Expect records to be broken in residential real estate, one long-time analyst of the local market says, and at the same time, say good-bye to the $175,000 entry-level home, according to another real estate professional.
It all adds up to an exciting time to be in the residential market, said Kalen Ludwig, who specializes in new construction sales for Peoples Co.
A 25 percent increase in lot prices over the last 18 months, combined with hikes in the cost of labor and materials is pushing the entry-level home from a comfortable-sounding $175,000, up to $225,000 to $250,000.
Ludwig noted that painters, roofers and framers, after struggling to stay in business during the recession and early into the recovery by holding their rates steady, finally are able raise their prices in the range of 20 percent. Construction materials are on the rise, too, Ludwig said.
"It's the new normal," she said. "Though I know it is a difficult thing for homebuyers to wrap their heads around."
The increases in prices are an indication that the real estate market is reaching equilibrium, said Joe Pietruszynski, vice president of land development for Hubbell Realty Co.
Those price increases are not impeding sales.
According to statistics Ludwig has compiled, 875 newly constructed single-family houses had been sold in the year ending Sept. 30, a small increase from the previous year but a 35 percent increase from 2011. In addition, 347 new homes were under contract to be sold as of the end of September and another 510 were listed for sale, with both categories representing increases from the previous year.
The "new normal" in entry-level houses has boosted the sales of existing homes, Ludwig said.
Les Sulgrove, a real estate agent with Keller Williams Greater Des Moines and a long-time gatherer of metro area housing market data, expects records to be broken this year.
Here are five records he expects to fall:
- Sales should exceed the record of 10,236 set in 2007.
- Pending sales are on pace to exceed the 12-month-average record of 836 set in 2012.
- The median sales price of $151,000 was set last year, too. Figure it to be broken. "We have consistently beat(en) that number all year long," Sulgrove said on his website.
- Home inventory levels continue to be at or near record lows
- Most buyers use conventional bank financing, but this year cash buyers rank second, accounting for about 20 percent of all transactions.