Expectations vs. Reality
Local builders and developers anticipate more of the same for 2025.
According to a November article in Builder Online, the five factors most likely to influence the housing market in the coming year are mortgage rates, land, labor, inventory, and politics. Local experts agree on most of those.
Central Iowa builders and developers tend to be an optimistic group, which is evident in our annual conversations about the year ahead. Even during periods of economic volatility, the local housing and construction market rarely suffers the same extreme highs and lows experienced in other areas of the country.
The same is true as we enter 2025. Looking back and looking ahead, the professionals interviewed on the following pages offer a realistic rather than a sunshine-and-rainbows outlook, one that reflects both market realities and good-natured Iowa optimism.
Maybe it’s the inherent Midwest mindset, which tends to avoid extreme views no matter the topic. Maybe it’s the wisdom gained from years in the industry. Either way, the theme for 2025 seems to be “expect the best, but don’t count your chickens just yet.”
Kevin Johnson
Accurate Development
Although Kevin Johnson says multiple factors created a slowdown in the market during 2024, Accurate Development ended the year better than anticipated. “Election years tend to be slower as people wait to see how that will affect things. But when rates started to come down in July, activity picked up, even before the election.”
Johnson says he’s optimistic about how the change in leadership will affect the economy.
“This President is typically more economically driven, which should benefit the economy. But fuel and energy prices will help keep the pace of growth from moving too fast.”
Although economic growth can bring a rise in sales activity, Johnson says too much too fast can be more a curse than a blessing. “Inflation might improve sale prices, but it actually hurts us in the long run. Higher prices make it harder to build because prices are higher on everything, and eventually those rising prices mean it takes longer to sell.”
However, other factors have the construction industry poised for a good year. With supply fairly even with demand and with labor remaining steady, Johnson doesn’t anticipate either of those to adversely affect the market in 2025. “The labor situation hasn’t changed, but we’ve all gotten used to it. It’s normal now, so everyone’s adjusted their processes to deal with it. And the balance between supply and demand is the best we’ve had in a long time.”
As far as interest rates, Johnson says that’s anybody’s guess. “Historically, rates in the mid-5s have been considered great. We’ve been spoiled with the extremely low rates of the past few years.”
Overall, though, Johnson is very optimistic going into 2025. “We started a fair number of projects the last quarter of 2024, more than usual for the end of the year. And we dug several more foundations in December. We never used to do that, so I’m very optimistic as we go into the new year.”
Accurate Development primarily develops projects in Urbandale, but has a new project in West Des Moines slated for 2025. “We’ve been building a second team, so we have the manpower to manage both these developments at the same time,” he says.
After a strangely paced 2024, Johnson says his expectations for 2025 are rooted firmly in reality rather than predictions. “Everyone predicted 2020 to tank when the shutdown started, and everyone expected 2024 to be slow until after the election. You can’t predict what’s going to happen, so we just keep doing what we do.”
Kevin Johnson, President
Accurate Development
AccurateDevelopment.com
Kalen Ludwig
Groundbreaker Homes & Diligent Development
“I don’t anticipate any dramatic changes in 2025,” says Kalen Ludwig of Groundbreaker Homes and Diligent Development. “I expect modest growth if rates stay in the same price range they’ve been in the past several months. The uncertainty from earlier in 2024 seems to be resolving, which is a good sign for the coming year.”
Having the elections in the past is another positive, Ludwig believes. “Getting the election behind us is good,” she says. “The uncertainty leading up to an election is often more of a factor than the election itself.”
In addition to hesitancy ahead of the election, Ludwig says the gradual decline of interest rates also kept the market subdued in 2024. “That combination led to a more measured pace of activity from buyers. Many opted to wait for clearer economic signals before making big financial decision.”
In addition to watching interest rates, she says another factor she’s keeping in mind is affordability. “Builders are sensitive to the issue of affordability, which has been a concern for several years. It keeps getting harder for first-time buyers to get into the market. And builders and developers need to keep working with cities to ensure that zoning and regulation makes it possible to build homes that meet that growing need.”
Following a slower start to home sales last year, Ludwig says custom-home sales ended strong, which bodes well for 2025. “The custom-home market has been the best we’ve seen in a while. Buyers who’d been on the sidelines seem to be ready to move forward. Rates have stabilized, and buyers have more understanding of market conditions.”
Potential buyers considering a new home are increasingly inclined to go with a custom build so they can choose their layout and finishes to meet their exact preferences, Ludwig says. Many of these buyers have significant equity from their previous homes and are less sensitive to interest rate fluctuations.
“People with the budget for that price point seem to feel that if they’re going to be spending a little more for a new home, they’d rather have exactly what they want,” she says. “Our Middlebrook Agrihood development is evidence of that. Its unique amenities set it apart from many other options, so activity there has been strong.”
Ludwig says Groundbreaker Homes will be strategic about its spec projects in 2025. However, she’s looking forward to a healthy sales year.
“Every year, something that we don’t anticipate affects the market. It’s something of a balancing act. You can’t prepare for the unexpected, so you just have to be sensitive to the changes and ready to pivot as needed,” she says.
Kalen Ludwig, Partner/Director of Marketing & Sales
Ground Breaker Homes & Diligent Development
GroundBreakerHomes.com & DiligentDevelopment.com
Jenna Kimberley
Kimberley Development
Kimberley Development’s Jenna Kimberley says a realistic look forward at 2025 has to acknowledge some ongoing challenges. “Affordability and interest rates remain factors no matter what happens with election changes.”
Facing those challenges and other long-term issues, such as labor shortages and price volatility, will require continued vigilance from builders and developers. “In that respect, 2025 will be like any other year. It’s always a matter of assessing those outside factors, knowing our own market and expertise, and making business decisions accordingly,” she says.
The past two years have remained fairly steady and even saw some growth as 2024 ended. Kimberley says, “Closings were actually a bit better than expected by the end of the year, thanks in part to some stale inventory that sold. Interest rates didn’t drop as quickly as we’d hoped. But build times improved, and contractors don’t seem to be as overbooked as they have been for a number of years.”
Although Kimberley would like to see rates drop a bit more, she says other economic factors, some of which could be exacerbated by proposed new economic policies, are likely to have effects longer-term. “I know some people are hopeful that the change in President will mean a more favorable economic climate. However, much of what happens in the market is the result of multiple factors and years of policy, and things don’t change that quickly.”
Kimberley echoes what other financial experts have said in recent weeks, especially in relation to proposed tariffs. “Supply issues have finally started to somewhat stabilize. There’s some concern that continued price volatility, along with proposed tariffs and immigration policy changes, will actually create an even more challenging market long-term.”
In light of those factors, Kimberley Development continues its efforts to address affordability and home ownership. The company will break ground on another row-house project of townhomes and remains cautious about overbuilding. “I’m optimistic about housing and lot demand in 2025,” she says. “Rates are likely to come down a bit more, and that’s going to be good for both buyers and sellers.”
Because single-family homes will always be the strongest segment of the local market, finding ways to meet that demand affordably continues to be a priority. “Working with communities to ensure favorable zoning laws is essential if we’re going to be able to accomplish that. It is possible to create attractive, affordable neighborhoods if builders and community leaders work together.”
Jenna Kimberley, Chief Executive Officer
Kimberley Development Corporation
KimDev.com
Chris Pickard
Sage Homes
Like Builder Online magazine says, Sage Homes’ Chris Pickard agrees that the factors that affected the housing market most in 2024 are likely to remain significant factors in 2025: mortgage rates, land, labor, inventory, and politics.
“There’s always apprehension before an election, and that may have led to misplaced expectations,” he says. “The first quarter of 2025 is likely to be a little rocky as people react to the new administration and some of the policies and tariffs that have been proposed.”
The National Association of Home Builders predicts choppy interest rate activity for most of 2025, so Pickard expects 2025 to look a lot like 2024. “We had a strong first quarter followed by a couple of softer months last year, which were offset by a strong October and fourth quarter. Right now, 2025 is looking to be a little back and forth just like 2024.”
That unpredictability is probably the most predictable feature of the housing market, but in so many ways, it’s more of the same. “Two or three years ago, a market like this might have stymied us. But because we tend to be land light and only carry about 70% of our lots, we’ve been able to adjust without being overburdened by land debt,” says Pickard.
Sage Homes, like many local builders, has projects going all over the metro, which Pickard says also helps the company adapt in unpredictable times.
“We don’t anticipate lot supply to be an issue in 2025. And we’re actually projecting we’ll close on the same or maybe a handful more units than we completed last year. Labor is still an issue. If things heat up too quickly, contractors will have to pick and choose projects. So balancing our own projects is going to be important if we don’t want cycle times to lag further.”
Ultimately, Pickard is realistically optimistic about 2025. “I’m not overly optimistic, but the adjustments we made over the past few years will serve us well in 2025. It’s likely to be a good year for the larger builders who can be a little more reserved in their approach. We just need to stay the course, do our best work, and continue to improve our processes.”
Chris Pickard, Owner
Sage Homes
SageHomesIowa.com
As these professionals say, despite some unpredictable ups and downs during the last few years, expectations and reality don’t have to conflict. Expecting the best and preparing for whatever tomorrow brings might be the most practical approach to any new year.