Pandemic-fueled boom tempers, but industry says it’s still a sellers’ market

A cooldown in what had been a red-hot real estate market is being seen in lower home sales and loan activity in eastern Iowa. But officials in the industry remain optimistic as they see the change as more of a market correction than a reason for concern. “I would say that sales are leveling,” said […]

A cooldown in what had been a red-hot real estate market is being seen in lower home sales and loan activity in eastern Iowa. But officials in the industry remain optimistic as they see the change as more of a market correction than a reason for concern.

“I would say that sales are leveling,” said Lynsey Engels, president of Mel Foster Co., Real Estate Brokerage. In the Quad-Cities, sales for properties closed in August totaled 572. That’s down from 736 the previous August. However, it is on par with August of 2019. Area real estate officials say that year is a better benchmark.  The 2020 year, with the onset of the COVID-19 pandemic, and 2021, which saw a remarkable runup in real estate activity, were anomalies, they say. Through the first eight months of this year, sales remain over what they were for the same period in 2019. The figures cover the Quad-City Multiple Listing Services (MLS), in Iowa and Illinois, and were provided by the Quad-City Area REALTORS group. The data generally reflect sales in the market but could include some outside the general geographic area, the association said. The tempered market also is evident in the Corridor region. In Linn County, sales in August for new and existing homes were at 339 properties, down from 421 in the same month last year. That’s a bit down from the same month in 2019, according to figures from the Cedar Rapids Area Association of REALTORS. However in July, sales – while below what they were last year – exceeded the 2019 figure for that month.

“Demand has slowed with interest rates, but it hasn’t gone away,” said Raymond Siddell, a Realtor with 360 Home Team, Keller Williams Legacy Group in Cedar Rapids. Mr. Siddell also is the incoming president of the Cedar Rapids Area Association of REALTORS.  “It hasn’t changed dramatically. We’re going to see a seller’s market at least for the foreseeable future.” The Iowa City Area Association of Realtors reported 378 sales in August, down from 418 in the same month a year ago. In 2019, there were 336 sales in the month of August. Loan activity also has slowed, compared with last year. Year over year across Iowa, loan purchase applications were down 8.2% in July, according to the Mortgage Bankers Association. Refinancings were down 76.5% in July, the latest statewide data available. Nationwide, purchase applications were down 17.8%.

Ryan Doehrmann, who oversees GreenState Credit Union’s mortgage department, said he’s seeing a slowdown, too. Year-to-date purchases are up, but he expects a drop in the fourth quarter because applications are down. Refinancings are significantly down, he said in an email. Mortgage rates began to rise in March, and Fannie Mae reported in early September that the 30-year fixed rate nationwide was at about 5.9%. A year ago, and even into the spring and early summer period for this year, the market was revved up, according to real estate and building officials across eastern Iowa. Sellers could often expect to see multiple offers on a property and contingencies, such as home inspections, were being waived. Now that this has tempered, as the market appears headed back toward a more normal position. Officials say they aren’t seeing as many multiple offers now and more buyers are asking for inspections prior to a sale. Mark Crowley, who owns National Property Inspections in the Quad-Cities, said that while buyers were waiving inspections in order to create the cleanest offer possible, conditions have changed somewhat. He didn’t describe it as an improvement but a “plateau.” Meanwhile, housing inventories are still low, industry officials say.

An inventory of more than six months is considered a buyer’s market, with a seller’s market considered an inventory of less than four months, Chris Beason, the president of Ruhl & Ruhl REALTORS in the Quad-Cities, said. On a three-month rolling average, he said, inventory in Scott County was at 1.5 months in August. “We are a long way from a normal balanced market. We still have a lot of demand relative to the supply that is out there,” he said. Mr. Beason added that while the number of sales is down, volume is still comparable with last year. Compared with 2019, he said, “We’re still doing really, really well.” The amount of inventory, particularly among lower priced properties, has been an issue for several years, according to industry officials. Still, there is a bullishness out there.  “We are still hoping and looking for a strong finish to the year,” said Drew Retz, vice president of operations for Jerry’s Homes in Cedar Rapids. Mr. Retz said it’s hard to tell whether the current slowdown is due to higher interest rates or because of the season. Typically, as school begins to start there is a dip in activity. However, he added it’s difficult to make predictions. “There is no rhyme or reason anymore as to what’s going on,” Mr. Retz said, adding years ago, if there was hiring at Rockwell, they could see it in the market. But now “we don’t have any leading indicators as to why sales are happening.” “Most builders I know and talk to are not overly concerned about the housing market, because they have their housing niche,” said Mr. Retz, who also serves as vice president of the Greater Cedar Rapids Housing and Building Association. Others, he said, have said they are going to sit on the sidelines. “Our sentiment is optimistic. We are predominantly a speculative builder,” he said. “We already have our eyes on the spring market.” In the Quad-Cities, Ms. Engels said Mel Foster also is building. “We continue to see the need for new construction,” she said. “We’re still developing land. We’re still developing lots, thinking that things are going to continue to move. For us, we feel that the market is going to stay steady.”