Something happened in Des Moines real estate on April 13th of this year. The number of homes for sale finally rose above last year’s inventory. It was only by 18 homes but it was the beginning of the turn. As the local spring real estate market continued to heat up, the month of May was leading the charge with more homes popping up for sale as the buyer frenzy mounted. In fact, the rest of the summer months also saw growing inventory levels. And now, as we near the end of September, we are hovering around a 6% year over year inventory increase.
How is this rise in listings affecting home sales and does this mean that there are fewer buyers purchasing homes? Actually, it’s the opposite. Closed home sales are ahead of last year at this time by 5% which means that the increase in homes to choose from is feeding a starved buyer pool. The number of days on market is 5 days shorter at this time of year compared to 2016 and the continuing big news is that average sale price is up by approximately 6%.
Earlier this month I had the opportunity to hear Dr. Lawrence Yun, Chief Economist at the National Association of REALTORS®. He was addressing the Iowa Association of REALTORS® at the state’s fall convention in Iowa City. He confirmed what many of us in Des Moines had experienced and that was statewide sales of residential real estate is up 3.5% year to date and that the median sale price is also up by almost 6%. Across the state, homes are selling faster than the previous year. A lot of this is attributed to a strengthening economy lead by steady job growth.
One of the questions at the convention for Dr. Yun was the impact of student loan debt on the real estate economy moving forward. He stated that student loan debt has tripled in the last 10 years and that it will have an effect on the buyer pool as many students will likely delay their home purchase until after they have paid off or paid down their student loans.
He was also asked about the impact of the recent hurricanes in Texas and Florida as well as the surrounding states. He stated that while there will most likely be a drop in national home sales going into the end of 2017, the real estate market is very good at recovering and that 2018 will be a rebuilding year in many ways. There will a strong demand for construction labor and materials which could impact pricing around the country as new home builds in those regions of the United States ramps up in 2018.
Lastly, a question came from the floor about when to expect the next economic recession. He said that the country as a whole tends to see an economic recession about every decade with the last one 10 years ago. However, with the strengthening economy, he expects that we will not see a recession for 2 to 3 years barring any major worldwide event or trade disruption.