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

Home Prices, Leading Indicators, & Employment… Oh My!

Posted by adamvanlin on September 8, 2011

Catching up after a long weekend and some unhealthy procrastination.

Let’s start with home prices.  Des Moines median home prices shot up over $4,000 over the past month to $148,608.  This is a 4.6% increase from a year ago.  The yearly growth rate (average yearly rate for the past 12 months) finally turned positive.  We can definitively say that over the past year, home prices in Des Moines have risen!  On average, August is typically the final month we see home price increases before the cold weather effect sets in, so we’ll probably see values head down starting in September.   That’s why it’s more important to keep an eye on the yearly growth rate as it’s a better barometer of “real” (adjusted for seasonal effects) housing prices.

Next up, Employment.  Employment leads home prices, so this gives us a good idea of where prices are headed.  The unemployment rate dropped from 6% to 5.7% in July.  That’s the good news.  However, then number of people employed was 302,219, a slight decrease from a year ago.  The overall employment numbers are still trending down, which means the number of employed individuals in Des Moines is slowly decreasing.  Not a great sign for the housing market, but not dire either.  There are plenty of cities worse off when you compare their employment situation to Des Moines.

And finally…  The Iowa Leading Indicators Index has stalled over the past 6 months, coming in at 104.83, a modest 0.12 increase from a month ago.  The yearly growth rate has “fallen off the cliff” over the past couple months after 16 months with over 4% yearly growth.  We are now down to 1.7% and falling.

BIG PICTURE:  The leading indicators had been on an upward trend for about 2 years.  Employment & home prices soon followed and are about 1 1/2 years through their upward projection path.  With the leading indicators “turning over” the past couple months, I would expect the relative strength we’ve had in employment and the housing market to stagnate in or around February of next year.  The question is, in February, will prices head lower, or will we see them even out for a while?  We’ll have to keep an eye on the next couple months of data to answer that question.

For a private consultation on your real estate needs, give me a call today at 515-344-1068.

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More Leading Indicators for Des Moines Home Prices

Posted by adamvanlin on September 6, 2011

I’ve been following new building permits as a leading indicator for a while, but I will begin to follow manufacturing and construction employment as well.  Both are considered leading economic indicators and therefore, would give guidance into future employment and home prices.  Here are the graphs…

Permits have turned negative over the past year, and both manufacturing jobs and construction employment have bounced off their lows of the past year, but are nowhere near healthy.  Mixed signs that are hard to draw much of a conclusion from.  We’ll have to keep an eye on these important indicators to see what they are telling us over the next couple months.

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Cost of New Construction

Posted by adamvanlin on August 25, 2011

The cost of new construction rose significantly in July compared to a year ago.  The BLS index rose 7.3% from July 2010.  This means it is 7.3% more expensive to build a house today than it was a year ago.  With prices down, it is becoming more difficult for builders to build new houses.  Not surprisingly, we have been seeing a decrease in new building permits in the state of Iowa over the past year.

For consumers, this will lead to a drop in supply, which the housing sector desperately needs.  Even in Des Moines, we have slightly too much housing supply on the market which continues to put downward pressure on prices.

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Average Monthly Increase or Decrease in Des Moines Housing Prices

Posted by adamvanlin on August 18, 2011

This is the average percentage increase or descrease in the price of the median Des Moines area home from one month to the next over the past 10 years.  Enjoy.

January -1.6%
February 0.9%
March 1.3%
April 2.3%
May 5.8%
June -2.4%
July 2.2%
August -4.5%
September -1.3%
October 0.5%
November 0.5%
December -3.3%

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The Future of Interest Rates

Posted by adamvanlin on August 15, 2011

An interest rate below 5% is rare and supportive of the housing market.  Interest rates are actually one of the ONLY few things that are supportive of the housing market right now.  Many people expected interest rates to rise as the debt ceiling debate weighed on, but they have not significantly rose.  Last month rates rose to 4.55% from 4.51% the month before.  Although I’ve heard clients say they are locking in their rate and making their purchase before rates go up, I don’t see that happening anytime in the near future.  3 reasons.  First, U.S. bonds are still one of the safest investments in the world.  Even though the U.S. credit rating was downgraded, that initiated a flight to safety, and money poured into U.S. bonds driving the yield lower.  Second, the outlook for the next 10 years does not look great.  Debt ceiling debates, rising taxes, more stimulus money going to waste, and Europe are just a couple of things dragging on the U.S. outlook.  (I bet we could get a list of like 25 things if we really tried!)  Third, deflation of prices still trumps inflation at this point.  There is still too much pressure on businesses and margins because of the lack of employment.  Until Americans regain their spending power, the threat of inflation remains in the distant future.

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Iowa Leading Economic Indictators

Posted by adamvanlin on August 10, 2011

The Iowa Leading Indicators Index (ILII) remained at 104.8 in June.  This was the same reading the index had in May.  The yearly growth rate of the index fell from 5.1% to 3.3%.  The strength of the past year is currently showing up in employment and housing prices, however, with the stagnation of the index along with the drop in the yearly growth rate, we could be in the process of another downturn.  Only time will tell.

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Apartment Market Conditions

Posted by adamvanlin on August 9, 2011

I only talk about national data when there is no local data available.  This, unfortunately, is one such instance.  Apartment market conditions continue to improve.  Rents are higher, vacancies are down, financing conditions are better, and sales are increasing.  Overall a great report for those currently owning rental (income) properties and those wanting to own in the future.  There are plenty of rental properties (apartment & single family) available in the Des Moines area.  Contact me to discuss.

Here is the link: http://www.nmhc.org/Content/ServeContent.cfm?ContentItemID=6253

 

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Des Moines Housing Prices – July 2011

Posted by adamvanlin on August 5, 2011

The preliminary housing price numbers are out for July and things look positive.  The median price rose from $135,667 in June to $144,083, an increase of 6%.  This is impressive considering median prices rose 10% from May to June.  An increase of this magnitude is rare, especially over just two months.  We’ll look for a continuation of this trend in future months.  If you were a seller in July, it was a great time to sell.  If you still have a property on the market, time to catch the wave before the surf goes out.

Also, we see that the yearly growth rate for housing in Des Moines has risen, but is still in negative territory.  Lets hope next months number push it into the positive.

Finally, months of supply came it at 7.0 months for July.  This number indicates a very slight downward pressure on prices.  Just something to keep an eye on.  This number should rise as prices take their seasonal fall and less buyers are making purchases while the number of homes on the market remains consistent.

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The Seasonal Drop in Prices Begins

Posted by adamvanlin on August 3, 2011

This won’t be the most upbeat post I’ve written, but it’s one of the more important ones.  Sometimes the truth hurts, but if you have information on your side, you will make better decisions.  Lets get to it…

History tells us that in Des Moines, the prices of homes drop an average of 8.8% from the warm weather months to the cold weather months.  So when does this precipitous drop start to occur?  Answer: Now.

It makes sense.  Someone walks into a home last month in their shorts, full of vitamin D from the sunshine, sees the pool in the backyard, and says, “This is it!”  That same person walks into the same home in January, shakes the snow from their snow pants, removes their wet boots, and says, “I’ll hear pools are hard to take care of.  Cross it off the list.”

What does this mean for sellers?  In short, the value of your home has started to drop, and will continue to drop into the cold, snowy, winter months.  If you have an offer on the table, you can assume it will be the best offer you will get for a while.  If you don’t have an offer on the table, you might consider lowering your price, or marketing more aggressively, to get someone to pull the trigger sooner, rather than later.

And if you’re a buyer?  If you can wait, you should.  It doesn’t make sense to buy something that will drop in value, especially such a large purchase like a house.  Of course, many things will affect your decision.  If you have another house to sell, you’re buying and selling at the same time, so it evens out.  Maybe you are getting a home for 10% below market value, and can withstand the oncoming drop in price.  Consider all the factors involved and make a great decision.

I will be posting home prices for July on Friday, including appreciation rate and months of supply.

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Building Permits

Posted by adamvanlin on August 1, 2011

Numbers just released from the U.S. Census Bureau indicate that building permits for Polk County remained at 170 in June.  This is the same number that were taken out for May.  The yearly growth rate of permits now stands at -6%.  After a growth spurt in 2010, permits now seem to be in a mild slump.

Permits are a leading indicator for the economy and housing market.

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