Metro developers see the market holding course despite uncertainties.
As 2024 came to a close, we spoke to a number of area developers about their predictions for 2025. After several years of unpredictable activity and the transition to a new President with new economic practices, gauging the future seemed like even more of a gamble than usual.
Now that we are in the height of our construction season and the market has made some adjustments regarding the change in administration, this seemed a good time to revisit those initial predictions for 2025.
On the following pages, you’ll find perspectives from four Des Moines-area developers. Although each primarily focuses on a different market segment and even, to some extent, different communities around the metro, there’s a consensus about the pace of development this year.
Overall, central Iowa development and construction continues to hold a steady course in a sea of ups and downs that are seriously affecting other areas of the country.
Kevin Johnson
Accurate Development
Despite the fact that interest rates have yet to drop significantly this year, Kevin Johnson says Accurate Development is on pace as projected.
“The level of activity really depends on the price range. Because Accurate tends to build at a higher price point focusing on executive-level custom homes, the slight changes in interest rates the past year or so have not had a dramatic effect on our level of activity.”
Johnson says Accurate’s typical custom-home buyer has a significant amount of equity or down payment, which gives the buyer more flexibility when it comes to interest rates.
However, those potential buyers who have to finance more are more hesitant to jump into a long-term mortgage that’s financed at a higher rate than their current mortgage.
“Experienced buyers are more willing to build now and refinance when rates drop,” he says.
Although they are maintaining a steady pace, and continuing to develop plats at the same level as in 2024, Johnson says he does keep an eye on interest rates.
“Even though many of our customers are less driven by interest rates, those rates still are the largest factor affecting activity. The slightest drop in rates causes a ripple effect and brings in buyers that have been sitting on
the fence.”
Labor costs remain an ongoing concern in the industry since those are the greatest percentage of a home’s final price.
“But labor costs have always been an issue, and that’s not going to change,” Johnson says.
“What happens in a tighter market like this is that entry-level and mid-range homes are most affected by the ups and downs of interest rates and rising costs. And when homebuyers at that level are hesitant, it can affect buyers in the move-up segments who are trying to sell an existing home.”
Johnson says remaining competitive in the current market can come down to amenities in the development more than in the home itself.
“We always make sure our developments have a variety of lot styles. Everyone assumes that every buyer wants a walkout lot, but that’s not the case. Some homeowners want to walk out the backdoor into their yard and not have a deck 10 feet above the garden. We’ve also become more proactive about parks and landscaping.”
Rather than waiting until homes are move-in ready, Accurate works with city officials to get green spaces and parks constructed on the front side of the development process.
The company also begins planting trees as soon as a development is underway.
“We’ve found that by doing this, those trees already have two years of growth by the time the first home is sold,” he says.
“Indoor/outdoor living is a huge deal for homeowners. Anything we can offer as a developer to enhance that is a selling point. People don’t want their home to just be a landing place. They want the whole space, inside and out, to be a place they can relax.”
This time last year, Johnson says, the market was just beginning to move at a steadier pace after a slow start to 2024.
“Once things started moving, they’ve just stayed steady. I expect 2025 to finish the same way.”
Kevin Johnson, President
Accurate Development
AccurateDevelopment.com
Tim Portzen
Diligent Development
After several unpredictable years, Diligent Development’s Tim Portzen says homeowners are recalibrating expectations to fit the market.
“I wouldn’t say the pace is great, but it’s good compared to what we saw the past couple of years. Contractors seem busier this year than last, nothing really seems to be holding the market back significantly, and that’s all brought some stability to the market.”
As a company, Diligent is uniquely poised to benefit from the steady growth that the Des Moines metro area has seen since the COVID boom.
“Communities that have been hot markets for a while always persevere better even when things slow down,” he says, “because builders who are being cautious will focus their efforts where they know the market is hottest.”
Some of those metro-area communities have extended their boundaries so far to the north and west that builders and homebuyers are looking for other options. Diligent Development is already there.
“We’ve tended to focus on Warren County with our developments in Norwalk and Cumming, and both of those communities saw unprecedented growth in the number of permits pulled over the past year,” he says.
The Middlebrook project, which has drawn national attention, remains a focus for Diligent. “Things we’ve focused on with that development are really in demand now,” he says.
“In a tight housing market, if you’re going to upgrade and pay more in interest rates, you need a really good reason to make that move. Homebuyers want more than just an upgrade in the home. They want access to recreational activities, lifestyle amenities, a community, a sense of place.”
But providing all those elements adds to the cost of development and the cost of the home. Portzen says affordability is something Diligent is focusing on more all the time.
“The midrange buyer is really getting squeezed out of the new construction market. Production builders are able to address the entry-level buyer, and custom-home buyers can always find a willing builder. But that midrange buyer seems to be the one that locked a rate a few years ago and can’t justify moving,” he says.
“We’re looking more at affordability and how we can make adjustments to develop lots that are accessible to a wider range of potential buyers.”
Balancing quality over quantity has always been a priority with Diligent, and that approach has served the company well in recent years. Despite erratic activity in many areas of central Iowa, Diligent projects have remained on pace.
“Our development lots that offer the features that homeowners are looking such as walkout lots, lots that back to ponds or greenspace still sell pretty fast because builders are more confident they’ll be able to land a custom or build-to-order versus taking the risk on spec,” Portzen says.
That fact, combined with continued stability in rates and cost, should result in a solid conclusion to 2025, Portzen believes.
“Throughout 2024, I think potential buyers kept expecting rates to change or the market to change, so it was hard to predict the pace of activity,” he says.
“Now, most people have had time to accept that it’s going to be this way for a while. That lack of dramatic change has actually built confidence.”
Tim Portzen, Vice President
Diligent Development
DiligentDevelopment.com
Jenna Kimberley
Kimberley Development
There are some positive aspects to the 2025 construction market. However, Jenna Kimberley of Kimberley Development says activity was notably weaker than anticipated at the end of 2024. “Builder sentiment at year-end was somewhat optimistic due to fairly stable activity as 2024 came to a close. That sentiment has plunged to the lowest it’s been in more than two years, according to the National Association of Home Builders (NAHB).”
Nationally, the housing market had far more sellers than buyers this spring, and Des Moines is seeing similar numbers. “As a result of these factors, many builders have scaled back forecasts for 2025, and we’re no exception. We’ve lowered our projects for 2025, we’re tightening our belt to prepare for an extended stagnant market, and we’re not putting as many homes in the ground,” she says.
That stagnant housing market is affecting development activity as well. “We’re pivoting with the market,” Kimberley says. “We’re scaling back speculative production, increasing custom built-to-order homes, and working through existing lot inventory.”
Kimberley Development is also developing smaller lots for smaller homes to help bring down costs by focusing on absorbing existing lots before pursuing new acquisitions or moving forward on new plats.
“Not to beat a dead horse, but high interest rates, affordability, and economic uncertainty are the largest challenges right now as they have been for a while,” she says. “The NAHB says almost 40% of builders nationally are cutting prices, and over 60% are offering incentives to close the deal, cutting into profitability.”
Kimberley says that Kimberley Development cut prices during the first two quarters of 2025 to spur demand and move some stagnant inventory, which did boost the company’s sales the first half of the year. With recovery closely linked to potential rate cuts, Kimberley expects the outlook for the remainder of the year to be weaker than the close of 2024.
“We’re prioritizing custom builds, affordability, and cost control to hedge our risks,” she says. “Although we’re pushing farther out into rural areas bordering the metro, where land prices are lower so lot costs can come down some, that also presents its own challenges. Land development is typically a 26-month process from annexation and zoning to complete lots, so slowing down the pace now means we’re guessing where the market will be in two years.”
Despite a somewhat pessimistic outlook on the 2025 market, Kimberley says developers, builders, and homeowners are all prioritizing the same thing. “Stability, stability, stability,” she says. “For homeowners, it’s stability in rates and the economy. For builders, it’s stability in costs and demand.”
She says developers are dependent on all those factors. “Controlling land and material costs, navigating tariffs and their impact on the supply chain, and trying to plan in this constantly changing environment are efforts in futility,” Kimberley says. “So a large priority at the moment is managing financial risk amid tight lending and rate pressure.”
The second half of 2025 may remain steadily on the current course, but Kimberley says there are still positives for Iowa builders and developers. “A mortgage rate decrease would be the catalyst to turn builder sentiment around and spur buyer activity. Given that most of these issues are outside of our control, it’s encouraging to note that Iowa remains in the top 10 most affordable states in the country.”
Jenna Kimberley, Vice President
Kimberley Development Corporation
KimDev.com
Eric Grubb
Solid Ground
The cautious pace of home construction and sales last year is only tangentially due to interest rates, believes Eric Grubb of Solid Ground.
“Affordability is really the core issue,” Grubb says. “Even though interest rates are historically not all that high, when applied to today’s cost of construction and the pace of income growth, new home affordability is at an all-time low. That’s probably having the greatest impact on activity right now.”
Grubb says Des Moines is in better shape than many areas of the country as far as affordability goes, but “it’s still pretty shocking how far a dollar—or even a million of them—goes today compared to five or six years ago.”
For Solid Ground, that means costs remain one of the company’s biggest challenges.
“Everything across the board, from the land to development to the vertical construction, has risen consistently for the past five to seven years. Add to that the growing cost of regulation and the slower growth in wages compared to inflation,” he says. “It’s easy to list the challenges, but it’s harder to put a finger on exactly how to adapt to them.”
Solid Ground is on pace to meet expectations for the year, partly because the company adjusted expectations in reaction to the slower activity in 2024.
“This year actually feels a bit slower than last year, although it’s on pace with my expectations,” says Grubb.
“But 2024 was slower than 2023, which was slower than 2022, and so on all the way back to 2020 and 2019 before the market manipulations related to the pandemic. There are still pockets of demand in certain price points and communities, however, so it’s just a matter of chasing down and moving forward with the opportunities that make financial sense.”
One of the ways Solid Ground is adapting to the current market is by minimizing debt, especially debt related to speculative development.
“If things go sideways or just a little slower than expected, too much debt can quickly become suffocating,” Grubb says. “In most cases we’re waiting for some pre-sales before turning any dirt and using more equity to minimize the debt. We’re also being careful to match lot sizes and prices to the specific demand for the ground we’re looking to develop.”
This approach also sets Solid Ground up to act more quickly if the market picks up pace.
“Without a major recession or other significant market hiccup, I don’t see interest rates going down while the threat of persistent inflation remains high,” Grubb says.
“And with more than 60% of homeowners sitting on mortgage rates between 2.5% and 4%, there isn’t much of a catalyst for people to make a move without a major life-changing event to push them into action.”
As 2025 progresses, Grubb says, “The usual suspects will continue to see strong activity—Waukee, Ankeny, West Des Moines, and others. We may end the year close to 2024 numbers. So far it’s not looking significantly different than the last year or two.”
The entire metro area is seeing a steady rate of activity, which should allow us to create and maintain a relatively healthy market as 2025 comes to a close.
Eric Grubb, Owner
Solid Ground
SolidGroundIowa.com