We’re in the middle of a shifting market here in central Iowa, but for now, sellers have the advantage.
Can you believe it’s November already? The year has certainly gone by fast. Now, let’s take a look at the current state of our fall market.
New listings for the third quarter are ahead of last year’s pace by more than 200 properties. Pending sales are up by over 800 units. Year-to-date closings are up by 600 units. Unless the market stops cold, it’s possible we’ll end the year with
close to 14,500 closed transactions, which is more than a 3% increase over 2016 and a new record for the Des Moines metro area.
The number of closed sales reflects a return to a healthier economy, but the low number of homes for sale is what’s driving prices higher than the months of inventory for the overall market, which reflects a seller’s market.
All indications are showing that 2017 is the year that sellers are finally beginning to enter the real estate market. It will be very interesting to see how this affects pricing as we move toward 2018. Inventory levels actually began to rise in
2017. By mid-May, homes were consistently coming on the market at a faster pace than we’ve seen in awhile. If we end up above inventory levels of 2014 and 2015 by year’s end, 2018 could be shifting into a whole different type of real estate market.
We’re definitely in the middle of a shifting market. This isn’t a bad thing, but it’s something to be aware of. The statistics are a lagging indicator, so the shift is actually happening now.
Let’s break the market down by price points so we can really figure out what’s going on.
In the $200,000-and-under range, there are 1.8 months of inventory, which is a strong seller’s market. In this price range, if you’ve got a great home to list, it will likely sell within a few days. We can’t replace inventory in this price
range because you can’t build new inventory below $200,000 in today’s world—it just doesn’t happen. That’s why I think this is a shrinking market. With demand as high as it is and rates where they’re at, it’s cheaper to buy than it is to rent.
We’re definitely in the middle of a shifting market, and time is of the essence.
In the $200,000 to $400,000 range, there are around 4.5 months of inventory. This price range, while still slightly tilted toward buyers, is more balanced. If you’re a seller in this range, it might take you longer to sell your home, and
you’ll likely have to compete against other home sellers. You have to prepare and position your home to compete in this price point.
In the $400,000-and-above range, there are 8.5 months of inventory and that level continues to grow. This makes this price point a true buyer’s market. There is more inventory than there are buyers looking for homes, so buyers have more
pricing power. Due to high costs and a limited availability of land, the cost of new construction is rising, and the majority of it that’s happening in our market is at this price point.
I spoke to some new construction agents back in September, and they told me that new construction traffic has slowed considerably and almost came to a standstill for a while. New construction is something to watch for in 2018 because inventory
is starting to build and traffic is starting to slow down. I don’t believe we’re in an “over-build” situation like we were a long time ago, but if you plan on building a home, you need to watch your costs because your home may not be worth
what it costs to build.
So where’s the bright spot in our market?
If you’re a homeowner looking to sell in the mid-to-high $100,000 range to the mid-to-high $200,000 range and buy in the high $300,000 range and up, you’re best positioned to take advantage of our market. You’ll have a lot of pricing power
on the selling side and the buying side.
I’m not a fan of trying to time the market, but with the market shifting into potentially unknown territory in 2018, time is of the essence if you’re thinking of making a move.
If you have any more questions about our central Iowa market or you’re thinking of buying or selling a home in the next six to 12 months, don’t hesitate to reach out to me. I’d be glad to help you.