Iowa Real Estate Market Trends & Analysis


The Iowa real estate market has prospered in the wake of a strengthening economy. Unemployment numbers look promising, and both current and future job growth expectations are close enough to the national average to support a more active real estate industry. Evidence of the strengthening economy is mounting, but one indicator stands to hold the Iowa real estate market back from realizing its full potential: inventory.

Not unlike everywhere else, real estate in Iowa has had a hard time keeping up with demand; there aren't enough homes to satiate buyers who have seen their bank accounts grow from government stimuli and fewer opportunities to go out over the last two years. On top of larger savings accounts, interest rates remain attractive. While they are on the rise, many buyers are actively participating in the market to take advantage of borrowing costs before they increase.

These factors have contributed to historical appreciation rates and altered the investing landscape. In particular, fewer homes and higher costs have driven investors towards long-term exit strategies like rental properties.

The Top Iowa Real Estate Markets


While the best real estate market in Iowa is up for debate, here’s a list of the cities investors may want to pay special considerations to:

Iowa Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Real Estate Agents, Attorneys
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Non-Judicial
Process Period: 5 - 6 months
Notice of Sale: Sheriff
Redemption Period: 12 Months

Taxes

Income Tax: 0.36% - 8.98%
Corporate Tax: 6 - 12%
Sales Tax: 6.00%
Estate Tax: No
Inheritance Tax: 0 - 15%
Median Property Tax: 1.29%
Property Taxes by County: http://www.tax-rates.org/iowa/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,448.00
Transfer Fee: 0.16%
Origination Fee: $1,773.00

Iowa Housing Market Overview


  • Median Home Value: $176,499

  • 1-Year Appreciation Rate: +11.4%

  • New Listings: 3,142 (+6.9% year over year)

  • Pending Sales: 3,189 (+2.0% year over year)

  • Closed Sales: 3,631 (+4.3% year over year)

  • Days On Market: 34 (-29.2% year over year)

  • Median Sales Price: $190,000 (+5.6% year over year)

  • Months Of Supply: 2 (-16.7% year over year)

  • Median Rent Price: $892 (+6.5% year over year)

  • Price-To-Rent Ratio: 16.48

  • Unemployment Rate: 3.7% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 3,193,079 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $60,523 (latest estimate by the U.S. Census Bureau)

  • Total Foreclosures (Q3): 474

Iowa Median Home Prices


Home values across the entire state of Iowa have experienced radical shifts in relatively short periods. In as little as ten years, home values have seen both the depths of a recession and historically high prices. Dating back to March 2011, median home values in Iowa bottomed out around $109,000 — their lowest point of The Great Recession. Today, the median home value in Iowa is $176,499—easily surpassing pre-recession highs. Over that span, the state’s median home value increased 61.4%. Home values across the rest of the country, on the other hand, jumped about 93.8%.

Home values in Iowa, much like the rest of the country, are primarily the result of three fundamental indicators: lower borrowing costs, a distinct lack of available inventory, and pent-up demand. That’s not to say other factors haven’t influenced price increases in recent history, but rather that the unique combination of these three things have driven prices higher at a historic pace.

The rapid appreciation of home values in Iowa has left little room for growth. Prices are expected to continue increasing, albeit at a tempered pace. While values rose 11.4% over the course of last year, the next 12 months may see a more modest increase.

Iowa Median Rent Prices


The Iowa housing market's latest increase in home values has impacted the local rental market. If for nothing else, higher home values and a lack of listings have prevented a large population of prospective buyers from participating in the market. As a result, many people want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters.

Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. Landlords have found themselves in a position of power in Iowa, and their asking prices reflect as much.

According to the latest data released by Apartment List, the median rent in Iowa has increased 6.5% in the last year and now sits around $892. The latest increase in rents has failed to keep pace with home value appreciation over the last year. As a result, we may start to see rents increase faster. Here's a look at what renters can expect to pay in the Iowa real estate market today:

  • Studio: $667

  • 1-Bedroom: $694

  • 2-Bedroom: $913

  • 3-Bedroom: $1,096

  • 4-Bedroom: $1,139

For context, the national average rent price is about $1,302, or 45.9% more than the average renter pays in the Iowa housing market. The difference is significant, but appreciation forecasts suggest they may be able to close the gap slightly. As long as inventory remains tight, landlords will justify rent increases. That said, the Iowa real estate investing community still has time to get into the long-term rental space.

Iowa Foreclosure Trends & Statistics


According to ATTOM Data Solutions’ latest Foreclosure Market Report, "there were a total of 45,517 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 34 percent from the previous quarter and 68 percent from a year ago."

Foreclosure filings are up across the entire country, and the Iowa housing market is no exception. With moratoriums and foreclosure forbearance programs expiring, distressed homeowners are no longer protected. In Iowa, a total of 474 properties entered into the fourscore process in the third quarter of 2021; that's 306.2% higher than the second quarter and 98.2% higher than the same period a year earlier year.

Foreclosures in Iowa are increasing, just like everywhere else. In the last year, foreclosure rates have ticked up modestly, and it looks like they will continue to do so. As more and more banks are allowed to initiate the foreclosure process, the number of distressed homeowners across the state is likely to increase. That said, now is the time for real estate investors in Iowa to start lining up financing. Immediate access to funding could simultaneously enable Iowa real estate investors to help distressed homeowners secure a deal.

Tax Lien Investing


  • Tax Lien or Deed: Tax Lein State

  • Interest Rate: 24%

  • Redemption Period: 1.75 Years

Iowa Real Estate Investing


The Iowa real estate investing community has done well for itself dealing in distressed inventory. Coincidently, foreclosures offer the best profit margins. However, perhaps even more importantly, distressed property owners are typically more likely to sell. As a result, Iowa real estate investors should pay special considerations to delinquent homeowners; that way, they'll increase their odds of landing a deal with better profit potential.

With foreclosures in Iowa up more than 98% year over year, local investors should find it easier to locate distressed homeowners in 2022. Despite the increase, however, profit margins are still prohibitive. As a result, investors will need to have a backup plan.

Currently, the Iowa real estate market favors just about every exit strategy: wholesaling, rehabbing, and renting. That said, one strategy seems more viable in today's market than any other: long-term rental properties.

Most notably, investors can help offset high prices with attractive borrowing costs. As recently as the end of 2021, the average commitment rate on a 30-year fixed-rate loan was 3.10%. While up slightly year to date, today's rate is historically low and represents a great opportunity for Iowa investors to increase cash flow and offset higher acquisition prices. At the very least, the less money rental property owners have to pay towards their mortgage each month, the more they can pocket from incoming rent.

In addition to lower borrowing costs, Iowa's price-to-rent ratio is 16.48. At that level, it's slightly more affordable to rent in Iowa than to own real estate. The state's price-to-rent ratio will drive more people to become renters; houses are too expensive for many to even consider buying. The lack of affordability driving people to rent will increase demand, and landlords will be able to increase asking rates and mitigate the risk of vacancy.

Iowa Housing Market Predictions


The Iowa real estate market is firing on all cylinders. Housing activity is receiving plenty of underlying support from a healthy economy that appears to be growing stronger by the day. That said, exhibiting 100% confidence in any Iowa housing market predictions is a fool’s errand. Even in a market as “predictable” as Iowa, there are far too many variables to assume anything is guaranteed to happen. Instead, investors must remain patient and listen to what the market is telling them.

Let’s take a look at which Iowa housing market predictions are the most likely to come to fruition:

  • Prices will rise at a slower pace: The median home value in Iowa has increased by as much as 11.4% in the last year. The increase was expedited due to lacking inventory levels and more demand than ever before. The same trends will continue into 2022, but at a pace that will slow down appreciation. Prices will continue to rise, but not at the brisk pace of last year.

  • An influx of buyers from Illinois should increase demand: In an attempt to avoid high property taxes, Illinois residents are making their way across Iowa state lines in search of housing. Until something is done about the crippling taxes in Illinois, Iowa will continue to see an influx of demand, which will drive up prices and detract from inventory levels in the meantime.

  • Optimism in the industry will work in Iowa’s favor: The Iowa real estate market has a lot working in its favor, but optimism might be its greatest resource. While prices haven’t exactly kept pace with the national average, the worst appears to be in the past, and positivity is all that remains moving forward. In particular, new inventory should facilitate a more active and balanced market.

Summary


The Iowa real estate market has benefited immensely from indicators in particular: affordability. Real estate in Iowa, for example, is so affordable that more and more residents can partake in the housing industry every year. The activity generated by attractive housing prices has buoyed the entire state’s real estate sector and everyone participating in it: buyers, sellers, and investors. That, in addition to increasing inventory levels, should create one of the more balanced markets across the country.

Sources:



https://www.zillow.com/ia/home-values/
https://www.zillow.com/home-values/
https://www.bls.gov/regions/midwest/iowa.htm#eag
https://www.census.gov/quickfacts/fact/table/IA/PST045218
https://www.apartmentlist.com/research/category/data-rent-estimates
https://www.iowarealtors.com/filesimages/Docs/Monthly%20Stats%20Report/IowaStats_Nov2021_HousingReport.pdf
https://www.attomdata.com/news/market-trends/foreclosures/attom-september-and-q3-2021-u-s-foreclosure-market-report/

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