Is A Real Estate Tsunami Coming?

I have been noticing signs of a lot of pent-up demand in the real estate market. You have heard me say in the past that if interest rates would drop below 6%, even to 5.99%, that people would start buying homes in mass and because buyers are sellers too, there would be inventory to buy. I still believe that by the way. I can’t say where interest rates will go, but I have another theory to explain what I have been noticing.

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The real estate market in 2021 and 2022 was crazy and we blamed it on Covid, but other factors like unheard of low interest rates and huge levels of home equity all came together to create the perfect storm. Record numbers of homes were sold during that time, and although there were people who had to move due to normal reasons like changes in employment and family situations, there were lot of people got caught up in the hysteria.

The 5 years prior to Covid in Central Iowa, there were about 14,000 homes sold each year, but during the next 3 years there were about 17,000 homes sold each year. So where did all those extra sales come from? It wasn’t from people moving into the area from somewhere else or newly formed households, it was from people who were planning to move in the future, but took advantage of the market conditions to make the move early. In other words, we stacked the market with future sales.

Since so many future sales happened early, it stands to reason that sales during the next few years would be on the lean side, and they have been. It was easy to blame higher interest rates on the lower than normal home sales, and yes, interest rates jumping as high as they did in such a short time took some time to adjust to, but I believe much of the slowdown in sales was due the fact that future sales had taken place early.

Interest rates have remained fairly stable since the initial jump. The real estate market took a time-out for awhile to see where they were headed, but now it is obvious they have settled in the 6’s.Consumers can accept that, after-all, the average interest rate for a 30-year mortgage over the last 50 years is around 7.25%, so anything less than that should be pretty good.

What I am sensing now is that the real estate market has caught up to the early sales and now there is pent-up demand in the market. People not only need to move for certain reasons, but many people just want to move and it is time. Although the number of homes for sale is still somewhat low, I believe the upcoming Spring market is starting to boil and when it arrives, we will see more homes come on the market as people decide that they just need to move regardless of interest rates. Remember, buyers are sellers. When an offer is accepted on one home, it generally means another home comes on the market.

If everything remains the same, we already have a pretty healthy real estate market with a good balance of sales to inventory and I believe 2025 will be a good year for real estate, but if mortgage interest rates should drop below 6%, I believe that will add a significant amount of activity to the existing pent-up demand there already is and a tsunami will hit the real estate market.

Whatever happens, I am here to be your guide if you are thinking about a move this year. I can help you determine how much equity you have in your current home and how you could use that to make a move into a new home that better meets your wants and needs; or it could help you determine your need for a few more years in your current home to get to your dream home. Either way, I am happy to help! 

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Norwalk IA Real Estate – Jon Niemeyer, Broker Associate/REALTOR® at EXIT Realty and Associates. I list and sell real estate in Central Iowa including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill in the Counties of Warren, Polk, Dallas, and Madison. Call Jon Niemeyer at 515-490-4675.