Interest rate fluctuations and big demand for housing could make for some interesting times in the Dubuque area real estate market in the coming year. Nonetheless, Greg Adams, a Realtor with more than 40 years of experience, knows at least one thing won’t change — the dominance of the ranch-style house.
“Walk-out ranch homes have been the most popular thing in Dubuque for many years,” Adams said. “I always joked that Dubuque is a walk-out ranch town.”
Adams is the head of the Adams Team of agents with RE/MAX Advantage Realty in Dubuque. He watches the market closely.
“In the fourth quarter of last year, mortgage rates were expected to decline in 2024,” Adams said. “Although the prime rate was lowered, mortgage rates have not declined much. Homeowners are reluctant to sell their home that has a mortgage interest rate of about 3% and buy a different property with a 6.5% interest rate. There is no clear indication that mortgage rates will go down next year.”
Aside from rates, a shortage of housing supply has been another major factor behind the jump in home prices over the past four years, but there might be some relief eventually.
“October of 2024 saw a 23% increase in available housing as compared to October 2023,” Adams said. “This is good news for buyers.”
An October residential housing report compiled by the East Central Iowa Association of Realtors showed the average selling price for a home in Dubuque and the surrounding area was $279,926 that month. That’s up 8% from the previous year.
Jeff Hefel, managing broker at Ruhl and Ruhl Realtors Dubuque, believes the low amount of housing inventory in the Dubuque area will continue to keep prices higher in the local market in 2025.
“Anything under four months (of inventory) is a seller’s market,” Hefel said, during an interview in late November. “We’re sitting under two months right now.”
Hefel oversees multiple real estate agents at the firm based out of the Star Brewery building. Another factor he is tracking for the new year is the ongoing impact of a significant court case on Realtors nationwide.
In 2023, a jury came to a decision in the Sitzer/Burnett case. After this, a series of other lawsuits led to settlements across the country that have led to major changes in the real estate business. The central issue of the litigation involved commissions being offered to buyers’ agents.
“As a broker, my concern is the new rules that came out of the settlement … Especially on the ‘buy’ side, it’s changed pretty significantly,” Hefel said.
Hefel said his office has always been transparent about these issues, but there is now a greater effort at customer education across the industry.
Hefel and his colleagues are also keeping an eye on new home construction.
“Any building of new housing will help affordability,” he said. “I don’t think there will be enough to make an impact (in 2025) from a sales standpoint.”
Aside from helping people buy and sell, Ruhl and Ruhl Dubuque also offers mortgage lending services. Lawrence Davis, a mortgage specialist with the company, said the Midwest has been somewhat insulated from the negative effects of interest rate hikes so it is best to consult a local pro before making decisions.
“Stop watching the news,” Davis said. “Reach out to your local (Realtor).”
For several years, interest rates of 2 to 3% on mortgage loans stimulated the market. These rates were unusually low. They are returning to a level that is closer to the historical average, according to Davis.
“A 5 to 6% (mortgage rate) is the new normal,” he said. “Once people get used to it sales will pick up.”
Inflation is another reason for a spike in housing costs and rents. In response, Vanessa Cahill, a real estate agent with Ruhl and Ruhl, has seen people get creative.
“Families are moving in together,” she said. “They’re forming multi-generational homes.”
Single family homes have always been the most sought after residential property type in the Dubuque area. These days adult children are inviting parents or other relatives to live with them. These extended families help lower the cost of housing and child care.
Cahill also explained that more people locally have been looking for duplexes or even triplex homes. They live in one part of the property and rent out another part to help pay the mortgage.
There has been an increase in recent years in the price of farmland. In the local market, agricultural land is going for anywhere from $11,000 to $18,000, according to Cahill. This has raised startup costs for young farmers.
“You’re seeing with a lot of family farms, the kids are taking over because that’s the only way you can get into the business,” Cahill said. “You’re also seeing a lot of people come out of the city and buy farm land as an investment.”
Cahill encouraged people of all incomes to seek help if they want to own property.
“Don’t be afraid,” she said. “Some people say ‘I don’t have 20% to put down. I can’t buy a home. That’s not true.”
Cahill said there are U.S. Department of Agriculture loans, Veteran’s Administration loans and other programs that can make buying a home more affordable.
As of October, there was a 7% annual increase in the number of residential properties sold in the Dubuque area compared to last year, according to the Realtors association.
“Sellers: It may be a good time to sell your home and take advantage of the favorable home pricing,” Adams said. “Buyers: Don’t wait for interest rates to drop; it may not happen. If you buy now and interest do drop, you can refinance at a lower rate.”