2012 brought modest growth to new home sales results in the Cedar Rapids area markets. The Multiple Listing Service reported an increase in overall new home unit sales of 3% over the totals for 2011, as shown on an attached table. House sales dropped 2% while condo sales rose 13% for the year. Broken down by market segment; the Marion/Hiawatha/Robbins areas saw an overall increase of 17.9%, while the 4 Quadrants segment recorded 9.3% fewer unit sales than last year.
However, the real story here is not sales, but the sinking inventory level in this market. As an additional attached table illustrates, local new home starts in 2012 were down 4%, compared to 2011. This follows on the heels of a 16% decrease in new house starts from 2010 to 2011. Current new home overall unit inventory is down 31% at the start of 2013, with 49% fewer available new houses. New condo inventory is down 16%, compared to a year ago. As shown on the table, the average inventory decrease across the region was 14%.
Several key factors contributing to the continued reduction of inventory levels across the region are:
The natural result of reduced availability is the purchase of existing homes by buyers who would have preferred new construction. The resultant lowered sales figures will do little to bolster the confidence of lenders, etc. to loosen the grip on money for builders and developers. Lenders, developers and builders tend to gauge demand on recent sales figures and may forget to include lost opportunities in the equation when evaluating developer and builder loan needs. In this instance, reduced sales levels can become a “self-fulfilling prophecy”.
The Multiple Listing Service reported average sales price increases of about 5% in 2012, with the average new house selling for just over $260,000 and new condos averaging slightly over $160,000.
What to expect in 2013? With interest rates remaining historically low and consumer confidence rebounding, we look for continued growth in new home sales as buyers become increasingly comfortable committing to a new home purchase. However, material and labor costs give no indication of decreasing and rising regulatory fees and expenses are also pushing up the cost of delivering finished lots and finished homes to the marketplace. As pent-up demand for new housing emerges, look for new industry regulations to accompany it. Pending measures by regulatory agencies that have been delayed or temporarily “shelved”, in order to prevent further damage to the ailing building industry, will likely move closer to enactment once it appears that there is a return to a sense of “normalcy”. Add these factors to rising land costs and it is easy to understand why we anticipate rising new home prices later this year.
Following are figures illustrating how the Cedar Rapids market statistics compared to other sales results around the region:
Regional Overall Unit Sales increased by an average of 19%.
Dubuque Area: +69%
Iowa City Area: +26%
Quad Cities Area: +17%
Cedar Rapids Area: + 3%
REGIONALLY: Ruhl&Ruhl Realtors recorded increases of 38% in unit sales and 47% in volume.
Every market has distinct characteristics, and the Cedar Rapids area is no different. While regionally, ranch style homes accounted for 74% of all new home sales, in the Cedar Rapids market, ranches accounted for 95% of all 2012 new house sales and 97% of all available new home units at the beginning of 2013. Some additional comparisons follow:
New House Sales by Price Range:
Regionally: Cedar Rapids Area:
Below $300,000 = 60% 72.8%
$300,000-$400,000= 27% 22.5%
Above $400,000 = 13% 4.7%
Existing Home Sales vs. New Home Sales:
Regionally: Cedar Rapids Area:
Houses = 9.5 to 1 Houses = 8.9 to 1
Condos = 3.0 to 1 Condos = 2.5 to 1
A family-owned company since 1862, Ruhl&Ruhl Realtors has grown to nearly 290 sales associates, 58 employees and eleven offices, selling more than 5,000 homes in eastern Iowa, western Illinois and southwestern Wisconsin. The company has residential sales offices in Bettendorf, Burlington, Cedar Rapids, Clinton, Davenport, DeWitt, Dubuque, Iowa City, Maquoketa and Muscatine, Iowa; and in Moline, Illinois. In addition to residential sales, the company offers services in relocation, property management, real estate investments, new home sales, land development, farm and land sales, senior services, home vendor services, insurance services through the Nelson Brothers Agency and mortgage services through Shelter Mortgage. For more information on Ruhl&Ruhl Realtors, visit their website at www.RuhlHomes.com.
- There are more qualified buyers in the marketplace, but fewer new spec homes available.
- Tightened lending restrictions on both builders and developers have continued to limit supply.
- Selling times for spec homes across the region decreased in 2012, reducing their exposure.