Long-Term Forecast
Stat Guy Les Sulgrove gives an overview of the metro real estate market.
This past week the Des Moines Area Association of REALTORS® Young Professionals Network (YPN) hosted its annual State of the Market Brunch and Learn event, offering an overview of the metro real estate market. Keynote speaker Les Sulgrove, Simply Des Moines Real Estate’s Stat Guy, shared more than just statistics. He added a dose of humor and a few predictions for the year ahead.
Beginning with a look back at his predictions from last year’s event, Sulgrove said, “Like most weathermen, I’m wrong more often than I’m right.”
Although he only hit two of the seven categories he predicted, Sulgrove’s understanding of local real estate statistics more than made up for his ability to foresee the future. And his observations about trends to watch can be a powerful tool for real estate professionals.
Watch the real estate cycle
“The real estate market tends to follow about a 10-year cycle with expansions and peaks, slowdowns and recoveries in a continuous cycle. COVID disrupted that cycle, so we’re about 14 years into our 10-year cycle right now,” Sulgrove says.
Although the length of the cycle may be an anomaly, Sulgrove says the market is functioning more or less as it always has. “Different segments of the market can be in different phases of the cycle at any given time, and that’s certainly been the case since COVID. But overall, no surprise to anyone, we’re experiencing an extended period of slowdown and recovery.”
Although Sulgrove predicted inventory might hit 4,000 units in 2023, the actual volume barely surpassed 3,000 units.
“After the incredible pace of 2021 and 2022, it’s easy to look at the sales volume and only see it dropping, but we’re still within the normal range of the past 10 years,” he says. “And even though the total sales units number is down from 2020, the sales dollars are almost the same. So the increase in sales price has kept that dollar amount at 2020 levels.”
Watch Listing Prices
As those peak sales months in 2021 drove prices up and then mortgage rates increased, more buyers stepped away from the market. Taking a wait-and-see attitude became the prevalent view. But as sales volume dropped, listing prices didn’t follow as quickly.
Sulgrove says that attention to listing price was a key factor in another statistic he follows. “Days on market shows a correlation to listing price. If the listing is priced right from the beginning, it sells much faster. So it’s important to pay attention to all the factors that play into that listing price.”
To a degree, days on the market can also be a predictor of sales price. “It’s common sense, but the statistics prove that the longer a property stays on the market, the farther the sale price gets from the listing price,” he says. “That just reinforces how important it is to get that listing price right from the beginning.”
Mortgage rates, too, although they may not affect the listing price, are perceived by buyers to play a major role in purchase decisions. Sulgrove says that despite the fact that mortgage rates are actually well within the average for the past 40 years, they remain above 2022 rates, and that’s keeping some buyers on the sidelines.
Watch the Trends
Everyone, including potential home buyers, is monitoring interest rate trends and anticipating lower rates during the peak summer and fall months. Sulgrove says this is just one trend to watch. “The home-buying season drops significantly during the final months of the year, especially from Thanksgiving and right into the end of January. So getting all those other factors in line—listing price, financing—in order to sell within that peak window is important.”
He says another interesting trend is buyer home-style preference. “For single-family homes, ranch-style homes dominate, but the opposite is true for condos and townhomes. Buyers prefer two-story homes in this category.”
This is a trend he says home builders might want to watch, but it should also be a factor in determining listing price.
Tracking numerous metro-area statistics gives Sulgrove a detailed perspective on the local market. And his YouTube segments and market analysis are a powerful tool for anyone connected to the Des Moines housing market.
Based on his observation of 2023 stats and trends over the past 20-plus years, Sulgrove concluded his presentation with some predictions for 2024. “I played it safe with the inventory and pending sales predictions,” he jokes. “After last year’s failed predictions, I needed a couple of guaranteed wins.”
In all seriousness, Sulgrove anticipates noticeable improvement in 2024 statistics. “We may not hit 2022 numbers for closed sales, but I expect the market to surpass 2023 numbers. And the buyer pool is likely to shift, too. There are a lot of buyers on the sideline who just want a reason to jump back into the market.”
Like most other industry experts, Sulgrove expects interest rates to continue their slow decline, settling in the 5½% to 6% range, which is a comfortable rate for a strong housing market.
“But,” he says, “this is an election year, so everything I’ve said could go out the window with that one event.”
Only time—and next year’s YPN Brunch and Learn presentation—will tell.
Learn More. To view Sulgrove’s slide presentation from the YPN event or any of his weekly YouTube videos, visit DesMoinesMarketValues.com.