“What a year 2020 has been!” How many times have we all heard that before? Yet it always seems to be so very, very true. It definitely applies when we look at the housing market!
2020 saw phenomenal sales for new construction homes in the Des Moines area, representing 20% of all single family home sales in 2020. The last time we reached a number even somewhat close to this was in 2007 at 19% market share. A truly remarkable year 2020 has been.
What is driving this consumer desire for newly built homes? The Urban Land Institute* refers to the current boom as “the great American move”, which was ignited by the pandemic, creating a growing desire to live in lower-density areas and thus, propelling suburban growth. The Des Moines metropolitan area is a prime location when applying this theory. We have many, many things to offer residents and the land space to accommodate a growing population.
Let us not overlook the common sense factor either, the lifestyle we are all becoming accustomed to; working from home!
The pandemic has changed the way each one of us completes otherwise routine tasks. Households need more space in their homes because we are spending more time in our homes. Designated space is needed for home offices, both for work and schooling. Space is also needed for entertainment and relaxation. Homeowners are finding, quite simply, that their current homes are not big enough.
Another outcome of the pandemic is a growing realization that the outdoors has so much to offer. When our usual hangouts were forced to close, we were forced to think outside “the box” for forms of entertainment. Outside gathering spaces were used more than ever in 2020. We met up on our neighbor’s patio when we had never made time to do that before. We found ourselves inviting family over for a backyard BBQ instead of meeting at a restaurant.
The way society gathered had drastically changed. As a result, homeowners were (and are) putting money into their houses and the spaces around their homes. This is the same money that, prior to 2020, may have been spent on traveling or eating out. The population, more than ever, is saying they are ok being “house poor”. They aren’t saving for that dream vacation to Europe or to take their kids to Disney this next school break. Plus, we all know that interest rates are going to go up at some point so building now (or buying a little more than we need in the hopes of getting a home one can grow into) makes sense when thinking about capitalizing on the low monthly payments.
Des Moines, again, is benefiting from this trend because of our moderate weather that stretches from March to November. We have an abundance of parks and great community planners. The outdoor trail system in the Des Moines area and surrounding suburbs is phenomenal. Cumming, IA has seen particularly high sales for this exact reason! Homes along the trail system are highly valued. To live in a location that offers bikeability and walkability is so important to today’s buyers. New construction communities are tapping into this desire and building accordingly, like Iowa’s First Agrihood, Middlebrook Farms.
If we step back and look at 2020 as a whole, the first quarter of the year had a great start but we had no idea what was about to hit us. With the arrival of Covid-19, the second quarter took a shaky start with a lot of uncertainty. The housing market overall slowed down a bit and some builders/developers pulled the brake on new projects. Homeowners, in general, did know if they should list their home or not. None of us knew what to expect or predict!
Then the third quarter hit and everything broke loose. People had settled into the Covid-19 “lifestyle” and were feeling more confident with their new normal. They were getting antsy and ready to move forward with their dreams. We were ready to sell, buy and build! Pent up demand hit us with full force, backed by record low interest rates, giving buyers more buying power than they knew what to do with! The housing market sped up so quickly that riots, natural disasters and even the pandemic as a whole could not slow it down. Quarter three included one of the toughest summers our nation has ever seen yet the housing market flourished.
Now the fourth quarter has come to a close and in our industry, there is nothing to complain about. When looking closely at the numbers for Q4, there just are not enough houses on the market. Buyers are plentiful. Total single family homes showed only a 1.4 month supply (1,192 homes in December 2020 versus 2,099 in January 2020). The supply of new construction carried the market with 3.6 months of inventory in Q4. It is important to note that 53% of the current inventory available to buyers is new construction.
One of the most shocking statistics of this year is that the total single family resale and new construction combined sales was 10,523 homes for 2020. This number becomes even more shocking when compared to the 8,877 homes sold in 2019. Do the math and you will see that this is a 19% increase in sales DURING A PANDEMIC! No one would have ever predicted such a year! Upon digging deeper into the data, you will find that 2020 built (and sold) 556 more new homes than in 2019. Again, truly amazing when you think about what our day to day lifestyles have had to overcome.
As we close out 2020 and look with hope to 2021, I invited you to join us at the Builder and Developer Luncheon on February 26th. This will be a virtual event with Economist Robert Dietz as keynote speaker and Kalen Ludwig speaking about the local housing market. To learn more or register for this event, click here.
Best wishes for a prosperous 2021 from all of us at Kalen Ludwig!