Record High Sales and Record Low Inventory
If I were to describe the Des Moines real estate market as a running engine, the gas pedal would be all the way to the floor and the needle on the fuel gauge would be just above empty.
It All About Supply & Demand
Realtor.com recently reported that nationally, the number of homes for sale in January dropped below 600,000 which translated to inventory being 42.6% lower than this time last year. Inventory supply is not just a local issue, it’s the same across much of the country. At the time of this writing, the Des Moines Area Association of Realtors MLS sits at just over 1,800 homes for sale, which calculates to 46% lower than last year.
Supply
Of these 1,800 homes for sale, 80% are located within the Des Moines metro, comprised of the city of Des Moines and immediate surrounding suburbs. Along with this shortage of listing stock, we also have an abundance of buyers ready and willing to buy. Unfortunately, there is not a one price/one size fits all solution when it comes to home buying. The buyer pool is so deep in every price range. Take a look at the availability of homes to buy broken down by price range just here in the metro.
Demand
With homebuyers already out in full force, the number of homes in sale pending status is already at levels we would expect to see in April and May. Currently the Central Iowa market has 3,000 homes under contract. A year ago, we had 1,000 fewer homes under contract on this date.
The record high pending count in our market occurred last June when there were 3,609 pending sales. It’s only the end of February and we are about 600 sales away from reaching that all time high.
Homes For Sale—Tale of Two Markets
There are two different markets within the metro. New construction and resale of existing homes. For those that can afford to buy in the $250,000 to $350,000 price range, new construction is likely to be where you will find the most options with around 700 homes currently for sale. The challenge for most buyers in that category is making the jump to new home pricing. The median price for a single-family new home is currently $300,000.
The resale market is more affordable, but has a much lower selection of homes for buyers to choose from with less than 400 homes under $250,000. Traditionally, resale homes make up for over 50% of all homes sold in the metro and the average sale price of resale single-family home in 2020 was $236,000. Even with low mortgage interest rates, it’s difficult for most homebuyers to spend an additional $60,000 to buy a new home. So they wait for a resale home to hit the market and hopefully be the first to get to it and make an offer that will entice the seller to accept their bid.
As a result, the supply of resale homes making it to the active market is reduced to days, if not hours before they go under contract to purchase. This keeps the for-sale inventory levels flat or decreasing as not enough homes are listed to meet the daily number of buyers wanting to buy.
Why Aren’t Homeowners Selling
If the market is so active, why aren’t more homeowners putting their homes on the market?
The simple answer is because once a seller goes under contract, they then become a homebuyer. Faced with the realization their home can and will likely sell at lightning speed, they will then be competing with the mass of other homebuyers. The sellers are in a catch-22 situation. Sell, but not have a place to move, or stay put and wait for the listing market to open up.
New construction is trying to break up the log jam but this strategy has challenges. If a homeowner decides to build, they will likely still not put their home on the for-sale market until the new build is within 30 to 60 days of completion. And with new home builds taking between 4 and 6 months, that doesn’t do much to help the “Now” market.
Another solution is if a home seller has the financial ability to buy first, then sell their home after closing and move into the new property. The subject to sale offer is common, but with so many buyers out there that do not have something to sell, this is a tough option for a current seller to accept.
The Ultimate Solution
Time, patience and persistence with more homeowners willing to put their homes on the market! It won’t be a fast change because the shortage of listings didn’t happen overnight.