DeWitt realtor Ryan Maher is under a lot of stress.
Across Eastern Iowa, realtors are scrambling to keep up with a feverish seller-friendly housing market. Houses are being scooped up as soon as they’re listed, and Maher said he’s writing offers for clients left and right.
In an average year, the DeWitt market tends to produce more buyers than it can sustain, Maher said, but normal times are “nothing like this.”
“I usually carry 15-20 listings at a time, and now I don’t have hardly any active,” he said. “When they go active they are gone in a day or two.”
The sentiments of Maquoketa-based realtor Chris Nissen are much the same. He’s worked in real estate since the early ’80s and has ridden market waves through the years.
“Demand is incredibly high and prices are escalating,” he said. “Back in the 1980s we had 32 listings and we couldn’t hardly sell anything. It’s exactly the opposite. Right now I have no listings and there’s not much that isn’t selling.”
Eastern Iowa influx
The largest contributing factor to the lack of available houses is high demand. Maher said he and other realtors have plenty of theories on why so many people are looking to invest in real estate in Eastern Iowa.
“I’ve worked with more out-of-town and out-of-state clients within the past 12 months,” he said. “It feels like there is a migration to the Midwest.”
Maher said some of his clients have looked to move to the area for employment, and others are parents who grew up in DeWitt and want to return to the area.
“They lived in Peoria for 15 years and their kids were young, and they wanted to come back to raise their kids where they were raised,” Maher explained.
“I see more, I think, that are trying to move here than before,” Nissen said. “I think there are people who are trying to get out of the big cities. They … like the small towns that have the amenities.”
Steve Nemmers, Realtor and broker-owner of Nemmers Realty, which has offices in both Bellevue and Maquoketa, said the pandemic-inspired shift to working from home has allowed people to move their home base more easily while staying employed.
“These small towns are getting more people looking at them due to a remote workforce,” Nemmers said. “People can work where they want and can find a school system that works for their children. The smaller towns are reaping that benefit more than the bigger towns.”
The type of real estate most in-demand right now, Nissen said, is ranch-style abodes and acreages at or under $200,000.
“That’s the sweet spot.”
Everything including the boat
Those who are looking for real estate can anticipate an incredibly competitive market, realtors agree.
Maher said it’s typical to have three or four listings each year that experience competitive offers from buyers. Right now, sellers are receiving four to six offers on each property.
“It’s a weird time because it’s a lot of work to go through all these offers and I have to weigh out plusses and minuses of each offer and sit with the seller and sort through that,” Maher said.
Before making an offer, buyers must act quickly. Some houses sell within 24 hours of being put on the market, Maher said. And most offers are above asking price.
“You have to be aggressive,” Nissen advised. “If a house fits your needs you really better go in with a strong offer.”
And as buyers are getting desperate, they are doing more to get the sellers’ attention.
“I’ve seen people write personal letters to sellers and explain their situation,” Nemmers said. “Basically, they are coming in with their greatest and highest and best offer right on the get-go. There are not a lot of negotiations because the offers are the highest they can offer (right away). That’s allowing sellers to have really good choices right up front.”
Demand is also driving some buyers to think outside the box.
“One added a fishing boat to their offer,” Maher said. “Another one put in football season tickets. People are getting very creative.”
On top of all that, there’s pressure on realtors to ensure the first offer is the right offer because oftentimes, buyers won’t get a second chance. Negotiations are rare.
“I have to almost take an educated guess on how many people are going to be interested (in a property),’ Maher said. “I’ve heard some pretty crazy stories of People going $30-$40k over asking price.”
‘Have your ducks in a row’
Sellers want convenience, and buyers are bending over backwards to make the closing process as easy as possible.
“(Sellers) are looking for the best price but the least amount of hassle or hurdles,” Maher said. “We’re seeing buyers waive inspections in addition to paying the full price for the house. Some people can’t stomach it, but that’s kind of the market we’re in.”
Pre-approval letters must be in hand before even requesting a showing for two reasons, realtors advise. One, because it makes the process of making an offer more streamlined, but also because the closing process is taking longer than what is typical, Maher said.
“The appraisers and underwriters are up to their necks in paperwork,” Maher said.
It’s also a good idea to work with a realtor instead of shopping on the internet, Maher said, because usually by the time a house is posted online, it already has multiple offers.
Don’t delay, Maher advised.
“You may be surprised with what you can afford,” he said. “Talk to the lender first and find out what you can afford and then take that pre-approval with you so when you’re looking at houses and one hits the market you like you don’t have to make those calls. Sometimes (you find a house) on a weekend and the bank is closed, and since there are houses that are selling within 24 hours, you might miss out on a house if you don’t have your ducks in a row.”
Another factor driving a volatile housing market is historically low mortgage interest rates.
On May 27, the average interest rate in the U.S. dropped below 3%, a number higher than a record low of 2.65% at the end of 2020 but still favorable to those seeking financing. Those numbers have held steady over the past year, but at the end of 2018, the average interest rate on a 30-year mortgage in the U.S. was pushing 5%, according to Freddie Mac, which was appointed by Congress in the ’70s to monitor and regulate money moved to mortgage lenders in support of homeownership and rental housing.
A handful of factors determine interest rates including inflation, housing availability, overall economic health, and the Federal Reserve’s monetary policies.
Nissen said low interest rates mean people whose finances may not typically allow it can purchase a house. And, sellers are more frequently getting asking price — or higher.
“If interest rates go up, things will change,” Nissen said. “Prices will go down.”
Nissen said demand and interest rates are not coequal, but they do determine who can partake in the housing market.
“When interest rates are low (people) can afford to pay a higher price.”
Realtors say buyers show no signs of slowing down, at least in the near future.
“My prediction is that it will go on for a little while because interest rates, even if they creep up, they are still good, Nemmers said. “There are a lot of buyers out there; they aren’t going away. And I don’t see the building costs coming down dramatically.”
“Our government owns so much debt, I don’t think they will be letting that interest rate go up too high,” Nissen opined.
Maher expects at least a full calendar year of similar market conditions.
“This is from my gut, but I think there are 12-18 months of potential buyers right now who are looking to move,” he said. “That is going to keep things going for a while until labor and lumber (prices) ever come down or level off.”