The HARD Facts About our Soft
New Construction Market
As much as we in the Midwest like to think we are insulated from the tremendous swings in the market often experienced by the coasts and some larger markets, the truth is – this time we are in it too!
Developers and builders in our region continue to suffer through a drought when it comes to financing being available for anything from a single spec home to any kind of new development. Loans that are already on the books are being scrutinized very closely, with new appraisals and cash calls becoming very common among builders and developers of all sizes and capabilities. This has resulted in a situation where shrinking new home sales becomes a “self-fulfilling prophesy” as spec inventories dwindle and cannot be replaced and pre-sold opportunities are missed because of tightened lending practices for both consumers and builders. Add in the rapidly increasing mandates on the part of federal, state and local governments regarding everything from erosion control to attempting to mandate interior sprinkler systems, and it is easy to see why homebuilders of all sizes might be questioning their career choice.
In the region served by Ruhl&Ruhl Realtors, while the year-to-date sales of all new residences is down from the same period in’08, there are some signs of stability and a few bright spots. The three largest new construction markets within our region are the Quad Cities, the Iowa City area and Dubuque. Of the three, Dubuque has shown the most stability, as unit sales recorded are exactly equal to the same nine month period in ’08. Overall, Quad City market unit sales have dropped 23% in the same period and the Iowa City market is off by 26%.
Hardest hit in all of these markets is the sale of free-standing houses. The three major markets combined have suffered a 48% reduction in sales so far this year, as compared to the same period in ’08. But, sales of condos, townhomes and zero lot line residences are up 13% across these same markets. The net result is still a loss of 26% in unit sales for these three markets but a 56% increase in market share for condos, townhomes and zero lot line homes.
An additional underlying factor is the fact that a relatively high percentage of the condo sales increase is in a price range of $150K and less, meaning that fewer dollars were spent and there was less “ripple effect” in our various communities’ economies. Overall, the decrease in dollar volume sales is far greater that the drop in unit sales. A perfect example of this phenomenon is the North Liberty market. Through the first nine months of 2008, North Liberty had recorded 140 house sales and 143 condo sales – a very balanced market. For the same period this year, they have 55 house sales (-61%) and 183 condo sales (+28%) for a net loss of unit sales of 16%. North Liberty’s experience is very typical in our region.
As mentioned earlier, widespread unavailability of financing for builders and the changing sales statistics are having an impact on the new construction inventory in the region. At the end of 2008, free-standing houses represented 65% of all new construction sales and 46% of inventory in our region. At the end of the 3rd quarter in 2009, they represented 45.4% of year-to-date sales and 49% of new construction inventory. And, as condo, townhome and zero lot line homes sales have increased from 35%to 55% of sales, their inventory levels have fallen from 54% to 51% of the market, leaving an overall market inventory that is 14% smaller than at the end of ’08, but more balanced with current sales activity.
Unrelated to sales statistics, another continuing trend we have observed is the shrinking of new homes in terms of square footage, in exchange for more versatile and open floor plans with increased emphasis on upscale finishes and amenities. As “space for the sake of space” becomes less universally attractive and more expensive to maintain, “Thinking Big” refers more to the QUALITY of our ideas and designs – not the SIZE of our carbon footprint.
Not all the FACTS are negative. Despite what you read or hear – If you are thinking about buying or building a new home, NOW is probably the perfect time to move forward. We still have LOW interest rates, beautiful building sites, experienced and innovative builders and a wealth of emerging technological developments and new products available, making this a great time to move forward. And here is a KEY FACT to remember……………………………………..
IT WILL NEVER GET LESS EXPENSIVE TO BUILD YOUR DREAM THAN IT IS TODAY!!!
Ruhl&Ruhl REALTORS, the residential company, has 250 sales associates, 60 employees and ten residential offices serving eastern Iowa and western Illinois, along with its corporate office in Davenport, Iowa. The company annually sells approximately 3,400 homes in the areas it serves, including offices in Davenport, Bettendorf, Clinton, Dubuque, Bellevue, Muscatine, Coralville, DeWitt, and Maquoketa, Iowa and in Moline, Illinois. In addition to residential sales, Ruhl&Ruhl offers services in relocation, property management, new home sales, farm sales, senior services, and mortgage services through 1862 Mortgage. For more information on Ruhl&Ruhl, visit their website at www.RuhlHomes.com.