The Midwest home building market is alive and well. Lumber prices are the best in years, and products and amenities are more affordable and available. Manufacturers offer reduced prices to spark interest. And tax credits, record low financing charges, and lower labor costs entice buyers to make a move.
We recently spoke with five local builders about the home building market in central Iowa.
“Overall, I think the Midwest is more practical than either coast, so we’re more sensible in our expectations,” says Jim Emery, president and owner of Quail Valley Homes. “We didn’t have houses doubling in value to begin with, like they did on the coasts. So we’ve had much smaller ups and downs.”
As the stock market declined, many people lost jobs and could no longer afford payments on the larger, fancier homes, Emery says. “So there were a lot of higher-end homes on the market.”
Des Moines has suffered some decline and some overbuilding. However, he says, “We’re approaching a leveling off of the inventory. The price structure and the value of homes are stabilizing.”
Kevin Johnson, president of Accurate Development, specializes in the high-end market. “We’re still selling, percentagewise, the same types of homes as several years ago—just less of them,” he says. “A large part of that market included people transferring into our community, and that has slowed down. For the housing market to be increasing, we need people moving in.”
Johnson says the number of spec homes (built to the home builder’s specifications in anticipation of finding a buyer) is down right now. “We sold down the inventory numbers, and we’ve adjusted the numbers to reflect the absorption.”
He says people are more selective today. “People in the $500,000 to $1 million range are not scaling back. When they spend that much for a house, they’re going to get exactly what they want. Once you have an irrigation system or central vacuum, you’re not going to live without them.”
Both Emery and Johnson believe it’s the entry-level house that is currently selling best and that there’s little movement in the townhome market. “We’re right on the end of a townhome project,” Johnson says, “and we’re not going to start another one.”
Bill Kimberley, president and founder of Kimberley Development, believes two forces are at play. “One, the population is growing older, so you’re not talking about as many people with children. Two, because of the recession people have become more conservative.”
He says, “The home buyer tax credit has driven the housing market across the country. If you had taken that incentive away, you would have seen the number of buyers greatly reduced. But the credit goes away in April, so we’ve probably taken care of the pent-up demand for that first-time home.”
Although he repositioned his company a couple of years ago to include both high-end and mid-range homes, he says the high-end market remains strong. “People are still building, but not the great big houses. They want nice things and nice amenities, but not as large a footprint.”
Luxurious Open Space
Marilyn Struecker, co-owner of Construction Professionals, focuses on the high-end custom market. Her customers know exactly what they want in a home.
“They want nice-size bedrooms and more open floor plans,” she says. “Instead of formal dining rooms, they want to utilize every bit of square footage, and that includes finishing the lower level. The formal living room has phased out, and they want the kitchen and great-room combined as a living area. The family wants to spend time together.”
Walk-in pantries are a must for most people, Struecker says. “We used to put in peninsulas, but now they want a big, detached, eat-in island. And we’re seeing more granite countertops. Gas is still pretty popular for cooktops, and many of them are putting in Advantium combination microwave ovens.”
Energy incentives are influencing the market, she says.
“Now we’re seeing people who are better consumers of energy. They’re more conscious of features like geothermal heating and blown insulation.”
Colin King, president and co-owner of K & V Homes, agrees the traditional home with formal living and dining rooms is no longer in style. “Now they’re putting more emphasis on the kitchen and breakfast area. More time is spent there. They want the family to be together and not so isolated.”
King’s customers take more time to make decisions. “We encourage our homeowners to measure their existing rooms and compare the measurements with the house plan they are considering. This ensures that they will be happy with their new living spaces, and it shows us whether we need to make any changes.
“The downturn has caused people to put more thought into the building process,” he says. “They’re doing due diligence to make sure they’re going to be happy with their home.
“We are definitely seeing a trend toward homeowners who are planning to spend much more time in their homes. They look for long-term features to serve them for years to come; they make sure the amenities and efficiencies are there.”
King’s customers spend more on luxury items—and expect to keep them longer. “There’s a trend toward tile showers, and geothermal heating is definitely an emphasis. The cooktop is a focal point of the kitchen now, with decorative hoods. More people are putting in covered decks and covered porches so they can spend more time outside and entertain there.”
All of these builders agree there’s never been a better time than right now to build or buy a home. “As soon as you sense the economy in general is picking up, you’re going to see the cost of basic building supplies increase,” Emery says. “There’s such a competition for the reduced number of buyers that it keeps the price down right now, but supply and demand will drive the market.”
“Product is out there,” says King. “There’s more value for the investment than in the past, and all the factors are in place to make it affordable to build.”
“It’s a good time to build,” Struecker agrees “There are some good deals on lots. The pricing people have had to tighten belts a little. Everyone has. Everybody is trying to make it work. We’re all trimming our costs.”
“I’m pretty optimistic,” Johnson says. “I think when spring starts, you’ll see a few more starts come out of the ground. Just pick out the best builder you can find and make sure your bids are apples to apples.”
“I don’t have a crystal ball,” says Bill Kimberley, “but I do believe we’ve been through the worst of it. If there’s anyone thinking of buying a new home—they have a job and their company is doing fairly well—they should move very quickly. You’re not going to get a better benefit than this tax credit, and mortgage interest rates are sure to go up.
“I can produce a house today for less than I could produce it a year or two ago,” he says, “but once the economy gets a little better, prices are sure to go up. We’ll just have to wait and see.”