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Roughly 15 months ago the world was turned upside down. Covid-19 was spreading across the country and around the world and lockdowns were just beginning. Schools closed, businesses moved workers to home and essential workers were defined. Real estate brokerages and agents were deemed as essential as homeowners scrambled to complete transactions and evaluate the new additional purpose of the family home.
Fast forward to month of June 2021
In the United States, 316 million vaccinations have been administered, 148 million fully vaccinated representing just over 45% of the population. In Iowa doses are approaching 3 million and just under 1.5 million fully vaccinated putting Iowa at 46.8% fully inoculated with one of three different types of vaccine. Mask mandates have been relaxed and people have begun to return to a more normal way of life even though we are not completely out of the woods yet, there is renewed hope and optimism.
How Covid-19 changed central Iowa real estate by the numbers
There are and will be many long-term effects of the coronavirus pandemic. This month I will compare key components in the Des Moines and Central Iowa real estate market. The data in this report is as of June 19th, 2021.
Homes For Sale
One year ago, there were 2,973 homes on the market. Today, the number of all homes for sale in the Des Moines Area Association of Realtors MLS is 1,861, a drop of over 37%. On a positive note, this number has gradually been building from June 1st and is up by a scant 200 homes from the first of the month. This is the first month since the pandemic that we have seen a positive net rise in For Sale inventory.
Single Family New Construction provided a lot of the much-needed inventory in the first 5 months of 2021 and it wasn’t until the past 30 days that we began to see an increase in Single Family Resale properties entering the market. This has been a welcomed sight to starved home buyers, especially in the under $250,000 price points where multiple offers and escalation clauses have become a normal way of buying homes.
With the record low inventory came record high list prices in the new construction areas of the market, primarily due to the rise of pandemic related material costs of lumber. Single Family Resale pricing however dropped below 2020 pricing by the start of the spring market in April. This drop was primarily due to the lack of resale homes on the market and resale buyers taking advantage of record low mortgage interest rates that allowed them to buy new homes in the higher price point. The median price of a Single Family New Home today is just over $355,000 compared to a year ago when the median price was only $312,000.
One would think with a substantial lack of homes for sale that the volume of pending sales would also be down. However, it has had just the opposite effect. The number of all property types in sale pending status is up by almost 24% from this time a year ago. Currently there are 4,287 homes in the various stages of inspection, appraisal and underwriting. Every single category of housing has more homes in Sale Pending today than a year ago with New Construction leading the way. Pending sales of Single Family New Homes are up 58% from this time last year with almost 1,200 homes in the process of being completed. New condo/townhome properties are also well ahead of 2020 up by almost 54% over last year.
Because final pricing isn’t disclosed until closing, I can only show that the overall price of properties at the time the homes went under contract were up 15%. This number is almost certain to be higher after closing as the number of homes selling for more than list price in the resale categories and the add-on’s to new home builds will certainly be higher.
Every single category of the Des Moines real estate market is experiencing record year-over-year sales. All property sales combined are up almost 16% with 7,062 home sales closed year-to-date. Along with the high number of closings, the median days on market of a Single Family Resale home is only 2 days on the market. 3 days for resale condo/townhome properties.
A year ago, the median days on market for a Single Family Resale home was 14 days. This fast-paced marketing time has had a lot to do with existing potential home sellers from entering the market due to the fear that, while they could easily sell their current home, the ability to find the next home in a frenzied buyer market is making them stay put for now. For this reason, I predict that 2022 and 2023 will be busy with home sellers finally deciding that it’s time to make the move.
The last thing to talk about in the Closed Sales area is pricing. Obviously with record low home inventory and record high buyer demand, prices have gone up over the past year. The only thing that has taken the sting out of this is the cost of borrowing money. Mortgage interest rates have remained around the 3% level allowing home buyers the ability to buy more (pay more) without stretching the budget too far.
The overall increase in sale prices are up 10.9% from this time last year. The median sale price of a Single Family Resale home is up just over 14% from last June at $247,250, while New Construction Single Family properties are only up 4.6% from the same time a year ago at $324,660.
The real estate market is not out of the woods yet. It continues to be a strong and vital part of the economy from local all the way up to national. There will be plenty of time to evaluate the future direction of the market and what the trends are showing as we move into the second half of the year. In a year or two we’ll look back at this market and I think we will be amazed at how we all survived some of the craziest times in real estate in our generation.
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Over the past few months, just about everyone has felt the loss of some type of freedom, whether it’s being able to travel, engage in social gatherings or participate in other activities we previously took for granted. Still, as we prepare to observe Independence Day, it’s comforting to realize all the freedoms we still have in this country. And taking the right steps can also help you achieve your financial independence. Here are some moves to consider:
- Build an emergency fund. It’s a good idea to create an emergency fund consisting of three to six months’ worth of living expenses, with the money held in a liquid, low-risk account. With this fund in place, you can avoid dipping into your long-term investments to pay for short-term, unexpected costs.
- Keep your debts under control. It’s not easy to do, but if you can consistently minimize your debt load, you can have more money to invest for the future and move closer toward achieving your financial liberty. One way to keep your debts down is to establish a budget and always stick to it, so you can avoid unnecessary spending.
- Contribute as much as possible to your retirement plans. The more money you can save for retirement, the greater your feelings of financial independence. So it’s essential that you contribute as much as you can to your 401(k) or similar employer-sponsored retirement plan. At a minimum, put in enough to earn your employer’s match, if one is offered, and every time your salary goes up, boost your annual contributions. Even if you participate in a 401(k), you’re probably also still eligible to contribute to an IRA, which can help you build even more funds for retirement. And because you can fund an IRA with virtually any type of investment, you can broaden your portfolio mix.
- Explore A long-term care coverage.One day, your financial independence could be threatened by your need for some type of long-term care. It now costs, on average, over $100,000 for a private room in a nursing home and more than $50,000 for the services of a home health aide, according to Genworth, an insurance company.
Most of these costs won’t be covered by Medicare, either, so, if you want to reduce the risk of seriously depleting all your financial resources—or burdening your adult children with these heavy expenses—you may want to consider some type of long-term care insurance. You could choose a traditional long-term care policy—which can cover a nursing home stay, home health care, or other services—or a hybrid policy, which provides long-term care coverage plus a death benefit.
- Manage withdrawals carefully. Once you retire, your financial freedom will depend a great deal on how skillful you are in managing the money in your retirement accounts. Specifically, you need to be careful about how much you withdraw from these accounts each year. If you set a withdrawal rate that’s too high in your early years of retirement, you might eventually risk outliving your resources. So, set a withdrawal rate that reflects your age, assets, retirement lifestyle and other factors. You may want to consult with a financial professional to establish an appropriate rate.
As you can see, working toward your financial independence is a lifelong activity—but it’s worth the effort.
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When you go to an art gallery, do you see the blank canvas hanging on the wall? Do you see a perfectly formed tube of paint sitting there on a stool along with a brush still stiff from it’s packaging?
No, you see a painting or sculpture presented to you in all of its finished glory!
So why on earth would you put before pictures on your gallery page? I know the answer, but it’s wrong. Your gallery is supposed to be your verifiable proof that you can do what you say you can throughout the rest of your site.
Having a picture of a tattered home’s exterior with the shutter falling off next to a shiny new image of the same exterior DOESN’T help you sell. It confuses.
People look at these pictures and wonder ‘what did they do here?’ or ‘what am I supposed to be looking for?’
I can hear your response already…But Darren, how about if I label them before/after?
Which Gallery is the most appealing to Your Clients and Customers?
I refer you back to paragraph one and ask you this question…Do you prefer to think or dream?
If you like to think more than dream, good for you, but your prospect is on your gallery right now dreaming. She is imagining herself in her new space and dreaming about it. Sure, she will think about it at some point, but right now, she is living in a fantasy world where she doesn’t want to think ‘does this picture go with this room or is it over here?’
The point is, in good construction web design, the trick is to not make people think, and this is especially true with your gallery page. You can use before and after pics in other places on your site (we normally don’t, but you can) but leave the gallery for the pretty pictures!
Since each page of your site ranks independently, visitors may never see your homepage. This means you have to make the topic of the page the most visible part of the page. For example, if you are a remodeler and the reader shows up on your bathroom remodeling page, make those words the biggest text on the page. Put it in your headline, sub-heads, bullets and bold and italics.
Not only is it giving the search engines a better idea as what the main point of the page is, but you are also helping your reader get at what they want…information on what they searched for in the first place!
When you design your site, design it with passion. Passion is what conveys from the pages to your reader. And readers buy with passion. If you can write content for your website that has YOUR passion for your work baked in, I promise you will have more clients or customers contacting you.
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It’s not a real estate bubble, it’s simply a lack of supply, and here is why it is different.
Back in the early 2000’s, mortgage options were plentiful. Too plentiful as it turned out. Banks were offering easy access to money prior to the mortgage crisis of 2007.
The result was three-fold. Risky individuals with low credit scores were qualifying as sub-prime borrowers by way of little or no income and debt qualification.
Banks were offering risky products with short term benefits but long-term risk such as option-arm loans and interest-only loans. And lastly, there was fraud in the industry from some buyers and mortgage brokers by providing inaccurate information on loan applications.
Unlike in 2007 during the subprime mortgage crisis, borrowers are less risky in today’s market. Banks and mortgage brokers are working within a much stricter lending environment and buyers today are finding primarily 15- or 30-year fixed rate mortgage options. Buyers with lower credit scores are less likely to be able to enter the home purchase process. Adjustable-rate mortgages still exist; however, they are used few and far between and predominantly in situations where a homeowner knows they will only be the current home for a very short period.
Why This Market Is Different
- Home Inventories Are At Record Lows. The first 3 months of 2020 showed signs that sellers were ready to re-enter the real estate market—until Covid-19 hit. After a pause in market activity as people tried to figure out what Covid-19 was going to mean to them, buyers of real estate began to accelerate their spring and summer purchase plans and the buying frenzy began. From April of 2020 and continuing to date, we (and the national market) have experienced a rush of buyers never seen before.
- Buyer Demand Is At A Record High. The cost of borrowing money dropped in 2020 with mortgage rates just over 3%, coming down from a high of just under 4% in 2019. Rates then fell even further in 2021 to an average rate for a 30-year fixed mortgage under 3%. Add Covid-19 stimulus funds, buyers’ new needs to not only work from home, but also in many cases school their children from home, lead to the realization that the house they currently lived in is suddenly too small. And these buyers are not like the ones in 2007. For the most part, they have solid credit scores. They have stable employment. With record low mortgage interest rates, it was no longer a question of how much they can afford to spend, but what are they comfortable spending now that they didn’t have the expense of commuting. The world changed this past year and working from home is now a reality. This also opened more options for buyers and their home search areas. The suburbs and rural communities (as long as there is strong broadband service available) are seeing more growth and popularity.
If Mortgage Money Is Cheap, Why Can’t We Keep Up With New Homes To Fill The Void?
The National Association of REALTORS® (NAR) tracks the national trends for annual housing starts. The last time that new construction building was above the annual average of 1.5 million homes under construction was 2006. Just before the subprime mortgage crisis hit. The years leading back up to 2020 in this graphic shows that there was a housing supply issue in the making long before Covid-19 entered the picture. Add to the mix now supply and cost issues associated with new home construction and even with the record low mortgage interest rates, home builders are struggling to keep up the pace. A recent article in the Business Record reports that the 468 building permits taken out in April was down 9% from March when 513 permits were issues. At the same time the average price of a new built home is rising each month, a 3.6% increase from March to April alone.
Why This Market Is Not A Bubble
If we were in a bubble, we would have excess home inventory (we had 4 times as many homes for sale nationally in 2007), we would have high mortgage interest rates, the number of buyers being able to qualify would be low and home values would be plummeting.
The solution is to add more new homes to the market. Government actions to remove the tariff fees (or greatly reduce them) for the United States to be able to cut the costs of lumber and building supplies from Canada and other countries. Get people back to work and off unemployment so that the effects of inflation do not become another factor and enact legislation such as the Neighborhood Homes Investment Act, which would offer tax credits to attract private investment for building and rehabilitating owner-occupied homes and enacting the Housing Supply and Affordability Act, both at the Federal level.
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On Friday, April 30, Governor Reynolds signed into law HF 561 (formerly SSB1006), a bill pertaining to mechanic’s lien. The bill goes into effect on January 1, 2022.
This bill was an affirmative legislative item from the Iowa State Bar Association’s (ISBA) Construction Law Section. Attorney Jodie McDougal, Vice-Chair of the ISBA Construction Law Section Council, was the initial drafter and driving force behind, the bill. In December, Jodie presented the bill to the ISBA Board of Governors for approval on the ISBA’s legislative agenda. Also, in February, Jodie, as a subject matter expert, spoke at the Iowa State Capitol, along with ISBA representatives, to the Senate subcommittee considering the bill, which was eventually passed by both chambers.
This law makes two important changes to Iowa lien law (Iowa Code Chapter 572) to the benefit of all contractors, subcontractors, and other lien claimants.
Streamlines the filing of liens covering multiple counties
First, the bill amends Iowa Code § 572.8 to allow a mechanic’s lien involving a realty covering multiple counties to be posted once on the centralized, digital MNLR system and indexed on all applicable counties, eliminating the current practice of attorneys posting duplicative liens—one for each county. The exact language of the amendment is below, with the updated language underlined.
Section 1. Section 572.8, subsection 3, Code 2021, is amended to read as follows:
- 3. A lien perfected under this section shall be limited to the county or counties in which the building, land, or improvement to be charged with the lien is situated. The county or counties identified on the mechanics’ notice and lien registry internet site at the time of posting the required notices pursuant to sections 572.13A and 572.13B shall be the only county or counties in which the building, land, or improvement may be charged with a mechanic’s lien.
Expansion of recovery of attorney fees when a lien is bonded off
Second, the bill amends Iowa Code § 572.32 to provide statutory certainty on the recovery of attorney fees by prevailing claimants in mechanic’s lien actions where the lien is discharged by a bond, as there is a disagreement among district courts in this regard. This amendment expressly allows for recovery of attorney fees by prevailing contractors in all mechanic’s lien actions, including where liens are discharged by bond. The exact language of the amendment is below, with the updated language underlined.
Sec. 2. Section 572.32, Code 2021, is amended to read as follows:
- 572.32 Attorney fees—remedies.
- 1. In a court action to enforce a mechanic’s lien, or an action brought upon any bond given in lieu thereof, a prevailing plaintiff may be awarded reasonable attorney fees.
- 2. In a court action to challenge a mechanic’s lien posted on a residential construction property, or any bond given in lieu thereof, if the person challenging the lien or defending against any action on the bond prevails, the court may award reasonable attorney fees and actual damages…
Please reach out if you have questions about your obligations to file notices on the MNLR.
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