Has the Des Moines real estate market really turned the corner? In a word — yes.
It wasn’t that long ago we saw sellers languish on the market for months, often requiring multiple price drops in order to sell their home and thereby reinforcing a downward cycle of price depreciation. Those days are history.
The current market is as hot as many local agents can remember. Bill Eisenlauer, a Remax agent on the east side and one of the most successful Realtors in the country, recently commented “This is the craziest I’ve ever seen it in over 30 years of doing this. We’re having a hard time just keeping up with the paperwork.”
So what’s triggered such a seismic shift in such a short period of time? My personal theory is twofold: 1) The economy has stabilized in central Iowa, which is the primary prerequisite for any housing recovery. 2) The number of sellers available to sell has decreased dramatically due to the enormous number of mortgage refinances experienced over the last few years. During this period we saw the convergence of a poor economy, a housing downturn, depressed prices and historically low interest rates influencing large numbers of homeowners to wait out the recession and simply refinance. This, in turn, has sidelined many of those potential sellers for at least the next couple of years. After all, the logic goes, as long as your current home is meeting your basic needs why move when you’re paying hundreds less a month for your current home? Thus, while the number of buyers has remained constant, the lack of homes for sale has resulted in fewer options and buyers having to move fast when something does become available.
As The Des Moines Register recently reported, an amazing number of homes are selling within the first week of listing as a result of this limited inventory. So far year to date an amazing 41 percent of all sales have occurred within the first month of listing, and a full 20 percent of all sales happened within the first week.
The natural inclination for sellers in such a market is to dramatically increase their price; but we must tread carefully when dealing with prices. Most home sales require a mortgage, and new mortgages are contingent upon an appraisal. All appraisals are backward looking — in other words, they look at historical sales (typically the last six months) and determine value based on these past sales rather than a forward looking sales forecast. As a result, price appreciation takes longer and is much more incremental than price depreciation, which can plummet quickly. Nevertheless, the market is clearly on the upswing and prices are rising for the first time in years.
In the end, real estate is no different than other commodities — it’s all about supply and demand. With the limited available supply currently on the market, we’ve not seen a more propitious time to sell a home in years.
Information provided by Ted Weaver, Remax Real Estate Group, 271-8281, email@example.com.