The two most often asked questions on the streets this month have been “How is the real estate market?” and “Have we missed the busy part of the market if we list now?”
The answer to both questions is that the real estate market in central Iowa is hot! (Temperature and Activity) The real estate market we would normally see in May has appeared in July. Right after Independence Day, the real estate market typically experiences a little dip in sales as home buyers and sellers focus on vacations and summer family activities. That breather hasn’t affected real estate sales this year.
I’ve researched how July 2019 compared to July 2018 as well as what segments of the market are doing best. The results surprised me a bit.
Year-Over-Year Market Activity
There are two main segments in our real estate market at play. Resale and new construction homes. However, the combined activity alone doesn’t tell the full story.
For example: Looking at overall combined market data July 2019 compared to July 2018, home inventory levels are up 8½% over last year. The median list price is down 5% this month at $274,900 compared to $288,650 a year ago. The pace of sales (Months of Inventory) is exactly the same at 2.8 months, meaning if no additional listings came on the market, we would run out of homes to sell in less than 3 months.
Year-to-date closed sales tell a little different story. Because of the delayed start to business this year from weather, closed home sales are just a little bit behind—but catching up quickly. Currently there have been 7,640 home sales close year-to-date vs 8,052 during the same period in 2018. The number of sales in Pending status (going through the inspection, appraisal and underwriting process) is also up adding to my report of a fast-paced market. Word on the street this past week is that appraisals are currently taking up to 3 weeks to be processed—a sure sign of heavy sales activity.
New Construction vs Resale
When you break down the homes for sale and closed sale activity by resale and new construction, you begin to see an interesting change. For much of the past 12 to 18 months, I have reported that new construction inventory is growing at a fast pace. In the past, new construction has made up as high as 36% of all homes for sale. This month that number has dropped down to 33% (still a high number in my opinion).
New construction inventory levels are dropping and so is the median list price of new homes. With the introduction of a couple of national builders entering the real estate market offering entry level new homes at a substantially lower price point, the median list price of new homes has dropped to $298,900 from $316,450 a year ago. Interestingly the median sale price has remained almost exactly where it was last year at $300,000.
This tells me that between the lower entry price new homes entering the market, buyers are taking advantage of dropping mortgage interest rates, builder incentives and what was a buyer’s market of new home choices. Builders appear to be getting a good handle on supply and demand of the central Iowa home buyer market.
While new construction inventory is dropping, resale home inventory is on the rise— up over 14% from a year ago with 2,641 homes to choose from and at a median list price of $249,900 (down from $259,000 a year ago). The resale market is by far the most active with the months of inventory at 2.2 months and for the month of July, resale homes were on the market on average 10 days before accepting an offer.
When homes are listed for sale and they don’t hit that 10 day on the market average, the first solution is to look at the home to determine what is keeping buyers from making offers. Everything from condition of the home, accessibility or ease of showing and the all-important factor, price is evaluated. Statistics from 2018 sales showed that a single-family resale property that is properly priced at the start will sell within 98.7% of list price. If you miss that initial price, the ultimate drop from the original list price is almost 10% and takes over 3 times as long to sell.
42% of homes on the market had a price reduction in July and 46% of the homes that went into Pending status had a price reduction. What this is showing is that the Des Moines real estate market is hitting its peak pricing levels and that between 40% and 50% of home sellers are evaluating their list prices.
Bottom Line – In this weather delayed market year, Proper Pricing is the number one factor that home sellers must focus on to get the maximum sale price on their homes.