The housing market is in the middle of a perfect storm.
You may have heard some of the crazy stories about the current homebuying frenzy. Several factors have converged to create this incredibly hot real estate market. Measures to counter the economic impact of COVID-19 have created historically low mortgage rates, which, combined with rising demand for space amid pandemic lockdowns, has fueled increased demand. On the supply side, the pandemic slowed materials production and new home construction. Lumber prices have surged, further boosting the cost of new construction.
Inventory is shrinking.
By November 2020, inventory in the real estate market had hit a record low, and it has continued to dwindle since. Nationwide, the housing market is still on fire, and the Des Moines real estate market is no exception. In May 2021, only 1,734 homes were for sale in the Des Moines market, down 43% from May 2020. By May 2020, however, home inventory was already in decline and had slid 9% from the previous year’s level. In 2021, each month has seen fewer homes for sale.
Prices continue to skyrocket.
At the same time, prices continue to climb. The median home sales price in Des Moines during May 2021 reached $245,950, up 9.8% from 2020 and 17.1% higher than in 2019. Even more incredibly, prices are rising at escalating rates: the median home sales price in Des Moines has already gone up more than 3% since the beginning of 2021, and 9.6% of homes are selling for cash!
Homes are selling fast – and with great terms for sellers.
This is all great news for sellers. Redfin realtors reported in March that 64% of the offers they wrote involved bidding wars, and in Des Moines, the trend doesn’t seem to be slowing. Potential buyers are snapping up homes more quickly than ever: in Des Moines, homes are selling in an average of just 31 days, and many are selling within just a few days of listing. As a result, sellers are enjoying enhanced negotiating power. There is less need to make concessions, as many buyers are prepared to forego demands for repairs in order to secure a deal.
This hot market won’t last forever.
The real estate market is still undeniably hot, but there are some signs of it beginning to cool. In May, Realtor.com and Redfin both reported slower year-over-year growth in median sales prices than in April. However, Redfin reported that more than half of homes still sold for more than their list price. Mortgage interest rates continue at record lows, but they ticked up a bit earlier in the year before declining slightly through the spring. Currently, the Federal Reserve is expected to raise interest rates in 2023, which is likely to slow demand. This suggests that you’re considering selling your home, there is still time to take advantage of this outstanding sellers’ market.
Get the most out of your home sale.
Higher home prices also mean higher sales commissions. Buyers’ and sellers’ agents typically split a 6–7% commission. So, if you sell your home for $300,000, it’s likely that $9,000 of that will go to the agents. Of course, agents provide value, or no one would hire them! Fortunately, there is a middle path between selling your home “by owner” and paying the full cost of an agent. Learn how you can access the most important benefits of a realtor while keeping more money in your pocket.
