Temperatures are dropping, days are feeling shorter, and our farmers are harvesting their fields. Fall has come to the Des Moines metro and the third quarter of 2021 housing market is wrapping up very similarly to the second quarter. We still have a hot market, high prices and a drought of inventory.
What is driving this, you ask? Record low mortgage rates and a scarcity of inventory. Home ownership is within reach for a large number of prospective purchasers as our economy continues to support work-from-home options. This is directly fueling an increase in housing demand. Those in the Des Moines metropolitan areas want detached single-family homes that provide greater living space and separation from adjacent properties.
As Q3 comes to a close, there are only 1,363 single family homes (only a 1.5 month supply!) in the 19 communities we track. In comparison, last year there was a 1.8 month supply but two years back (in 2019) there was a 3.5 month supply of single family homes. Lack of inventory available in the market is of definite concern, giving ample opportunity for the new construction industry to shine.
Looking at new construction, there are 666 active (new construction) single family homes on the market. This translates to a 3.5 month supply and works out to be almost 50% of the homes currently for sale! To better understand this number, historically around 20% of homes sold every year were new construction. Not only do we have more new construction on the market but we are selling these homes at a shocking rate, at record prices.
Price gains are a natural result when inventory is of high demand and supplies (and labor) are hard to get. Because new construction is such a big part of our overall inventory, concern can set in when new home prices become unaffordable for the masses. One cannot even start a conversation about new home construction without the topic of lumber and other material prices taking over.
In Q3, we can confirm that lumber prices have fallen, after hitting their high in May of 2021. Despite this good news, the total cost of wood in home construction continues to rise. For example, since April 2020, the price of softwood plywood has risen by more than 200 percent, while the price of oriented strand board (OSB) has increased by over 500 percent. We don’t foresee an overall decrease in new construction home prices but would think the price increases would not be as aggressive in the months to come.
YTD for 2021, we are on track for another record year. Homes sold as of October 1. 2021 are 8,337. This is 367 more homes than the same time in 2020 and 1,516 more homes sold at the same time in 2019! New construction homes sold YTD is 1,702 in comparison to 1,541 a year prior.
To further discuss market trends and home availability, contact us for a real-time conversation! We can be reached by email at [email protected].