For the first 11 weeks of 2020, everything was looking fantastic for Des Moines residential real estate. A mild winter and warm weather were all that it seemed to take to signal homebuyers and sellers to start their engines.
The first week of March saw 426 homes added to the market which instantly translated into a spike in accepted offers recorded the following week. There was talk on the news about some quickly spreading illness similar to the flu in Asia and parts of Europe. By mid-March, it was clear that this was something big. Something that was going to affect the United States.
Covid-19 and Des Moines Real Estate
For the 8 weeks that followed, things did change. Sheltering in place and self-isolating began. We all know about the runs on grocery stores for hand sanitizer, home cleaning solutions and the oddity of toilet paper hoarding. Schools were ordered closed. Businesses of all kinds transitioned their employees to work from home and closures of some businesses triggered layoffs and record level unemployment in the state.
Through all of this, real estate began to change as well. Showings that were allowed, required Realtors and their clients to wear masks, sometimes wear gloves and foot booties and explicit instructions to “not touch anything or open doors” inside of homes. Social Distancing became the most used word in everyone’s conversations.
One of the biggest changes was a sudden drop in sellers allowing homes to be held open. In particular, opens of owner-occupied existing resale homes went from around 300 homes each weekend to less than 100. New construction opens also pulled back to just over 200 homes open from a typical count of closer to 500. This retraction continued until about the second week of May when homeowners began to allow some open houses to return. As of this past weekend, the count is still below what would be a normal year would be, but all indications are that any predictions of open houses completely ending is not going to come true. There will be limitations and new safety rules in place, such as restricting the number of people in an open house at the same time for example, but open houses will remain a part of our market business moving forward.
The Economic Impact of Real Estate Sales in Iowa
In 2019, Iowa home sales accounted for over $28 billion dollars in the state, which in turn equates to 14.5% of the gross state product. Another way to look at this is that every time a home sold in Iowa in 2019, the impact across related businesses and services generated almost $58,000 per sale. When a home sells, it subsequently generates business for related industries, such as moving services, home appliance/furniture sales, remodeling and repair services, not to mention adding to retail sales and entertainment revenue as homebuyers explore and get to know their new communities.
Pending Sales—The Benchmark of Market Activity
Through all of the Covid-19 pandemic fears, homebuyers continued to schedule private showings of homes and make offers on homes for sale. With mortgage interest rates already at rock bottom, Realtors were writing more sales contracts compared to the same period a year ago and with the ability to borrow money at a much lower rate, homebuyers were not hesitant to take advantage and raise their purchase price.
In fact, even during the most restrictive period of self-quarantining, Des Moines pending sales have not dipped below 2019 counts. The median price of a home at the time of offer acceptance has also been higher than 2019 coming in at $213,500 for single family resale homes compared to $210,000 this time last year.
Homes For Sale
A typical year in our local real estate market would start off with our lowest count of homes for sale in January. Homebuyers would begin to jump into the market in March or early April, buying down existing homes for sale inventory.
This would signal homeowners on the sideline that it was time to put their homes up for sale and the spring real estate market frenzy would begin. Fresh new homes for buyers to choose from brings out even more buyers that snap up the new properties.
Ultimately enough homeowners finally enter the for-sale market to curb the buyer’s appetites and by mid-spring the number of homes for sale begin to rise. It’s a well-choreographed dance in a normal market and throughout the months of May, June and into July, the real estate market would finally hit its peak.
That is what happens in a “typical” year. 2020 is not typical. What we have experienced this year as a result of Covid-19 during the months of March, April and May is a flattening of home for-sale inventory. Enough home sellers have entered the for-sale market to feed the buyer demand so far but not so many that the inventory levels have started to rise. This is largely due to the mid to upper price ranges of homeowners holding back.
What we are now beginning to see is homebuyers picking up the pace of making offers on properties newly added to the market which is causing the number of homes for sale to drop again. This will ultimately re-signal those homeowners that buyer demand is on the rise and this is the time to put their homes on the market.
What I predict will happen is that instead of having a typical spring market, Des Moines will see a strong summer market with homebuyers purchasing higher priced homes (thanks to new-record low mortgage interest rates) and also purchase larger homes, also thanks to a new need to be able to work from home.
If we have done a good job of stopping Covid-19 from spreading and can follow social distancing practices throughout the rest of the summer, hopefully we will not see a resurgence of coronavirus this fall. Weekly graphics related to our real estate market and how Covid-19 is affecting it can be found at SimplyDesMoinesStats.com.