Say GOODBYE to the uncertainty that was 2023 and HELLO to the stability 2024 should bring! In the real estate industry, the fourth quarter months of 2023 ended with interest rates finally settling into a more predictable pattern. Housing market trends in 2023 were incredibly hard to predict – making planning very hard to do. As we close the door on yet another year, the environment feels as though things are shifting in our favor!
Historically high interest rates of 2023 averted buyers. However, mortgage demand rose after interest rates lowered in the months of November and December. This end of year ease of interest rates and inflation should bring house hunters back in 2024. Baby boomers wanting to downsize and first time home buyers were on the sidelines in 2023. Both these demographics can be expected to be more active, looking to close on homes in the new year.
While taking into consideration that interest rates eased in Q4, low housing supply and still-high mortgage rates continued to make housing unaffordable for many. It will be interesting to see how this affordability issue drives the market in 2024. Will smaller houses solve this problem? Will more potential first time buyers rent instead? Only time will tell.
Fourth quarter numbers show that there were only 25 more single family homes ACTIVE in 2023 versus the same time in 2022, a 2.6 month supply instead of a 2.1 month supply a year ago. The number of new construction single family homes available in the Des Moines Metro throughout the year hovered between 1,450 and 1,850 homes.
Iowa has a lower supply of homes available when compared to the national housing market. Nationwide, a four month supply of homes was average (while Iowa was at a 2.6 month supply, as noted above). This works to our advantage and will keep the metro’s housing prices from declining in a slower market.
New construction held 56% of the market at the end of 2023, compared to the 63% of the market it held at the end of 2022. Due to a lower rate of home sales this year, the average month’s supply for 2023 was higher (at 6.3 months) when compared to 2022 (at 6.1 months).
December finished with 76 more single family homes under contract than January started with. New construction pending finished with 49 more homes under contract, year over year.
It is notable to point out that there were 17.7% fewer homes closed in 2023 when compared to 2022 (7,718 single family homes closed in 2023 vs 9,379 in 2022). This is the lowest told sold since 2013 in the Des Moines metropolitan area. What is causing this? Many factors; the number of homes available for buyers to choose from is low, higher interest rates, and affordability in general. 2023 has been the reset year that everyone knew had to happen. We can expect it to be the bottom, with 2024 bringing an uptick in the market as interest rates stabilize (and even decline).
Another notable fact is that 22% of homes closed in 2023 were new construction. But good to keep in mind, this total (1,771 new homes) is higher than each of the years from 2007 to 2019. Fewer homeowners are wanting to list their homes for resell, making new construction a more prominent option for a higher percentage of the market.
As we dig deeper into new construction sales, 2023 continues to peak our interest as the Des Moines market experienced a stabilization of the average sale price (of new construction homes). There was a 9% increase in 2021 and a 16% increase in 2022, however 2023 only brought a 3% price increase. One can infer that the sale price for 2024 will keep a marginal increase due to the metro’s tight inventory.
Check out full statistics for each Des Moines metropolitan area here.
As we put closure on 2023, we look forward to 2024 and warmly invite you to attend the 17th Annual Builder & Developer Luncheon on Tuesday, March 5th at the Sheraton Hotel in West Des Moines. This is a must-attend event for anyone interested in learning more about our area’s lot inventory and new construction housing. Our industry experts will provide valuable insights and updates on industry and market trends. We hope to see you there!
This year’s speakers include:
Selma Hepp, Core Logic, Chief Economist
Adam Farver, Pella Corporation, Chairman of the Board
Tiffany Tauscheck, Greater Des Moines Partnership, President & CEO
Kalen Ludwig, Diligent Development, Sales and Marketing
