There is no doubt that Central Iowa real estate sales are following a similar path to the last two years. This month, I am going to focus on five reasons home buying and selling in the Des Moines area will be different from previous years.
- The Number of Central Iowa Homes For Sale Are At Historic Lows
From 2015 through 2019, the average count of homes for sale was consistent at around 3,500 on the market. When Covid-19 hit our market in 2020 and through the end of 2021, the average count dropped to 2,500 homes for sale. As we begin 2022, the average is now around 1,800 homes on the market and that number is dropping every week. Single Family Existing homes make up the largest percentage of sales in our market each year. We are currently averaging only 570 of those properties for anxious homebuyers to choose from right now.
- Mortgage Interest Rates Are Around 1% Higher Than This Time Last Year
Ever since Covid-19 came into our market we have been hearing that mortgage interest rates were going to go up. But each time that it looked like rates were poised to rise, they fell even further. At the lowest point in 2021, 30-year fixed rate mortgages were below 3%. Today, in 2022, the same 30-year fixed rate mortgage is a full 1% higher. A homebuyer prior to 2022 that qualified for a home mortgage in the $250,000 price range, now find themselves only able to purchase up to around $210,000. And in a market where home inventory is already low, that puts more buyers fighting for the same home, typically squeezing out the very bottom group of buyers.
- Homebuyer Demand Continues To Climb At A Record Pace
During the first six weeks of 2022, the average list price of an existing home going into sale pending status was $224,500. Compare that to the same period in 2021 when the average list price of homes going under contract was $219,600. 2020 was even lower at $191,300. Even with higher mortgage interest rates, most homes priced under $300,000 on the market are selling at record pace.
We are finally beginning to see activity from previously resistant homeowners that have quietly sat on the sidelines. For much of 2020 and 2021, they stayed out of the listing market waiting for the pace to slow down. They knew all too well that selling their home would be easy but finding the next home would be the challenge. Many are seeing the rise of mortgage interest rates as a sign to enter the listing and buying market. This new influx of sellers is still not enough to bridge the listing gap because they are simply replacing the entry level buyers that have been priced out of the market.
- Home Sellers Have A Distinct Advantage Over Homebuyers
One thing remains constant as we head towards the 2022 spring real estate market. Home sellers will continue to have the advantage over homebuyers, at least through the first half of the year.
Effects of this extreme sellers’ market:
- Negotiated purchase prices at or above list price.
- Multiple offers and short marketing time of seller listings.
- Buyers accepting homes in less than perfect condition and not asking for as many repairs from home sellers.
- Some buyers are foregoing home inspections all together—not a recommended strategy.
- Buyers giving sellers extra time to move out resulting in some homebuyers not taking possession at the time of closing.
- Fewer accepted offers contingent on the sale of a buyer’s current home.
- And one of the biggest challenges for a homebuyer, having to make a very fast homebuying decision.
- Decision Paralysis Is REAL—Enter FOMO and FOBO
This type of market can put many homebuyers into the state of decision paralysis, and this is compounded by two distinct universal emotions. FOMO, the Fear Of Missing Out, and FOBO, the Fear Of Better Options. And it’s not just the homebuyers that experience this emotion. Sellers also often second guess their decision of how or when to sell. This can even happen during the listings marketing period.
This is the time that a knowledgeable real estate listing expert is most needed. To act as a guide in the transaction advising home sellers of the way to get the best buyer AND best offer on their home. REALTORS® representing homebuyers are also tasked with the very difficult job of getting their clients into a home during that very short window of opportunity. They will be preparing them to be ready to make a faster decision than they may be expecting and of course to have all their financial ducks in a row before even stepping into that first home they ask to see.
For the latest information about the Central Iowa real estate market, be sure and check out DesMoinesMarketValues.com. Here you will have access to a short weekly market update video as well as access to hundreds of local real estate charts and graphs focused on the Des Moines and Central Iowa real estate market.