Change is in the air for buyers, sellers, builders, developers, lenders, and others in our industry! Everyone, everywhere is trying to adapt to a housing market that is very different from what we experienced just last quarter. The strong buyer pool we have experienced the last few years has cooled with higher interest rates. This does give our marketplace a chance to tie up loose ends, get new construction homes finished, and get back to the basics.
“Realtors across the country confirm what the macroeconomic data says: the housing market is in a transition, driven by an uncertain economy and consumer backdrop. Inflation is hot and economic growth, as measured by the GDP reading, is tepid. But jobs remain plentiful and few people are being laid off. The stock market has been battered, yet consumer sentiment remains high.”1
Digging into our local housing statistics, there is a 2.1 months supply for single family homes. This remains very low. When isolating new construction months supply, a 5.1 months’ supply is shown. This supply is actually a more balanced buyer/seller market. Overall, there are more options for buyers to find new homes than resales. Interestingly, 55% of the active homes on the market in the Des Moines metro are new!
Looking further at the numbers, actively listed single family homes, in the 19 markets tracked, totaled 1,774 homes. Out of that number, 968 were new construction. This quarter, there has been an increase in home inventory. For comparison purposes, at the end of quarter 3 of 2021, there were 1,363 single family homes listed and 666 were brand new homes. Despite climbing inventory, we are still lower than most quarters in the last decade.
Looking at houses under contract in October 2022, 1,186 single family homes were pending, of those 344 (29%) are new builds. Historically, it is typical of the market in Des Moines to show that many pending homes in the fall months. That said, the incredibly hot markets over the last two years have shown irregularly higher pending homes (October 2021 had 2,060 and 2020 had 2,065 single family homes pending).
As 2022 begins to wind down, this year’s total homes sold for the year are on track to be very similar to the sales reported in 2015-2019 throughout the Des Moines metro. Interestingly, total new construction sold in 2022 should be very similar to 2020 and 2021 (1,744 sold already plus 344 pending currently is 2,088 homes sold. Add in a few more that will sell between now and the end of year, numbers will be close to the highs of 2020. 2020 had 2,133 new construction sales and 2021 had 2,326 new construction homes sold.) What was driving this? Strong first two quarters and low resale inventory play their part.
Overall, housing affordability needs to stay at the top of our minds. With inflation happening, higher building input costs, higher interest rates, and more federal, state, and local regulations coming into effect, buyers are being priced out of the market every day. Average new construction price YTD 2022 is at $429,000 or 15% higher than 2021.
Our industry will have to find ways to be creative with housing types, to make good policies, and to educate buyers. Buyers need our support and knowledge to know how to get into a home that is best for them. There are still many reasons to buy today. Waiting to purchase may mean missing out on the upside of inflation and appreciation, there will be more inventory to choose from, quicker closing dates and the option to refinance when interest rates come back down. Homeowners will find it is still a seller’s market and that their existing home has more value than ever before.
Change is here… it is up to all of us to focus on “today” so that the American dream of homeownership can live on!
Save the Date! The Builder and Developer Luncheon is back for the 16th year! Kalen will be sharing her housing report at the annual luncheon on Tuesday, February 28, 2023. Early registration is open now: https://www.eventbrite.com/e/2023-builder-developer-luncheon-registration-419146778297.