Iowa housing market brightening a bit

Sarah Gorkow, age 20, just bought her first home in northwest Cedar Rapids.

She worked two jobs while earning a degree at Kirkwood Community College. She found a full-time job. She lived with her parents and saved enough for a healthy down payment.

The home-buying experience, she said, was “very overwhelming and nearly impossible if you don't save like I did.”

But she was determined, wanting to build equity in a starter home rather than paying “very expensive” rent.

In buying her home — for $179,500 — Gorkow achieved a goal that’s out of reach for a number of Iowans, with housing sale prices rising, starter home inventories being low, and mortgage interest rates only now beginning to drop.

More homes for sale

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Les Sulgrove, housing analyst for the Iowa Association of Realtors, said “starter home stock is very limited” in Iowa.

“There are practically none under $100,000, and very few under $200,000,” he said.

The good news is that more homes are coming on the market in Iowa, and interest rates are coming down, with further drops expected after the Fed cut its benchmark interest rate by 0.5 percentage points this month, the first reduction in four years.

Iowa in August had 8,240 single-family homes and 1,516 condos for sale, an increase of 500 homes from July. The single-family home total is more than 30 percent higher that the total in August 2023, according to the realtor association’s data. The condo total is up 25 percent.

Those totals do not include homes for sale by owner.

The average interest rate for a 30-year fixed mortgage was 6.2 percent in Iowa in August, compared to 7.2 percent last August.

Statewide, the average time on the market for homes is about 40 days.

In the Cedar Rapids/Marion metro area, 1,143 homes were for sale in July — 818 single-family homes and 325 condos. The Iowa City Realtors Association listed 954 residences for sale at the end of August.

Selling prices

The median price of a single-family home in Iowa this year has increased $15,000 in the past year.

Through August, the median cost of a single-family home in Iowa was $242,750, down from July’s $249,500, according to Iowa Association of Realtors data.

In the Cedar Rapids metro area, the median cost of a single-family home was $250,000 at the end of July.

In the Iowa City area, the median cost of a single-family home in July was $300,000, but jumped to $310,000 at the end of August.

With "the high prices of homes, insurance rates and taxes, people are getting hit from all angles," observed Annie Kaestner of Skogman Realty, president of the Cedar Rapids Area Association of Realtors.

And despite interest rates being higher than they were during the height of the COVID pandemic, Sulgrove, of the state Realtors association, said “there is still a lot of demand to buy.“

"We're in good shape except for the affordable housing (shortage),“ he added, though ”interest rates and the economy are keeping a few homebuyers from being able to pull the trigger.“

Finding a starter

Gorkow said she considered renting an apartment rather than buying a starter home, but found rents of $1,000 or more per month, even for units that weren't that nice.

Also, she said, renting gave her no return on her investment.

She spent three months looking for a starter home, noting few homes were for sale in her price range before finding a three-bedroom, two-bath home, built in 1962. The asking price was $179,500, which she paid.

Also, she said, getting a home loan as a young, first-time buyer was difficult.

"That was a little tricky because of my age,“ she said. ”I shopped around a lot."

She finally found a 30-year fixed rate mortgage loan with a 6.5 percent interest rate. Having a sizable down payment, she said, was a large factor in her getting the loan.

After moving in, Gorkow said, "I got my first taste of home ownership right away." A sewer backed up, and a washer and dryer, which she was told worked, did not. And the kitchen needed a new floor. All at her expense.

Market factors

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Kaestner, president of the Cedar Rapids Area Association of Realtors, said starter homes sell quickly when they come on the market.

Only a couple are available at $150,000, meaning homes in the $170,000 to $200,000 range might also be considered starter homes, Kaestner said.

The high demand for those homes, she said, is coming from newcomers to the area, growing families, people either downsizing or upsizing and the lower inventory of homes being sold.

“Prices are softening a little bit right now, which is typical” for this time of year, Kaestner said, adding she expects more homes to be on the market by the holidays.

“I don't see prices crashing, but I don't see them skyrocketing either,” she said.

It’s too early to tell how the spring housing market will be, she said, adding some of that may depend on the outcome of the November election.

"The American dream is a little bit tougher right now,“ Kaestner said. ”But I still feel it is within reach," though it may take longer than in the past.