The Des Moines Metro Market Snapshot is a quarterly report featuring inventories of new construction and existing single-family homes in the 18 communities I track for Peoples Company. My reports cover the residential housing data and statistics presented during Peoples Company’s Annual Builder & Developer Luncheon, and provide updates on the Des Moines-area market throughout the year.
The 2015 Builder & Developer Luncheon, presented by Peoples Company and Diligent Development, walked us through the prior year and provided a look to what’s ahead in for the Des Moines area housing community.
My annual presentation is focused on comparing statistics, sharing information and leading a discussion about trends throughout the residential real estate and the new construction home market in Central Iowa.
Lower interest rates combined with consumer confidence and decreased costs of becoming a homeowner appeared to factor in with what we saw in terms of improved total pending sales numbers in the first quarter of 2015. A mild winter and the high cost of rents on the multifamily side of the market also may have played a role.
In mid-February, there were 2,291 total active listings in Des Moines, and this inventory has continued to drop since I started tracking the numbers eight years ago. On the other hand, listings of single-family new construction – at 636 homes – has continued to rise with the percentage of new construction listings moving from 15 percent in 2011, and closer to 27 percent today.
The local market at the end of February had an overall 3.6 months of total inventory; the lowest I’ve seen since I began documenting my research. The Des Moines-area has NOT experienced a shortage of new construction, as evidenced by the current and nearly stable 6.3 months worth of supply.
The local and national market has seen an upswing in activity from buyers this winter. The question today is whether the number of new construction listings on the market increasing to replenish resale inventory, or are new construction sales starting to slow – resulting in a higher level of inventory?
There has been speculation as to whether the increased level of new construction inventory is leading to affordability issues with first-time homebuyers? The average new construction sales price has continued to rise in the past couple of years. In 2010, the average new construction sales price was $229,000. That’s compared an average of $316,000, just five years later in 2014.
So what does this mean for buyers in this new construction market? In a review of the average monthly principal and interest payments, based on the average cost of new construction in the Des Moines-area over the past five years, here is what we found. Given a 20 percent down payment and taking only the principal and interest on a 30-year mortgage, the average monthly payment would break down as follows: 2010 – $950; 2011 – $988; 2012 – $975; 2013 – $1,121; and 2014 – $1,232.
That means the average new construction home payment in 2014 was approximately $282 more per month than a buyer may have expected five years earlier. One concern is that as lot prices have increased, with the average price of entry-level lot prices approaching $70,000 in the western suburbs. That translates into a $350,000 home.
The Iowa economy was a bright spot during the economic crisis with low interest rates and a weak dollar benefiting the agriculture sector. As the national economy improves alongside a strengthening U.S. dollar, there is potential for upward pressure on interest rates with the possibility that Iowa’s economy may be placed at a disadvantage in comparison to the national market.
Continued depression in the farm economy could be a drag on the local housing market with ripple effects throughout all Iowa communities.
The majority of experts and others operating in the real estate field think 2015 is poised to be a terrific year. While I’m inclined to agree, high lot prices and the potential for rising interest rates – coupled with a struggling Midwest ag economy – could have some implications.
One warning sign to be on the look out for are lots that miss that entry-level price point as this could in turn slow the potential for new construction sales momentum, and with the potential to negatively impact momentum in building industry.
The cities of Des Moines and Norwalk have moved up the list and made strong showings with the 2014 Home Show Expo and availability of affordable lots acting drawing more exposure to those areas – and spurring more sales and growth – in recent years. The key is to talk with the city officials, regional developers and local builders – and then work together on finding ways to offer the right product, in the right locations, and at the right price points.
Follow the links for more data and information on the Des Moines-metro housing market, including a digital look at my Q1 single family housing statistics, and a downloadable PDF of our 2015 Builder Luncheon presentation slides.
For more information, contact me directly at Kalen@PeoplesCompany.com. You can also explore the unique housing communities offered by visiting Diligent Development’s website at www.DiligentDevelopment.com.
I am a Residential REALTOR® and Certified New Construction Sales Professional who specializes in helping homebuyers locate a suitable lot, secure a qualified builder, and pick a perfect floor plan to match their unique tastes or personal style. The ability to listen and understand the needs of her clients allows me to offer appropriate feedback and credible data that help sellers and buyers make informed decisions regarding real estate transactions. Follow me on Facebook, Twitter and LinkedIn.