Des Moines Real Estate Blog

Your Economist of Choice, Your Realtor of Choice

  • Adam Van Lin, Realtor
    Burnett Realty
    10200 Hickman Rd. #100
    Clive, Iowa 50325
    Cell 515.344.1068
    Fax 515.331.3401
    Licensed in Iowa

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  • Archives

Why Interest Rates Matter (Now More Than Ever!)

Posted by adamvanlin on October 21, 2011

This is a re-post but I think it carries more weight today than it did when I first wrote it.  Enjoy

Let’s say that you could afford a 1K/month payment on a house (forget taxes & insurance to keep things simple).  How much house could you afford at a certain interest rate?

  • 3% – 250K
  • 4% – 220K
  • 5% – 196K
  • 6% – 176K
  • 7% – 158K

As you can see, the lower the interest rate the bigger the loan you can afford.  Which leads us to another question… WHY IS THIS IMPORTANT?

Well, let’s look at payoff percentages on each of the loans above after 5 years.

  • 3% – 11.1%
  • 4% – 9.6%
  • 5% – 8.2%
  • 6% – 6.9%
  • 7% – 5.9%

So not only do we get a bigger loan at a lower interest rate, we pay off the balance at a faster rate too.  For example, we could get 220K loan at 4% and pay off 9.6% of the loan after 5 years = $21,120 in equity!  Or we could get a 176K loan at 6% and pay off 6.9% of the loan after 5 years = $12,144 in equity!  Remember, both of these loans have the same 1K monthly payment.  The difference is clear, lower interest rates make a difference.

Thinking of buying in the next 12 months?  Give me a call/e-mail and we can discuss where interest rates are headed.

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Foreclosure & Delinquency Rates Remain Elevated in Des Moines

Posted by adamvanlin on October 19, 2011

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Leading Economic Indicators for Des Moines, IA

Posted by adamvanlin on October 17, 2011

Predicting the future is impossible, but we can at least take an educated guess with the right information.  If I were to predict where housing prices are headed (and I do!) I would pay most attention to Iowa’s Leading Economic Indicator Index.  It has proven to have a direct relationship with employment and housing prices.

The index recorded a reading of 104.5 for August, down 0.3 from July.  More importantly, the yearly growth turned negative, if by only -0.01%!!!  The trend is definitively down, which doesn’t bode well for employment and housing prices.  GREAT NEWS… for buyers 🙂

If you are thinking of selling, you need to give me a call and we’ll talk about timing your sale in this market.  A matter of months could make a difference of up to 10% in the sale of your home!

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Housing Prices in Des Moines, Johnston, Urbandale, Waukee, West Des Moines…

Posted by adamvanlin on October 13, 2011

Here are the updated housing prices for Des Moines & surrounding areas.  As expected, prices topped out in August and have started their seasonal decline.  Not great news if you are selling your property, but with prices expected to decline over the next 6 months, you still have a window of opportunity to get a good price.  Especially with this warm weather we’re having in central Iowa!  Let’s hope for that to last as long as possible.

To the details… median prices dropped about $5,000 to $142,917 in September.  The yearly growth rate is still positive, so we are in better shape now than we were last year.  However, prices are only growing at 1/2% on a yearly basis.  Not much to get excited about, unless you are a buying waiting to get into this market.  Months of supply came in at 7.3 month, which would imply slight (very slight) downward pressure on prices.

If you are a buyer and you’d like to know the best time to buy, give me a call and we can go over the facts.

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Employment in Des Moines, IA

Posted by adamvanlin on October 11, 2011

The Des Moines (and surrounding areas such as West Des Moines, Urbandale, Waukee, etc…) unemployment rate rose to 5.9 in August.  Total employment, much like housing prices, has started its seasonal decline.  We look at the yearly numbers to get a better idea of the general direction of employment, and future housing prices.  Yearly growth in employment is still negative, so we are slowly losing jobs over the long run.  Not a great sign for prices.

Want to know how economical data can influence future housing prices?  Call me today and we can sit down and discuss.

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A Couple Leading Indictors

Posted by adamvanlin on October 6, 2011

Just a short post and update on some leading indicators in the Des Moines housing market.  The number of new residential building permits shot up last month, but the yearly average is still negative.  Construction and manufacturing employment are both trending upwards, but are only in the 0% – 2% range right now.  At these levels in permits and construction/manufacturing employment, we can expect housing prices to stabilize for the next several months without much action.  Better to have no price movement than falling prices.

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Cost of New Construction Ticks Lower

Posted by adamvanlin on September 26, 2011

The cost builders incur to build new houses is tracked by the BLS’ Residential Construction PPI (Index).  The more expensive it is to build, the less likely builders are to take out new permits and begin construction.  As we can see by the chart below, the cost has risen sharply over the past 2 years but this month is actually dropped (slightly).  It is still elevated though and the cost to build a new home is about 6.5% higher in August 2011 compared to August 2010.  Fewer houses being built means less supply, which is probably a good thing for prices right now.  The builders in the Des Moines area that I talk to all say the same thing.  People are only buying homes that are already built, so there are no “pre-orders” being placed like in years past, which has slowed the building of new homes in our area.

Interested in new construction?  Give me a call.  Des Moines has several options available if you would like a custom-built, new home.

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Interest Rates in Des Moines

Posted by adamvanlin on September 22, 2011

Interest rates continue to melt downwards.  The lack of risk taking in the global economy is enticing people to buy US Treasuries, pushing rates down, which are the main factor in determining mortgage rates.  These are low, and should get lower.  Bottom line, money is cheap to borrow, if you can qualify.

Need help qualifying for a loan?  We can get it done!  Call, e-mail, Facebook, tweet, or text me (am I forgetting anything!?!)  I’m available now to help.

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Des Moines Foreclosure & Delinquency Data

Posted by adamvanlin on September 21, 2011

The June foreclosure & delinquency data for Des Moines is out.  The 90+ day delinquency rate fell to 4.50% from 4.51%, and the foreclosure rate rose to 2.54% from 2.52%.  Big picture… no change.  Still elevated, probably will rise in the near future and stay elevated for 2 – 3 years creating downward pressure on prices.  If you’re interested in looking at foreclosures (there’s plenty to look at in Des Moines!), shoot me an e-mail.

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12.8% of Residential Properties in Des Moines are Underwater

Posted by adamvanlin on September 13, 2011

According to CoreLogic, 12.8% of all residential properties with a mortgage were in negative equity for second quarter 2011.  An additional 8.1 percent, or 8,575, were in near negative equity in Des Moines-West Des Moines.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity mostly occurs because of a decline in value of the home.

High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery.  Those underwater are more likely to stop making payments and walk away from their home, adding to the foreclosure market.

How do we fix the problem?  John Hussman has been advocating for PARs for several years now.  According to Hussman,

“Suppose a $300,000 mortgage is in foreclosure (or the homeowner and lender can agree to the following arrangement outside of foreclosure court). A reasonable mortgage restructuring might be to cut the principal of the mortgage to $200,000, and to create a $100,000 PAR. The homeowner would agree to pay off the PAR to the Treasury (and administered through the IRS) out of future price appreciation on the existing home or subsequent property. The homeowner would be excluded from taking on any home equity loans or executing any “cash out” refinancings until the PAR was satisfied. The maximum PAR obligation accepted by the Treasury would be based on the value of the home and the income of the homeowner.”

Sounds better than anything else out there.

If you are underwater but would still like to move into a different house, give me a call and we can talk about your options.

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