Greater Des Moines Realtors and homebuilders expressed hope on Thursday that a slowdown in house sales is a natural regression that will benefit buyers and homebuilders after a protracted time of limited supply and pressure to make hasty buying decisions.
According to the most recent information available from the Des Moines Area Association of Realtors, metro house sales decreased for the fifth consecutive month in October despite rising mortgage interest rates and worries of a recession.
According to association records, the fall has been going on for at least five years, and October’s monthly sales decline over the same time last year was the highest. Sales were down 27.5% from October 2021 to that same month, greatly exceeding the impact of the recession brought on by business closures during the early months of the COVID-19 pandemic.
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Interest Rates Are Affecting The Market
The steep increase in interest rates that is being held responsible for the slowdown. Freddie Mac reports that the typical 30-year fixed-rate mortgage increased from around 3.1% on December 30, 2021, to a high of 7.08% early this month. It decreased to 6.58% the prior week.
Wells Fargo, the largest private employer in the area and one that has its mortgage lending division based in Des Moines, has been negatively impacted by the situation, laying off at least 402 employees since April. The Mortgage Bankers Association predicted in September that borrowers in the United States will obtain 6.6 million mortgages this year, a 51% decrease from 2021.
The rise in interest rates, according to Tracy Frette, a senior mortgage lender with Lincoln Savings Bank, has had a substantial impact on potential homeowners’ purchasing power, she said at the event on Thursday.
First-time purchasers on single incomes and those making less than $50,000 annually are the ones experiencing the effects the most. According to Frette, a larger portion of the income of our customers is now going toward housing costs. “With the rising rates and rising home costs, those two have seemed like a double-whammy.”
According to Frette, some purchasers are considering adjustable-rate mortgages, which lost popularity in the last several decades as interest rates hit record lows. Stanborough added that there has been an increase in interest in the option.
“I have more and more buyers who are discussing adjustable-rate mortgages, which may occasionally be a little frightening when you first hear about them. It’s definitely coming into play to look at an adjustable-rate mortgage that we haven’t utilised in a while”, she added.
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Sales Slowdown And Metro Development
The metro area of Des Moines, which has had the Midwest’s fastest major metro area growth over the past ten years, is still expanding despite these uncertainties. Grimes is fast growing, and according to Jake Anderson, municipal administrator, demand is overwhelming the quantity of lots that are available.
The problem, though, is cost. According to Anderson, the majority of the city’s upcoming single-family homes are located in neighbourhoods with high-end residences that cost more than $500,000. Additionally, an increasing number of people are choosing to rent rather than buy homes.
Residents’ reactions to it have been mixed, although Anderson noted that not all aspects of housing development are under the city’s control. One way we may address the affordability issue is through single-family homes that are rented out.
Developer Jensen pointed out that Des Moines’ rent and house costs continue to be lower than those in the majority of other, larger Midwest metros. He added that the recent decline in lumber prices was positive and expressed optimism that Des Moines will perform better in the current slowdown than it did during the Great Recession.
When compared to 2008, when the bulk of homebuilders and developers went out of business within a year of a slowdown, the local builder and developer profile in Des Moines right now just feels extremely solid, Jensen said.
Expectation In The Rise Of The Market
The good news for homeowners in central Iowa is that Des Moines continues to be one of only a few of locations where Moody’s predicts any price growth for 2023. It forecasts for a price decrease in 231, more than half, of the 414 largest housing markets in the US, with some Florida metros seeing prices drop by as much as 7%.
Even after a sharp increase, the median house sale price in the Des Moines metro area is still substantially lower than the national average. This spring was the first time the median home price in the country crossed $400,000.
The number of homes available on the market in the area “continues to slowly rise with a 24% increase over July 2021,” according to Jen Stanbrough, president of the Des Moines Area Association of Realtors. Despite the sharp drop in sales last month, West Des Moines realtor Gina Swanson said she is not witnessing a market crash; rather, she is observing a slight decrease in the buying frenzy.
Swanson said that “it’s cooling a little.” “The entire home isn’t on fire right now, but it’s still a tiny bit on fire.” She claimed that demand was still high and that she had a lengthy list of prospective purchasers seeking for the suitable properties.
“When interest rates increased, folks were kind of startled by it for a few weeks,” she said. Despite rising mortgage rates, which are still much below historical highs, “but they recognize it’s still better to own than rent,” She predicted that prices would slow down. “But I almost promise that home prices will never decrease. Simply put, they won’t accelerate as quickly.”
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