Will Cedar Rapids see more home construction?

The inventory of for-sale homes has fallen, pushing up prices

Craig Cardis of CEC Construction cuts lumber as he and his crew frame a new home on Prairie Rose Drive Southwest in Cedar Rapids on Tuesday, Jan. 23, 2018. Cardis says he’s had steady work as a subcontractor for Jerry’s Homes and others for the past four years. (Rebecca F. Miller/The Gazette)
Craig Cardis of CEC Construction cuts lumber as he and his crew frame a new home on Prairie Rose Drive Southwest in Cedar Rapids on Tuesday, Jan. 23, 2018. Cardis says he’s had steady work as a subcontractor for Jerry’s Homes and others for the past four years. (Rebecca F. Miller/The Gazette)

CEDAR RAPIDS — As Prairie Rose Drive winds around its curve in southwest Cedar Rapids, an established neighborhood lined with finished homes opens up into a construction site.

Working in windy, 20-degree weather, Craig Cardis and his crew build the frame around what will soon be a new ranch-style home in the Hoover Meadows development. Their work can take less than two weeks, Cardis said, and business has been steady.

“The last few years, it’s been nonstop,” Cardis, with CEC Construction, said.

Max Freund / The Gazette

Nearby lots include two houses that already have roofs and one with just a foundation. One already is sold, even though it’s not even finished.

In that regard, the Prairie Rose development is representative of the housing market in Cedar Rapids. All last year, homes in the metro sold for more money at a faster pace as a combination of pent-up demand and a lack of inventory pushed up prices.

That small amount of inventory, though, has persisted and followed a national trend. On average last year, only 707 homes were up for sale each month in the metro area, down 42 percent from 1,211 five years ago. Meanwhile, homes sold on average in 29 less days and for 10 percent more in 2017 than 2013.

“If you have a really nice property that is marketed well, that is clean, that is in a price range or a location that people want, it’s going to fly off the shelves,” said Mike Schulte, a Realtor with Coldwell Banker Hedges Realty.

While crews such as Cardis’s have work building new homes, there is no clear sign the metro area is poised to see single-family home construction grow significantly and alleviate the scarcity of for-sale homes.

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“That’s the concern everybody has going forward is just how are we going to be able to have enough (inventory) for the demand,” said Dan Seda, a Realtor with Iowa Realty.

Permit data provided by Cedar Rapids, Hiawatha, Marion and Robins shows that construction of new homes in the metro has been relatively steady the past five years.

Altogether, the four cities reported 425 permits for single-family homes were filed in 2017. That’s up 12 from 2016, but down each year from 2013 through 2015. Builders cautioned, however, that those earlier years may include permits for homes constructed as part of flood recovery efforts and don’t represent the area’s normal market.

The permit numbers do not include condo construction.

Builders said they expect that to continue, barring any sharp increases in employment or population.

“That obviously hurts a little bit. When the population isn’t growing, that just means less people are here to buy new homes,” said Hunter Skogman, operations manager for Skogman Homes.

Between 2010 and 2016, the Cedar Rapids metro area saw a 3.8 percent and 5 percent increase in population and nonfarm jobs, respectively. By comparison, the Des Moines area saw 11.4 percent and 26 percent growth.

“The demand in our market isn’t anything like it is in other areas,” said Drew Retz, vice president of Jerry’s Homes in Cedar Rapids, which is developing the Hoover Meadows neighborhood.

Randy Dostal, owner of Thomas Dostal Developers in Cedar Rapids, pointed to smaller Iowa cities that have rivaled or overtaken Cedar Rapids for new home construction. For example, Ankeny, a fast-growing suburb of the Des Moines area, has less than half the population of Cedar Rapids but had more than double the amount of single-family home permits last year than the city. It also had more of those permits — 567 — than all of the Cedar Rapids metro area combined.

“That tells me right away you’ve got a problem. There has been no significant development of significant paying jobs in Cedar Rapids,” Dostal said.

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Retz said city leaders should work to diversify the city’s employment such as Des Moines has done in attracting finance and insurance jobs. He and Skogman also mentioned that concern over the future of Rockwell Collins, whether reality or perception, may tamp down demand for home construction.

“Over the years, a ton of their engineers have bought houses from us. They’re great customers. I think it’d be hard not to be a little worried about it,” Skogman said.

Bill Micheel, assistant director of community development and planning for Cedar Rapids, said the city has taken efforts to bolster development. They include steps to streamline the development process and update Cedar Rapids’ zoning codes to “form-based zoning.”

Form-based zoning, Micheel explained, would focus less on strict, compartmentalization of developments — setting aside spots just for residential or just for commercial — and more on how buildings fit with their surroundings and in their neighborhoods. This, he said, would help developers construct buildings with mixed purposes that normally would not be permitted in residential neighborhoods. In turn, the city hopes that helps attract residents to neighborhoods with a better quality of life.

“What the zoning code will do is make it easier to include some different housing types and some neighborhood commercial in close proximity or even within traditional single-family development,” Micheel said.

HOME SALES STRONG

Despite concerns about the low number of homes on the market, the builders did not say they were worried about their business. Construction might not be surging, but it’s not dropping drastically, either.

Skogman said his company has a positive view of 2018. They already plan to construct 100 new properties this year.

Max Freund / The Gazette

“For us, we’re actually putting in more inventory homes this year than years past. We think the market’s going to remain strong in 2018,” Skogman said.

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Realtors have also said the metro’s housing market is strong. The number of homes sold in 2017 came to 3,309, according to the Cedar Rapids Area Association of Realtors. While that’s down eight homes from 2016, it’s up 386 from 2013. Average and median home prices are up and days on the market is down from previous years.

Milder winters in 2016 and 2017 helped boost the market as home sales got started early, Schulte of Coldwell Banker said. That could continue this year.

“What’s crazy is even with the up and down winter season we’ve had so far, there has still been a lot of competition,” he said.

Lower inventory numbers and more educated buyers are also helping “people pull the trigger on buying houses faster,” Schulte said.

Unlike previous years when a prospective buyer first has gone to an open house, then set up a showing or two, wannabe homeowners can research properties online ahead of time.

Iowa Realty’s Seda said homes under $200,000 are selling particularly fast.

“They’re all doing well, but the below $200,000 is certainly going fast,” he said.

The trends in Cedar Rapids follow a national one. Last year saw the highest number of home sales since 2006 across the nation, even as inventory levels hit their lowest level on record, Cheryl Young, senior economist for real estate website Trulia, said in a blog post Wednesday.

Young wrote that “demand for homes appears undaunted” even with the stock of homes for sale in decline.

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“Low unemployment, steady job growth and low mortgage rates led existing home sales to account for 27.2 percent of inventory sold, well over the pre-recession peak,” she wrote.

ANNUAL HOME SALES

Here is how homes in Cedar Rapids, Marion, Hiawatha and Robins have sold the past five years.

2013 — 2,923 sold; $162,565 average; median not available; 83 average days on market; 1,211 average monthly inventory.

2014 — 2,918 sold; $160,300 average; $138,526 median; 81 average days on market; 1,158 average monthly inventory.

2015 — 3,175 sold; $167,240 average; $142,000 median; 72 average days on market; 1,059 average monthly inventory.

2016 — 3,317 sold; $170,893 average; $143,000 median; 64 average days on market; 864 average monthly inventory.

2017 — 3,309 sold; $178,962 average; $150,000 median; 54 average days on market; 707 average monthly inventory.

Source: Cedar Rapids Area Association of Realtors

HOME CONSTRUCTION

Single-family building permits filed in Cedar Rapids, Marion, Hiawatha and Robins

2013 — 464

2014 — 469

2015 — 475

2016 — 413

2017 — 425

Source: City building departments

l Comments: (319) 398-8366; matthew.patane@thegazette.com

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