Learn more about the housing market in Iowa

Every state is unique when it comes to the real estate market. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying or selling, it will impact many aspects of your life.  

Iowa Housing Market Overview 

Like many other states, Iowa’s housing market was experiencing lower inventory and higher prices for an extended period. Additional inventory in April 2024, though, impacted the outlook. New listings accounted for 4,068 homes, which is a 13.1% increase from last year. 

Inventory is still the main issue regarding the housing market. Iowa’s unemployment rate and future job prospects indicate an economy that would support an improving housing market. The current environment is due mostly to pent-up demand, low housing inventory, and lower borrowing costs. 

Despite these issues, real estate in Iowa is more affordable than in most of the country. This is part of a strong market overall.  

Iowa Housing Market Trends 

To understand the Iowa real estate market, it’s important to keep up with trends. Let’s look at some key ones in IA: 

Note: These statistics are based on Redfin’s monthly housing data from April 2024. 

Median Home Price 

Iowa’s median home price is $231,600, according to Redfin’s monthly housing market data from April 2024. This is a growth of about 3.0% since April of last year. The median home price for a house in America is $433,558, so you can see the difference.  

Number of Homes Sold in April 2024 

In April, there were 3,071 homes sold in Iowa, up 12.1% from last year according to the Redfin dataset. Thus, even though Iowa’s market has some issues, selling and buying are occurring at a solid rate. However, it’s important to keep in mind that this number might be inflated compared to other months since nationally speaking, sales usually peak during the spring and summer months and slow considerably in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%. 

Median Days on Market (DOM) 

Days on market (DOM) is the average length of time a home remains listed on the market before being put under contract. A lower DOM signals an extremely competitive seller’s market with more pressure on buyers to come in with higher offers and remove contingencies. A higher DOM signals a buyer’s market with slower sales and less leverage for sellers. 

The current median DOM in Iowa is 34 days. This is average, so Iowa is more in the middle when it comes to this metric. Iowa’s DOM is another indicator that the market is somewhat solid for everyone overall.  

New Supply Statistics 

Housing supply continues to be an issue in Iowa. It’s an attractive market compared to other states, but it still experienced things like a near tripling of 30-year mortgage rates in the last three years. Statistics like housing shortages as a percentage of population and permits as a percentage of housing shortage/surplus also indicate current and future housing supply issues, even though Iowa is still healthier than many other markets. 

While supply in general is up from last year, it’s not keeping up with demand. Experts hope this trend will course-correct a bit in 2024.  

Property Tax Rate 

The average property tax rate in Iowa is 1.52%, according to Rocket Mortgage. This places Iowa’s average property tax rate as the 10th highest in the United States (includes District of Columbia). It’s important to point out that property taxes vary widely depending on the specific county of Iowa and the value of the home, so this average rate may or may not be indicative of your situation. 

Foreclosure Rate in Q1 of 2024 

In the first quarter of 2024, 1 in every 1,503 homes experienced a foreclosure filing (according to recent data from ATTOM). Based on this data, Iowa’s foreclosure rate is the 15th highest in the country. 

Hottest Local Markets in Iowa 

Iowa has several noteworthy markets. Here are three of the most noteworthy: 

1. Des Moines

The capital of Iowa is one of the fastest growing areas in the Midwest with strong financial prospects and improving city services. A diverse economy continues to multiply with robust sectors like insurance, healthcare, and tech supporting a stable ecosystem.  

The housing market Iowa is home to is extremely competitive with houses selling in 14 days on average. The median sale price was $210,000, up almost 8% from last year.  

According to a 2023 study by Wallethub, Des Moines is one of the worst places to buy a home due to a myriad of factors. 

2. Cedar Rapids

The largest corn-processing city in the world is a vibrant manufacturing hub. It’s a fairly competitive housing market. The median sales price for homes hasn’t changed since last year. The Median Days on Market is 12, which is up by one from last year.  

Per this 2023 study by Wallethub for best and worst places to buy a home, Cedar Rapids ranked 253 out of 300 cities studied, so it’s still indubitably a sellers’ market. 

3. Council Bluffs

Council Bluffs was ranked fifth place in a list of best markets for first-time homebuyers in 2024. This area is definitively a buyer’s market (somewhat of a rarity in America right now) with supply outpacing demand. The median days on market is 21 days.  

This city is the tenth most populous in Iowa and the largest population in the southwest of the state. In this urban city, most residents own their homes. 

Factors Impacting the Iowa Housing Market 

Iowa’s market is influenced by macroeconomic trends and more granular economic factors specific to the state. 

Mortgage Rates 

High mortgage rates are a continuing difficulty for would-be homeowners in the U.S. Iowa’s average rates for 30-year mortgages in June of 2024 are above the national average at 7.25% Higher interest rates deter borrowing and discourage those who already own homes from putting their homes on the market. Many homeowners report feeling “tied” to their current homes, as it is unlikely they will secure a mortgage rate as low as their current if they move to a new property. Prospective buyers in Iowa would be wise to monitor mortgage rates in the coming months for a better understanding of how they impact the housing market. 

Inflation and Cost of Living 

Mortgage rates relate directly to inflation, another massive contributing factor to the affordability of housing and the status of housing markets in general. Inflation has increased the cost of living for many across the U.S., including in Iowa. This means fewer people can truly afford to limit housing costs to less than the recommended 30% of their monthly income.  

Population Changes and Demographics 

In Iowa, urban populations continue to grow, while rural populations continue to decline. Between 1940 and 2020, the urban population doubled in 11 counties.  

The increasing population is another factor in people staying in their homes longer. The lack of new houses means a lack of available housing for a growing population.  

Long-Term Projection 

Although it’s currently not favorable to buyers, Iowa is a growing state with an encouraging economy. This means the long-term projection plays into decision-making. Investors and buyers may see better opportunities as soon as late 2024.  

Iowa also has one of the lowest crime rates in America. Generally, it’s a very safe place to live. Thus, it has numerous factors that make it appealing when viewed from a long-term lens.  

Iowa Housing Market Forecast 

Spring has made its presence felt already in Iowa. Inventory is up a little bit. Warmer weather is bringing buyers back into the market. The stabilization of interest rates is also bringing buyers back into the fold.  

That said, stable still isn’t a word most realtors are throwing around when describing this market yet. David Nelson, the CEO of NelsonCoCorp Wealth Management says, “The problem is often when rates come down, the prices can go up. It’s a teeter-totter typically, but it hasn’t happened this time. My instinct would be to probably wait. I would say wait probably 12 months. Chances are you are going to get a much more competitive rate than you are now.” 

It’s important to note that Iowa is one of the most affordable housing markets in the U.S., particularly if you only look at prices compared to typical income. Thus, it’s still an appealing place for people to consider. 

Likelihood of Iowa Housing Market Crash  

Most experts don’t see a crash anytime soon for the IA housing market. As supply continues to increase and interest rates decline, the market should stabilize a bit. Additionally, the market isn’t showing major signs that should cause undue concern. 

The affordability of housing compared to the rest of the nation also bodes well for the future. Tradingpedia created a map showing home affordability with personal income as a percentage of median home price (the higher the percentage, the more affordable the state), and Iowa came in at 27.61%. Comparing this to somewhere like California (10.56%) gives you an idea of how affordable Iowa is. This isn’t a market that looks to be in danger for the foreseeable future. 

Forecast for The U.S. Housing Market 

Now that we’ve looked at Iowa’s housing market, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years? 

The United States’s median existing-home sale price in April was around $432,812 per Redfin. The inventory, though, remains low. A balanced market typically has a five-to-six-month supply, but the current figure is two. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get. 

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth. 

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Iowa Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year. 

The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America. Whether high rents or low income is the main cause doesn’t change the fact that this problem is widespread.  

Iowa’s current rental market is influenced by these trends, but not dominated by them. Iowa is a very affordable state, in terms of rentals. Below are just a few of the current trends for Iowa’s rental market based on data pulled from Zillow: 

Iowa Rental Market Key Trends 

• Median rent: $1,100 (note: This is over $1,000 lower than the national median of $2,132 as of June 2024) 

• Month-over-month rent change: +$6 

• Year-over-year rent change: +$100 

• Available rentals: 3,173 

The Iowa rental market, like the housing market, is known for affordability. Even though the state had one of the largest recent rent increases in the nation, its prices are still lower than most other states. A lack of new construction is one of the main reasons rent prices continue to climb all over the U.S. Iowa, however, still has the fourth lowest median rent prices in America. 

It’s wise to keep an eye on Midwest rental prices in the coming years. This area is one of the main drivers behind the continued increase in rents.  

Conclusion 

The Iowa housing market in 2024 is marked by a blend of stability, challenges, and changes, making it crucial for potential buyers and sellers to stay informed about market trends. Whether you’re looking to purchase a home soon or sell your property in IA, the macro- and micro- economic trends outlined above will impact your decision-making. Market dynamics like changes in home prices, inventory levels, and interest rates will continue to be critical for stakeholders in local real estate.