a Republican, has said she is not surprised more people are interested in moving to South Dakota. In an Oct. 12 interview with Moorhead, Minnesota radio station WZFG, Noem said her decision not to mandate mask-wearing or shuttering of businesses during the pandemic has attracted both new companies and new residents to the state.

The Noem administration has also launched a multi-million dollar ad campaign to lure businesses from Minnesota into South Dakota based partially on Noem’s handling of the pandemic. The campaign also notes South Dakota does not have a state income tax, has low property taxes and has a business-friendly regulatory climate.

“And there’s a governor in South Dakota that isn’t going to shut your business down or take your rights away,” Noem said.

The surge in home buying comes as South Dakota’s COVID-19 infections are peaking. As of Oct. 14, there were more than 6,000 active cases of COVID-19 in South Dakota, 303 people were hospitalized due to the disease and 288 people had died.

While critics point to Noem’s laissez-faire approach to the pandemic as one of the driving forces behind South Dakota’s rising numbers of COVID-19 infections and deaths, her policies have also played a big role in the strength of the real estate market, Luetke said.

Many of his new clients say South Dakota’s refusal to mandate masks or shut down businesses were among the top reasons they chose to move to the state, Luetke said.

“They’re, basically, moving here right now because of our governor,” Luetke said.

Sarah Gross, of Keller Williams Realty in Sioux Falls, said she is working with four clients who are leaving larger, urban areas for South Dakota. One of Gross’ new clients is in her 20s and left a job and a downtown apartment in Portland, Oregon, to relocate to Sioux Falls. Another couple is trying to sell their home outside Minneapolis and is looking to build a new home near Sioux Falls, Gross said.

“They are pulling whatever cash together however they can get it together. They’re cashing out retirements, and they are just buying something in cash. It may not be the size and style of house that they would normally want, but they’re just desperate,” Gross said. “They just want to get here. They want to get away and they want to restart their lives.”

Work-from-home trend benefiting SD

Another factor driving the increase in South Dakota home sales is the number of companies allowing or requiring employees to work from home. Several of Luetke’s new out-of-state clients are former South Dakotans who moved away for work but have come back during the pandemic, some seeing a financial benefit along the way.

“They’re actually moving back, and they’re living with their parents but working from home,” Luetke said. “They’re still making the same money they were making in California, but they’re living in Sioux Falls.”

Nationally, the pandemic has spurred interest in moving out of big cities, said Lawrence Yun, chief economist for the National Association of Realtors. The association’s regular surveys of realtors have shown a burst of home buying in outer suburbs, small towns, and historic vacation destinations. Buyers, Yun said, are looking for larger homes with more space that are more affordable than similar homes closer to cities.

“States like South Dakota, I think, will be the beneficiary of this because of the abundance of land and plentiful affordable homes,” Yun said.

Sioux Falls housing market seeing a bump

Here are some facts about the current housing market in Sioux Falls:

• For the 12-month period spanning September 2019 to September 2020, the number of pending home sales rose 19.8%
• The average sale price rose 7.1% from $210,000 in 2019 to $225,000 in 2020
• Housing inventory fell 36.4%, from 1,980 in 2019 to 1,256 in 2020
• The $450,000 to $500,000 price range saw the highest jump in sales with a 69.6% increase
• 98.9% of homes sold in September were sold at their original list price

Source: Realtor Association of the Sioux Empire

Companies large and small across the U.S. sent office workers home to help slow the spread of COVID-19. Technology companies such as Twitter and Facebook found that many workers could be just as productive when working from home. In Twitter’s case, the company has announced to employees that they no longer have to live in the San Francisco Bay area, Yun said.

Businesses such as Target and Ford Motors have extended the work-from-home requirements for their white-collar employees into the summer of 2021. In the future, some workers may only need to be in their office two days a week; others may not need to spend any time in the office at all, Yun said.

“This trend will keep going all the way through 2021. And with broadband access that is available in most parts of the U.S., and hopefully, they will make it even more accessible in rural areas, so more people can work from home,” he said.

Virginia family seeks a new life

Nathaniel Putney’s move from Virginia to South Dakota with his new wife, Jeanette, was heavily influenced by the Rushmore State’s approach to the pandemic, gun rights and personal freedoms. After seeing crime rise in his Virginia Beach neighborhood for years and watching new gun regulations get passed, the last straw for Putney was his home state’s response to COVID-19.

“I didn’t really want to leave. I kind of figured maybe it would get better, but it never did,” Putney said. “I might have physically left Virginia, but Virginia left me long before.”

Before March 2020, Putney made good money as a technician installing new computer and software systems in airport control towers. He thought his job would be considered essential, but when Virginia’s economy shut down due to COVID-19, Putney found himself out of work, a situation he blames on Democratic Gov. Ralph Northam.

“With the snap of his fingers, the man basically took away my livelihood,” Putney said.

After losing his job, Putney started searching the internet for states with strong support for gun ownership, respect for personal freedom and which had not put many restrictions on businesses or individuals during the pandemic. Putney looked at states such as Nebraska, Montana and Utah before landing on South Dakota.

Moving to South Dakota was not easy. Neither Putney nor his wife was employed when they decided to move. They were making do on unemployment benefits and savings, which Putney learned do not count as income when applying for a lease on an apartment. Putney said he could not convince landlords to accept a few months of rent in advance to let him move in. His original plan to rent for a few months while looking for a job and settling in South Dakota was not going to work.

Eventually, Putney met Gross and agent Mark Sorenson and determined that he could buy a house rather than rent. But without a job and a regular paycheck, securing a mortgage was out of the question. Instead, Putney and his wife took every bit of cash they could scrape together from savings and retirement accounts, and in early September bought a house in Madison, S.D., for roughly $145,000 in cash.

“We had to give up a lot, but in doing so, frankly, God provided,” Putney said. “It was almost like God prepared this house for us to come out here. That’s what it felt like.”

Putney and his wife moved into their new home on Sept. 25. The move came just in time for Putney to start a new job as a technician at Mid States Audio & Visual, a job Gross helped him find. The pay is a little lower than what he was making in Virginia, but between not making mortgage or rent payments, a lower cost of living and not paying a state income tax, Putney said he may make a higher net income.

“South Dakota is just the land of milk and honey, and I love it,” Putney said.