The capital is number one with young buyers.
Mention New York and people think arts and attitude. Seattle? Coffee and hipness. Austin? Cowboy boots and a fun sense of weird.
Mention Des Moines and people outside Iowa think corn—or potatoes—before anything else. But that’s finally changing. In the past few years, Des Moines has been named “the Hippest City in the USA” and moving to Des Moines the most hipster thing to do.
Now Des Moines has also been recognized as the hottest place for millennials to buy a home.
According to a recent study by Realtor.com, nearly 60% of home sales in Des Moines during the first half of 2015 were to buyers between the ages of 21 and 35. And that’s helping change the image of Des Moines—even to the natives.
“Des Moines is getting all kinds of national publicity,” says Iowa Realty’s Brennan Buckley. “It’s being praised as a great place to live. It has one of the lowest unemployment rates in the country. And it’s just on fire right now.”
Coldwell Banker’s James Von Gillern says that the proximity of several universities and graduate schools has played a part in the number of millennials settling in Des Moines. “As a millennial myself, I deal with these issues on a regular basis. With the universities close by, graduates know the area and what it has to offer. And since the government enacted the tax credit programs, young people took advantage of that. That’s part of what helped Des Moines lead the country out of the slump ahead of most metro areas.”
But to keep Des Moines at the top as a great place for young buyers, several factors need to remain in play.
1. Affordable housing
“There’s a shortage of new homes millennials can afford,” Von Gillern says. “Between the cost of land and the cost of construction, most new homes are out of the price range of young buyers.”
Because of that, millennials often focus on resale homes in popular neighborhoods like Beaverdale and Windsor Heights. For those interested in suburban Des Moines, new construction is more often affordable in the form of town homes or condos.
“Builders have a great opportunity with this target market,” Buckley says. “There needs to be more of a market of first-time-level new construction, not just multifamily.” Young people who have been renting for a while and are ready to buy often don’t want to live in multifamily housing, but most new construction is out of their reach, he explains.
Von Gillern adds, “Multifamily options are great, especially for buyers right out of college. But building affordable homes is a huge step in the right direction when it comes to reaching young buyers.”
2. First-time buyer lending options
Cade Lindaman of Community State Bank says that after some very tight restrictions, the mortgage market is opening up a bit more, which is making it easier for young buyers to arrange financing. “We definitely work a bit differently with first-time buyers, in part because the guidelines are different, but also because we want to make sure they really understand the whole process.”
Allowing a lower down payment, sometimes as little as 3%, makes home buying more attainable for a young buyer. In addition, a first-time buyer can often obtain more of that down payment in the form of gifts from family rather than from personal savings.
“The guidelines for a first-time buyer are a little different than for someone who’s financed a home before,” Lindaman says. “And we always walk through the process with every borrower. But with first-time borrowers, we advise sitting down with a lender ahead of time and really going over everything involved so they know exactly what to expect and exactly what it’s going to cost.”
Some young buyers assume that simply having that 3% down payment means they are ready to buy, Lindaman explains. But helping them understand the full scope of their purchase is a crucial part of his job—additional fees and escrow funds, as well as potential purchases like furnishings and lawn equipment will all add to the potential costs of buying a home.
3. Appropriate marketing
Though marketing has changed along with technology, marketing to millennials is all that and so much more.
“Young buyers rely heavily on peer reviews and social media,” Buckley says. “And they value that community heavily, whether it’s their online community of friends or their physical community.” He says that to be successful reaching millennials, you have to use the tools they value. “As a real estate company, we have to ask those questions all the time—how do we evolve our marketing platform to reach them as well as the traditional client?”
Lindaman agrees. “A lot more borrowers are going the online route because so much of the paperwork can be handled online or through email. Sometimes we don’t actually meet face to face until closing.” Though this is not uncommon with second-time borrowers, it isn’t always the best option for a first-time home buyer, he says.
“Marketing to tech-savvy borrowers requires the right balance. The process needs to be easily accessible,” Lindaman explains. “But I don’t generally recommend an exclusively online application process for first-time buyers. I’ve had clients who came in after trying that approach who said those online lenders left them with too many unanswered questions.”
For years, Des Moines has been proud to claim first-in-the-nation status for political caucuses and butter carvings. Now we can claim first place on another list—the best place for millennials to put down roots.
“Des Moines has always been a great place to live,” Buckley says. “Millennials are drawn to that. Now the goal is keeping them here.”
If we keep making those Top 10 lists, that should be no problem.