With new neighborhoods opening in and around Sioux Falls, homebuilders hope for rebound year

What’s the market in Sioux Falls for a residential home lot priced at more than $200,000? Or $300,000? Or $400,000?

It’s starting to become clear for developers of The Sanctuary, a 200-acre new neighborhood in northeast Sioux Falls. The area has averaged 15 lot sales per year the past two years.

“The most expensive ones have sold,” said Jesse Deffenbaugh, co-owner of Deffenbaugh Homes. “They were all premier lots.”

That’s a common trajectory for a new development, he said. The average list price for lots throughout the entire property is $333,000.

“We did a market analysis at the beginning of the year, and in lot sales over $200,000, The Sanctuary was around 70 to 75 percent of the overall market,” Deffenbaugh said.

“So The Sanctuary was doing well for the market, but the market wasn’t bearing any more.”

This season, though, infrastructure has been completed in the development to the point that a buyer can purchase a lot and get started right away. Until last fall, “it was a more long-term planning process,” Deffenbaugh said.

There are 120 lots remaining out of 160.

“If things got hot this summer, the Sioux Falls market could maybe sell 60 lots in that upper-end market,” he said. “But historically, we haven’t really seen over 30 a year. What’s going to be interesting is how are those $200,ooo to $400,000 lots selling.”

As the east side matures and the Veterans Parkway corridor is completed in the next several years, “it’ll be really interesting,” he predicts. “I think we’re going to see good growth in that whole corridor.”

While lot sales represent the ground level of residential growth, actual home construction appears to be tracking similar to 2025 as spring unfolds.

New residential construction totaled $23.8 million in the first quarter, down from $32.3 million last year and $35.4 million two years ago.

Through March, the city has issued permits for 59 single-family homes, which is 10 more than last year but less than the 105 permits in the first quarter of 2024.

The pipeline of homes suggests a slowing market. Last April 1, there were 821 single-family or townhomes at various stages of construction, according to the city of Sioux Falls. This April 1, it was 604.

Still, at a homebuilder level, “it doesn’t take much for us to get busy,” Deffenbaugh said.

“We had a couple bigger projects kick off six months ago that will come to a close this fall. We’ll kick off a couple more this summer. When the market is stagnant long enough, at some point people decide: ‘I really want to do something. Let’s just do it.’ That’s what we saw last summer.”

While that’s the high end of the market, Empire Cos. is continuing to build owner-occupied townhomes, twin homes and single-family homes.

“We’re still building every product type, but it’s definitely slowing,” co-owner Brady Hyde said. “The market activity has definitely decreased. There’s still people out there looking and buying, although our take is we feel ’26 will be slower than ’25.”

His company has a new 75-acre development opening up off 57th Street between Highway 11 and Six Mile Road — a mix of single-family, villas, townhomes and twin homes, as well as the next phase of development in townhomes and twin homes in Empire’s SouthLoop neighborhood off 69th Street and Sycamore Avenue.

“It’s been good for us, and that’s kind of our forte,” Hyde said. “But we’ll expand and keep some single-family detached as well. I think everything is reasonably healthy. It’s just different than a few years ago. The purchase price is quite elevated from 2019 and 2020.”

There’s a different dynamic emerging at Van Buskirk Cos., which notably has several new neighborhoods under development in communities adjacent to Sioux Falls.

“Coming into this spring, everybody in the office is saying the same thing: It’s busier than it was last year,” co-CEO Steve Van Buskirk said. “We’re getting more phone calls, more web inquires; it just seems more energetic across the board. Last year was a little slower on the housing side.”

The company’s new Mapleton Highlands development near Mapleton Golf Club “has been a lot of fun,” he added. “I think we have five houses going up right now getting under construction, and this spring we’re thinking we’re going to have another five, so it’s been amazing the traction we’ve had out there.”

There were 66 lots opened and 44 sold, so the plan is to open 60 more. Lot prices generally range from $150,000 to $275,000 but increase to more than $550,000 along the golf course.

The first round of buyers represents many new members of the private golf club, but “what we’re seeing now are people not associated with the golf course and just moving to the neighborhood,” Van Buskirk said. “It feels more Minnesota — rolling hills and trees — and it’s right on the way into town, so we’re really connecting with Minnesota there.”

Other active neighborhoods for the company include River Park in Brandon, “where we’ve gotten really good traction,” and Heritage Pond in Crooks, where “we had a really good year last year,” he said.

He estimates that there are one or two seasons left of lots in Willow Ridge in northeast Sioux Falls near Fred Assam Elementary, “so we’ve worked our way through that subdivision.”

Multiple neighborhoods are under construction in Harrisburg.

“Those are active neighborhoods, and we’re working on opening up another executive neighborhood on the south side of Harrisburg — big acreage lots where you can build your own accessory building right on the property because the lots are big enough,” Van Buskirk said. “We think there’s a lot of demand.”

The company also is looking at the next phase of residential growth on the far west side of Sioux Falls, building on the success of its Cherry Lake Reserve development. Westwater at Cherry Lake could begin this fall, bringing 150 lots adjacent to a private lake with shared amenities.

“We’ve had a slew of people excited about that neighborhood, so that’s going to go very, very quickly once we can get it going,” Van Buskirk said.

Buyer profiles

Here’s another interesting data point: At Van Buskirk, where activity is increasing, “everyone we’re building houses for this spring — every single one — is from out of town,” he said. “We’re speculating that it’s the tight inventory. People are moving from out of town, and there’s not a lot of options, so it’s getting them into new-housing product.”

His buyers generally are coming from Minnesota and Iowa, he said.

“It’s a lifestyle choice. It’s getting closer to medical care, grandkids; those are the big draws,” Van Buskirk said. “(Age) 53 to 65 is what we’re seeing. What they’re looking for is a slab-on-grade home that we’re producing quite a bit of.”

The average age of a first-time homebuyer has increased as people rent longer, Hyde said.

“Definitely over the years as purchase prices have increased, we’re seeing less first-time homebuyers on single-family,” he said.

Deffenbaugh sees two distinct demographics in his buyers: families with kids not yet in middle school or grandparents building what they hope will become a home base for the extended family.

“It’s nearly never in the middle,” he said. “Empty-nesters are cash buyers. They’ve worked their whole life, and it’s ‘if I’m going to do something, let’s do it right … and we’re going to enjoy it the next 10 or 20 years.’ Or the family says, ‘I want my home to be where my kids are, where we have a pool in the backyard so I have the kids at my house.’”

Buyer confidence is still a factor, though.

“In our market segment, 75 percent-plus are cash buyers, nonfinance buyers, and in a market where the interest rates are higher, I feel like it truly is a better time for them to build,” Deffenbaugh said. “But interest rates still affect buyer confidence and buyer psychology.”

Van Buskirk agrees the timing is right for homebuilding.

“It’s a really good time if people are inclined to do something because the bid market is very good right now,” he said. “That’s exciting for homeowners. They’re going to get a good value this year. Construction in general is slower, and people are looking to fill their schedules. It’s a good time to jump in and build a house.”

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