A Positive Outlook

13th-Annual Builder Developer Luncheon provides predictions.

Diligent Development and Peoples Company hosted their 13th-Annual Builder Developer Luncheon at Hy-Vee’s Ron Pearson Center in West Des Moines on Friday, February 28, with a record of nearly 400 in attendance.

Stephan D. Nygren, the keynote speaker, told the story of his accidental transition from the hospitality industry to land development. The founder of the Chattahoochee Hills Country Alliance, which brought together landowners, developers, and conservationists in the Atlanta, Georgia, area seeking to find a mutually satisfactory solution to growth and development, has been a leader in the concept of integrated development.

He has spent the past 20 years actively involved in researching and pursuing methods of development and community growth that not only serve the needs of the residents but honor the land and the generations that have come before and will come after.

One of the results of his activism is the innovative Serenbe.com community in Georgia, which Nygren developed to demonstrate the principles he advocates, concepts such as integrated agriculture, a range of housing options mixed with retail, the most-efficient infrastructure options, and services that nurture the community at all levels.

Nygren describes his philosophy as “radical common sense.” But he says it has been an uphill battle to get leaders in finance, development, regulation, and construction to support many of these concepts. Homeowners, however, have been quick to see the value of the lifestyle such development provides, and the award-winning organizations and services that have grown at Serenbe are leading the way in a growing movement to create more communities like it.

Nygren said he was pleased to see so many attendees representing the financial industry. He says transforming our approach to development and land use can only take place if the financial community is behind the effort. As home buyers demand these amenities, builders and developers will follow the market. But municipalities and lenders must get behind the movement if there is to be real change.

“When is the time that the development community starts asking what part we’ve played in the declining health of our nation?” Nygren asked. “By 2035, it’s anticipated that 50% of our GDP will be spent on health care needs. We’ve created environments that are caging our children and destroying our health, that are taking us away from nature and the very things that promote good health and community.”

He says the future of development is changing, returning to a community design that’s more reminiscent of centuries-old communities that encouraged members to be outdoors, to know their neighbors, to nurture the land on which they lived. He believes the future for this type of development is not only growing exponentially, it’s necessary.

Following Nygren’s description of a more holistic view of development, economist Dr. Frank Nothaft, the executive and chief economist for CoreLogic, took the stage. He offered another positive economic outlook.

Despite the unknown effect of events like the current coronavirus scare, Nothaft says key factors are keeping the economy strong, especially in the Midwest. Low unemployment, low mortgage rates, and a strong market of potential buyers combine to lead Nothaft to predict continued growth in home prices for the Des Moines area.

Des Moines’ unemployment rate of 2.5% is even lower than the national unemployment rate, which, at 3.6%, is the lowest the nation has seen in 50 years. Normally, Nothaft says, this might motivate the Federal Reserve to leave interest rates alone or even increase them, but other risks that have arisen lately (including international activity and impending elections) are more likely to encourage the Fed to lower rates slightly before the year is out.

Another effect of this strong economy has been growth in the home improvement industry. Nothaft says 2019 saw home equity wealth continue to rise. As a result, home improvement spending hit an all-time high. Despite the fact that the cost of building materials is rising faster than inflation, Nothaft predicted that remodeling investments would remain strong, like the rest of the home construction industry. Builders and developers can also expect to see greater demand and premium prices for homes in walkable communities, homes with greater energy efficiency, and homes in areas that offer a variety of community amenities like those advocated by Nygren.

Closing out the luncheon, Peoples Company’s Kalen Ludwig presented her annual perspective on the home construction and development situation in the Des Moines metro.

The statistics from 2019 offered a few surprises over the previous year as well as some predictable numbers. Ankeny and Waukee again led the way in new homes sold. Permits pulled, lots developed, and new construction available were all down slightly for the metro area as a whole. Ludwig says the slightly lower housing inventory is partially due to the strong market and lower rates, which have allowed homes to sell more quickly rather than sit on the market for longer periods.

Some surprising statistics included the number of townhome permits pulled, which has more than doubled in the past 10 years, and that the inventory level of higher-priced homes was actually lower than those of entry-level homes. Ludwig suggests these are the result of builders and developers responding to demands from the market over the past few years.

Of homes currently on the market, 38% are new construction, which is down 20% from a year ago. Ludwig says this came as a surprise as well. Three national companies entered the metro market in 2019, and many experts anticipated inventory levels to rise as a result.

All three speakers offered a positive outlook for the Des Moines construction market and the metro economy as a whole, even with some economists continuing to predict a recession in the nation’s future. Nothaft and Ludwig presented positive numbers, and Nygren offered a vision for growth that has the potential to nurture communities, businesses, and individuals, as well as bank accounts.