Navigating The Maze

Annual Builder Developer Luncheon offers a path through the current economy.

Last month Diligent Development hosted its annual Builder Developer Luncheon at the West Des Moines Sheraton. Several speakers addressed a sold-out crowd of local industry professionals, offering guidance on navigating the current economic maze.

Elliot Eisenberg, Chief Economist at GraphsandLaughs, opened the event with a broad view of Taxes, Tariffs, and Treasuries, including some predictions about the 2025 economy and the local market. And the afternoon concluded with a chat hosted by Diligent Development’s Tim Portzen with Steve Bruere of Peoples Company and Diligent Development and Jim MacRae of Design Workshop.

“Residential and nonresidential construction along with automotive and other durable goods are the main reasons we’ve avoided a recession,” Eisenberg said. “All of those categories are doing well, and that’s 12% of GDP (Gross Domestic Product).”

On the other hand, Eisenberg says, there are a number of factors such as taxes, tariffs, and the Treasury that could become caution signs as the year progresses. “Economic uncertainty is off the charts. In just a few weeks after taking office, President Trump’s policies have spiked uncertainty beyond COVID levels. Bad policy decisions have been exacerbated by indecision, and that makes investors nervous.”

Proposed tax cuts, which Eisenberg says are in fact extensions of expiring tax cuts put in place during the President’s first term in office, have the government looking for ways to cut spending to compensate for the cuts.

Tariffs, which continue to be a threat, may serve as a legitimate defensive move politically, but they “haven’t and don’t improve the trade deficit,” said Eisenberg. “What they do accomplish is to deindustrialize companies. They remove competition. So prices rise and quality drops, and other countries pay us back by charging tariffs on other things.”

As far as the Treasury is concerned, Eisenberg advised his audience to keep an eye on the unemployment rate. “If the unemployment rate remains flat, like it has been for the past six months, interest rates aren’t likely to drop,” he said. “Inflation has remained fairly flat, too. Companies aren’t firing, but they aren’t hiring either. And until one of those changes, the Fed won’t make a move on interest rates.”

Ultimately, Eisenberg was marginally optimistic. “I think 2025 will be a decent year. The Fed will cut rates slightly, job growth will slow a bit more, and inflation will continue decelerating.”

According to Kalen Ludwig, Diligent Development & Ground Breaker Homes, the local market, like the economy, has been something of an uncertain maze to be navigated. The entire Des Moines metro has just a three-month supply of inventory, about half of what is necessary for a balanced market.

“Resale inventory has climbed significantly,” Ludwig said. “So far, new construction sales have remained stable. But it’s possible the increase in resale inventory could have an impact on the 2025 market.”

Looking back at 2024, Ludwig said a couple of statistics stood out. “New construction is taking longer to sell than existing homes, a factor that is driven by cost. Construction prices and sale prices are finally leveling. And resale prices have also risen steadily at a rate of 4 to 5% annually.”

The other standout statistic is the breakdown of builders making up the local market. “The top eight builders are responsible for 78% of the market and one national builder for more than 25% on its own,” Ludwig said. “The custom market, though, is dominated by local builders with their reputation for expertise and craftsmanship.”

A closer look at the 17 communities making up the Des Moines metro showed few trend changes over the past year. Ankeny and Waukee remained at the top in both new construction and total homes sold. Altoona saw a jump in permits pulled compared to 2023, and Norwalk, too, showed standout growth. (For a look at the entire report, visit Ludwig’s website at NewConstructionSpecialistDSM.com.)

“The 2024 numbers indicate that the local market is balanced overall,” Ludwig concluded. “But developers are being cautious, which could result in a tightening supply of lots as 2025 progresses.”

After Ludwig’s presentation, MacRae and Bruere took the stage with Portzen for a chat highlighting the path from concept to reality for Middlebrook, Iowa’s first agrihood development.

Bruere shared a glimpse of the project’s timeline and said, “One of the most exciting parts of this project has been bringing builders, bankers, and commercial partners along on a pioneering journey. It’s not like anything else any of us have done before, so a big part of this process has been sharing that vision for what Middlebrook can be.”

MacRae said, “The Des Moines metro is a rapidly growing region. One of the things we had to do as we had our early conversations was marry growth, which is a good thing, with the desire to preserve the culture of a small, agricultural community. It’s about place-making, and that’s what Middlebrook has become.”

Bruere’s original vision for the development was “to create a destination where people want to come, where people want to live. We had an ambitious plan, and we really had to start with branding Middlebrook before we even started building.”

With only a handful of agrihoods across the country to view as models or inspiration, and creating this unique development in a community that didn’t even have written codes for such a project, meant the vision could easily have failed.

“Many of those factors that might have seemed negative turned out to be positives,” MacRae said. “Our experience at Design Workshop and Steve’s relationships with the community enabled us to work alongside the community of Cumming to design something that complements what Cumming already was. It wasn’t just a design; it was about curating the experience of Middlebrook.”

Today, less than 10 years after the first land was acquired, Middlebrook is thriving. Fridays at the Farm became a destination event before the first homes were complete. The Middlebrook Mercantile hosts packed crowds for live music and drinks as well as private events. Iowa Distilling is housed in a century-old building across the road from the farm. And Wilson’s Orchard and Ciderhouse anchor the open space along the western edge of the development.

“It’s pretty amazing to look around and see all the things we envisioned have become a reality,” Bruere said.
As Ludwig concluded in her presentation, “We may not see every turn ahead, but we know the only way to navigate the maze is to move forward.”