Business

Demand is high for homes in Cedar Rapids, but the market is tight, made worse by the derecho

Residential real estate inventory remains low, and the derecho has slowed some Iowans' efforts to sell

Real estate agents say damage from the Aug. 10 derecho has prevented some people from listing their houses. In addition,
Real estate agents say damage from the Aug. 10 derecho has prevented some people from listing their houses. In addition, a lack of construction supplies can increase the cost of those improvements. Above, Jeremiah Hawkins puts a ladder to get on the roof of a neighbor’s house as he and others work to remove and cut up a large tree off a home in southwest Cedar Rapids on Aug. 14. (Jim Slosiarek/The Gazette)
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Marian Flink tells buyers to “run” when there’s a home at the right price and location. It might not be there for long.

“If it’s priced right and in right condition when it comes on the market, it will be receiving multiple offers,” said Flink, a Realtor with Skogman Realty.

“It’s coming on the market and selling within days.”

The inventory of available houses has been extremely low in Eastern Iowa — lower than Flink remembers in her previous nearly three decades at Skogman — about eight months into the pandemic and three months after the Aug. 10 derecho.

It’s part of a larger national trend.

“Inventories are low almost everywhere in the country,” confirmed Arthur Cox, the director of the University of Northern Iowa’s Center for Real Estate Education.

But it’s been especially prevalent in the Corridor.

“We’ve had a low inventory for a while now,” said Tracy Adams, a Realtor in Iowa City and president of the Iowa City Area Association of Realtors.

Single-family home inventory in the Cedar Rapids area has been below two months for much of 2020. A balanced market is considered five to six months of inventory.

Through the first 10 months of 2020, the Cedar Rapids area has 491 listings on average.

When real estate saw a lull in 2010 and 2011, that average went down to 1,290. Flink said she has never seen it this low.

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While home inventory already was historically low before August, the derecho exacerbated the problem.

Many lenders, for example, will not allow a home to close with property damage, Flink said, especially when there’s roof damage.

She’s heard of contractors scheduling visits for bids two to three months out.

In other cases, contractors’ voice mailboxes have been full.

“Contractors are just very, very busy,” Flink said.

One of Flink’s buyers was moving out of an apartment and already gave notice to his landlord. But the sale couldn’t go through until October because of roof damage.

“Luckily the seller of the home was relocating, and he allowed the buyer to get in under interim occupancy,” Flink said. “Luckily we were able to keep my buyer from being homeless.”

In other cases, derecho damage has prevented people from initially listing their houses.

“That threw another wrinkle into our already bizarre 2020,” Flink said.

Meanwhile, Cox said the lack of construction supplies can increase the cost of those improvements.

The current lack of inventory is different from the 2008 flood. Flink had listings “some more damaged than others” 12 years ago, but that damage was consolidated to specific areas.

“The derecho was more widespread,” Flink said. “It affected everyone.”

‘Seller’s market’

The Iowa City Area Association of Realtors’ Adams said the impact of the derecho on the Iowa City market has been much more isolated. He wasn’t aware of any houses that were supposed to close but haven’t yet because of the storm.

“We had pockets of neighborhoods that were hit pretty bad,” Adams said. “We didn’t get affected like I know Cedar Rapids did.”

Iowa City still has a seller’s market, though, from factors other than the derecho.

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That’s especially the case for town houses and condos — a small proportion of the market — in the Iowa City area.

In September, the median sale price was up 21.4 percent from last year. Townhouse and condo inventory was at a more balanced 4.6 months, though.

In Cedar Rapids, the lack of inventory has raised prices in particular on higher-end houses between April and October.

Home sales between $300,000 and $400,000 are up 34 percent, and home sales above $400,000 are up 38 percent.

“The demand for larger homes is very strong,” Cox said. “People that are moving are moving to larger homes. They want more space.”

Along with people wanting more space to work from home, Cox said there’s been a multigenerational component for people concerned about elderly parents.

“They don’t want them to be in any sort of senior community, so they’re putting them in what we used to call way back when ‘mother-in-law’s apartments,’” Cox said.

“That might’ve been a separate apartment in the basement or an addition to the back of the house.”

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He said people living in large apartment complexes also may be seeking more space from their neighbors.

Rates and gloves

Interest rates have been historically low, motivating many to buy despite the limited inventory. The average Freddie Mac 30-year fixed-rate mortgage rate is 2.94 percent, as of Nov. 12.

Before coronavirus, that rate never dropped below 3 percent.

“I was chatting with a few buyers and sellers,” Adams said. “And they said, ‘We didn’t plan on buying or selling. I couldn’t just pass up on these amazing rates.’”

Adams said the low interest rates have been “a tremendous help” and “our saving grace” during the uncertainty around coronavirus, especially at the beginning of the pandemic.

“I didn’t know if we were all going to have to live in our parents’ basements and there wouldn’t be a market this year,” Adams said.

“We didn’t know what to expect.”

Real estate agents have adjusted, though, to selling houses during a pandemic. Adams keeps a box of latex gloves and shoe covers ready for home showings.

He’s glad he can show homes in person instead of relying on virtual tours. He hasn’t needed to buy new technology for virtual home showings.

Cox sees the virtual tour technology as a tool here to stay, though. Real estate agencies that figure out effectively how to show a home virtually will have a long-term advantage.

“Some firms are better at this than others in terms of using technology,” Cox said. “A number of them have gotten a lot better recently, so the virtual tours have gotten really good.”

Some real estate agents have been getting creative with how best to virtually show homes.

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For example, Haleigh McMurrin, a Realtor with Keller Williams in Cedar Rapids, used Facebook to give an 11-minute live tour of a home in Cedar Rapids.

As of Thursday afternoon, it had more than 400 views.

Looking ahead, Flink has her hopes up for a mild winter. That way, more homes can be repaired, put back on the market and then sold to buyers who’ve needed to run.

“There are sellers out there who want to make a move but just literally can’t,” Flink said.

Comments: (319) 398-8394; john.steppe@thegazette.com

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