Des Moines Home Values Appreciated During Covid-19
With the new record low home mortgage interest rates recently, homebuyers will be able to spend more on their home purchases in 2020. The ongoing question this spring from homeowners contemplating listing their homes is whether their homes are worth more this spring than a year ago. The short answer is: Yes—No—Yes—Yes. Let me explain.
The Difference Between Average Sale Price and Annual Appreciation of Home Values
Calculating home values is a complicated process. On one hand, if you simply look at supply and demand, you would say that with so few homes for sale and so many homebuyers out shopping, the price of homes should be skyrocketing. On the other hand, the real estate industry has a checks and balances process in place predominantly for the mortgage industry. I’m referring to homes being appraised as part of the majority of home purchases. (Even many buyers paying cash for their homes are paying to have the home appraised as part of the purchase).
Without an appraisal (and without real estate professionals producing a comparative market analysis) there would be no consistency in the pricing of homes. Mortgage lenders require the appraisal so that they know that they are not taking on excessive risk by loaning more money than what the home is worth.
Simply looking at the average sale price of homes in a specific period compared to the previous 6 to 12 months does not take into account whether larger homes are being sold, if a change in mortgage interest rates are allowing (or limiting) homebuyers purchase ability, or if there are other outside factors involved.
The best way to determine annual appreciation of values involves comparing recent sales of like size and like style homes within a general proximity to the same period a year ago. There are other factors to consider as well, such as whether the home is single or multi-family and if the home is new construction or resale.
With that said, let’s look at the Des Moines metro market and break it down by four categories.
Single Family Resale
Overall, sales of existing single-family homes comparing March 1st to May 31st of this year to 2019 are seeing just short of a 3% rise in home values. The two most popular style homes sold across the board in the metro are Two-Story and Ranch homes. Two-Story home values have appreciated 1.6% and Ranch homes by 4.2% The average sale price during that time period was $236,236.
Condo-Townhome Resale
This category is the only one that is not seeing an overall appreciation during the March to May time period. Home values are effectively flat year-over-year. The exception in this group is Two-Story properties. They actually are seeing a rise of almost 3% in value year over year. The average sale price of Condo-Townhome properties is $185,870.
Single Family New Construction
As we move into the new construction categories, appreciation of values is really more due to increase in material costs year over year. The average sale price of a new Two-Story this spring is $304,200 which translates to flat year-over-year appreciation. Ranch style new home values rose by 1.6% and overall New Single-Family home values rose by 2%.
Condo-Townhome New Construction
At an average price point above Single Family Resale homes, new Condo-Townhomes are selling this spring at an average price of $250,500. The appreciation of value overall in this grouping is 3.6% over last year.
Recap
A strong local real estate economy appears to have kept the Des Moines market from suffering the full effects of a global pandemic. Yes, there have been changes and adjustments to the way real estate is marketed and purchased in central Iowa, but all things considered, the Des Moines metro real estate market home values are up 2.4% overall moving into the summer months.
Weekly graphics related to our real estate market and how Covid-19 is affecting it can be found at http://simplydesmoinesstats.com.