Des Moines Area Builders Build for Marketplace Demand

The first quarter of 2020 real estate sales showed favorably compared to the first quarter in 2019. The Des Moines Area Association of REALTORS® statistics show a 12.4% increase in units sold for new construction and resale homes combined. Due to the lagging nature of looking at sold properties, it is insightful to look at pended activity (homes that went under contract) for the same period. This was a better result at 18.7% increase in units pended when compared to same quarter in 2019. But what about March’s housing activity with the COVID-19 concerns? This was an area one could have expected a drop off in activity, but we experienced the opposite.

In the midst of the COVID-19 Pandemic, having real estate declared an essential business in Iowa was key in fostering a clear plan that invoked sound judgement and enhanced safety protocol in performing necessary real estate functions. In March alone, pended transactions increased by 12.6% over March 2019.

There is an interesting trend in the new construction arena. The industry generally sees a trendline of the average list price and the average sold price about the same; this has been in the $325,000–$335,000 range over the past year. This quarter we have seen a trend down in the average sold price from $319,000, $314,000, and $304,000; January-March, respectfully. However, the average list price has remained in the $325,000 range. This is worth a deeper dive. Is the new construction real estate market experiencing declining prices? Are there more Condos/Townhomes that sold? Are there more lower price point homes selling?

New construction prices are not declining, builders have increased building in lower price points to meet the demand. In recent years, the price point of $160,00–$250,000 has been a sellers’ market due to low inventory in the resale market and limited availability in new construction. The high cost of developing land and lot costs combined with price increases in building materials has made it difficult to deliver new construction single-family homes under $250,000. That has changed. Single-family new construction had 59 more units pended Q1 of 2020; a 79% increase. Condos/Townhomes also saw an increase of 21 units for a 37% increase in pended contracts. Builders have built more single-family homes on smaller lots with efficient designs to meet the homebuyers demand. New single- family construction had pended 575 total units; up 30.7% Q1 2020; of this, 412 units (72%) of pended are in the broader range of $160,000–$350,000.

This type of growth is assisted by a historical low mortgage interest rate; homebuyers have increased purchasing power. As we head into summer, there will be a watchful eye on the mortgage industry. We have witnessed some tightening of credit guidelines through minimum credit scores. This will undoubtedly have some negative impact on demand. Homebuyers are encouraged to work with local lenders for financing pre-approval, and to know their financing options. Most should still qualify, but for those that are borderline, there will be lender guidance on steps to take to increase their credit scores. When the REALTORS are working together with local lenders, homeownership has a much clearer path.

It is good to be Des Moines in these uncertain times. Strong leadership at our state and local government, builders, and brokerage operations have helped sustain our business operations. The U.S. News and World Report ranked Des Moines as the 5th best metropolitan city to live in 2019. There were five factors for the rating, Job Market and Value Index (Affordable Housing) were favorable to Des Moines.

I sense that post COVID-19, we will move even higher. The Desirability index used will be more favorable when people desire a community where they can have a yard and a park with trail access, and when they discover Des Moines is surrounded by innovative and forward thinking leadership that invests in its community. The greater Des Moines population will continue to grow, and REALTORS will serve this growth and our Builder Partners will continue to build the right product for the marketplace demand.

John Dunn is the General Manager for Iowa Realty Co., Inc. You can contact John at (515) 453-5234 or