4th Quarter of 2024, Des Moines Metro Lot Analysis
I remember it like it was yesterday! 365 days ago, at this same time (January 27, 2024 – 10:38 AM to be exact) I was sitting here, in this exact same chair, writing this exact same “4th Quarter Lot Analysis”. I was multitasking by interpreting small pieces of developed-lot and new construction housing data while also planning Staci and my “staycation” (or “holistay” if you will). The staycation was fabulous. The newly-renovated Hotel Fort Des Moines was everything it was cracked up to be, and sure enough, just like I predicted, Oak Park is my new favorite restaurant!
But what a difference a year can make, am I right? Today, rather than multitask by conducting due diligence on the new, local hotspots that I want to check out, I’ve upgraded my vacation experience to planning our trip to The Commonwealth of The Bahamas while creating graphs to paint a picture of Des Moines’ current lot and new construction market! I’m confident that #BAHA25 will be a trip for the ages and a celebration of not only Staci’s 40th birthday, but a toast to a good year in real estate.
I’d call it a year in review, giving weight to the “good” and the “bad”. If last year’s Q4 projections are any indicator, it seems as though I am as good at predicting what is going to happen in local development activity as predicting the response that my palate will give at chic, new dining establishments. Let’s take a look at some of the numbers. I predicted that 2024, new construction permits for townhomes and single-family homes would beat both 2022 and 2023 new construction permits, and they did, ever so slightly…
The metro’s 2024 annual, new construction permits beat 2023’s new construction permits by a total of 20, and beat 2022’s permits by an ever-so-modest six permits. I want to give a prediction for 2025. Permits will outpace the previous three years, again, by a modest amount. Boring, I know.
Let me follow that up with a more exciting prediction regarding permits. From what I can tell, D.R. Horton, the nation’s largest builder, pulled just over 900 single-family and townhome permits in the metro in 2024. Contrary to the recent downgrade by Bank of America on D.R. Horton’s stock, with the growth and market share that they have gained since entering the Des Moines market ±six years ago, locally, I think they finally pass the golden goose number of 1,000-permits pulled in a single year, a feat that (don’t quote me on this) I don’t believe has ever been achieved by a single builder, in a single year, in this market. They just keep gaining market share. Six years ago, there were 16 local builders building over 30 houses a year. Today that number has shrunk to ten.
Both 4th Quarter and Annual year-over-year new construction sales for 2024 are very similar to that of 2023. I predict that 2025 will slightly beat both 2023 and 2024 due to consumer acceptance of higher prices and interest rates. Housing prices will continue to increase as material and labor prices increase. Additionally, there have been more townhome lots developed market-wide to provide for the construction of more townhomes, a great “affordable” option compared to the traditional single-family house.
Next, both 4th Quarter and Annual year-over-year lot sales for 2024 toppled that of 2023. I can’t help but wonder if this is due to the fact that the election is over, which one might assume that builders feel that the market is more predictable than that of the previous year and they need lots to build on to fulfill their predictions.
Contrary to most national headlines, I really do think 2024 was a good year. While chasing land deals, rather than having five competing offers on any piece of ground that came up for sale, it seemed like there was one or maybe two competing offers. Selfishly, this led to more deals getting put together on my end.
Outside of real estate, in November of 2024 I crossed the finish line of the full Ironman triathlon I had been training for the previous two-and-a-half years. The similarities of endurance sports and the real estate development world are exceptional. I have no real background in swimming, cycling, or running, but with enough time, this industry gives a person an unbeatable mindset, which is really what counts in endurance sports. On top of that, I’ve got a beautiful wife and four happy daughters, and fundamentally, that’s all I care about. 2024 was good to me.
I’ve said it before… this time of year, I like to do forecasting and goal-setting. In my Q3, 2024 article I mentioned the phrase “Survive until 2025”. A couple of weeks ago, on the social media app “X”, contrary to what I said, I saw that a famous commercial real estate broker tweeted “Survive 2025”.
While I’m slightly optimistic about our local new construction and land development market, the elephant in the room is the turnover of commercial loans over the next few years. Many of the loans were initially set in the low-3% range. As those loans reset, the interest rates will be well over double that. How that rate turnover will impact residential new construction or development in our market, I have no idea, but in addition to land acquisition in the coming years, I’ll be actively trying to raise money for acquisition of distressed assets in the commercial sector.
Who knows, I might even find myself continuing my education. One has to continue to “sharpen the axe” somehow! Regardless, I’m optimistic about all of it. Best of luck, and survive 2025!
Nathan Drew, Broker/Owner of Drew Realty, a lot and development ground brokerage, has been in the business of lot and land acquisition and disposition since 2008. He keeps an ongoing inventory of all vacant lots and land throughout the Des Moines Metropolitan Area, and puts together a quarterly email blast with an interpretation of the metro’s lot market. Email Nathan to join his email blast list at Nathan@DrewRealtyUSA.com and follow him on Twitter @DrewRealtyUSA, on Facebook @DrewRealty, and on Instagram DrewRealty.