Real Estate Is Trickle Up Economics

The Spring Market Arrives Mid Way Towards Summer

After what seemed like a slow start to our spring market, real estate sales have taken off since the first of April. However, not all price points have seen the frenzy of activity that the lower price points have.

Real Estate Activity Begins at The Low-End Market First

A typical spring market leads first with activity in the lowest price points. First-time home buyers start their search early in the year when the winter weather first breaks. Savvy home sellers that get their homes on the market early, especially in a low inventory market and benefit from quick sales. In turn, they become move-up home buyers. In a perfect real estate economy, this “trickle up” economic process leads to more and more buying and selling activity until the market peaks as we move into the summer months. This is the point where sales begin to slow just a bit due to family vacations, summer activities and in Iowa… the summer heat.

Weather, Mortgage Interest Rates and Consumer Confidence

2018 has not necessarily been a typical year. First of all, winter lingered, and many would say overstayed its welcome. In the previous three years, the initial home buyer wave was out in full force as early as mid-January. This year the weather kept many of them inside as well as the entry level home sellers signs out of the yard until March. Mortgage Interest Rates have also been on the rise this year which marked the end of the record low rates in the 3% ranges. A bright spot over previous years has been the overall economy. Unemployment is at record lows and many employers have given raises or bonuses. The Federal tax reform that takes affect this year should be good for real estate sellers and buyers moving forward with many of the tax benefits being left alone due to local, state and national lobbying efforts.

Comparing 2018 to 2017 Through May

  • For sale home inventory levels are up over 6 ½% compared to the same time last year. This would make some think that more sellers are entering the market. We are actually slightly behind last year in the number of homes added to the market. The ever so small build up is a result of the later start of home buyers hitting the streets this year.
  • The number of homes in Pending status (offers accepted and working through the inspection/appraisal/underwriting process) is down around 10% from last year.
  • Closed sales are closely mirroring last year’s numbers, which at first glance would not make sense, if listing inventory is up and pending sales are down. What is happening is that the delayed start of the spring market has allowed lenders and appraisers to shorten the time from offer to closing, thereby keeping the pending transaction count lower as the time from offer acceptance to close shortens.
  • The overall price of homes for sale is up by only 2% over last year with the median list price of $295,000 (heavily influenced by new construction pricing), however buyers are spending more this year with the median sale price up over 9 ½% at $206,000 vs $187,250 the same time last year.
  • The Median Days on Market is down to just 20 days.
  • At the current pace of sales, if no new inventory were added to the market, we would be out of homes to sell in just over 2 Months.
  • Not all home sales make it from offer acceptance to closing. Whether it is buyer financing, inspection issues or appraisals, 1 in 6 homes that go under contract fall through and come back on the market.

Looking Forward

Time will tell if we are on track to meet last year’s sale units. The rise in home prices as well as higher mortgage interest rates will be a true test of the strength of the local economy. Homes priced above the $400,000 mark so far in 2018 are not experiencing the same list price increases over 2017 and time on the market is slower compared to the under $400,000 price point.

Monthly Market Snapshot as of May 31st

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2018 Year Trend Reports
Active – Pending – Sold – Balance of the Market
Compared To 2017

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Months of Inventory by Buyer Pool and by Price Points

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Home Inventory and Pending Sales Compared Over Time

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~Les Sulgrove, Broker

If you are interested in selling your home or purchasing a home, give me a call! I will help you determine your best strategy based on your local market data.

About Les Sulgrove

Les is an Iowa native born in Des Moines and raised in the southwest Iowa town of Bridgewater. He has been a resident of Des Moines since 1982 and has been married to his wife Linda for over 35 years. Together they have 3 grown children, 7 grandchildren and make their home on Des Moines south side. He has been a licensed REALTOR® since 1990 and is Vice President at VIA Group, REALTORS®. Les is the 2011 Past President of the Des Moines Area Association of REALTORS® (DMAAR) and received the award of Salesperson of the Year by DMAAR in 2007 for his involvement and service to the Association. Additionally, he is active at the Iowa Association of REALTORS® and serves on local, state and national committees. He also owns and operates the national technology networking group CyberProfessionals. This group of real estate professionals meets twice annually across the United States to learn from each other and share new marketing ideas with heavy emphasis on current and future technologies and their use in the real estate business. Les’ hobbies include golf, photography and sarcastic humor. He and Linda spend many Saturday mornings from Spring to Fall at the Des Moines Downtown Farmers Market. He enjoys spoiling his grandchildren at every opportunity.

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