A typical busy season in real estate is during the warmer spring and summer months. Activity increases as more people are keen on looking for attractive homes in good weather. Of course, by the time fall rolls around, the busy season draws to a close and sales fall.

Numbers are falling nationally as well. Home sales across the country are falling as prices rise along with mortgage rates.

The national housing market is experiencing what is commonly referred to as a housing bubble, which is a direct burden on a natural exchange between housing supply and demand due to untenable prices, often brought on by inflation.

In Iowa City, trends matched national reports for September, according to Chief Executive Officer Megan Flewellyn of the Iowa City Area Association of Realtors.

Flewellyn wrote in an email to The Daily Iowan that Iowa City faced an 18.2 percent decrease in closed sales, down to 148 from 181 over the last year. Additionally, the median sales price was up 2.1 percent from $284,000 to $290,000 between September 2023 and 2024.

In September, homes spent an average of 46 days on the market, up from 41 days a year ago, she wrote. Iowa City, except for the unique housing conditions placed by the University of Iowa and the demand for student housing, is relatively unremarkable on a national scale when it comes to housing.

Flewellyn wrote trends began to reverse in October instead of following the dropping temperatures down to a low-activity market. The median home price rose to $385,990 and the average days spent on market was 34; both of these figures are moving opposite, as expected.

Many factors could influence this reversal of home sales, but Phil O’Brien, board president of the Iowa City Area Association of Realtors, said it is directly related to the Federal Reserve lowering the discount rate, or the rate at which banks can borrow money, or reserves, from other banks in the short term.

He said the Federal Reserve originally raised its rates to combat an inflationary environment, making it more valuable to save money, creating a situation where lower rates lead unsure buyers to start buying.

“All these buyers who were uncertain and not sure are now seeing rates as manageable and are starting to buy,” he said.

Last week, the Federal Reserve lowered its rate to a 4.5 to 4.75 percent range, down from the 4.75 to 5 percent range, which was the cut made in October. Mortgage rates can behave similarly to the Fed rate, but oftentimes they match the yield of the 10-year treasury bond.

O’Brien said Iowa City has a naturally faster, revolving housing market. He said this is because of the UI and local enterprises like Procter & Gamble.

“We have a more revolving population than in some places, which can protect us and keep the market fueled,” he said.

O’Brien said the typical pattern between home buying and mortgage rates is a situation where active buyers and sellers back away when rates go up, followed by a staunch period with little activity at the higher rate.

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The equation is a matter of time, as when the rates fall, there is enough time with higher rates where market participants “forget” the previous period of lower rates. This can cause an almost instant reaction to enter the market, he said.

“If you can still see lower rates in the rearview mirror, you’ll hang back,” he said. “Once you have enough distance, and the higher rate becomes the new norm, people become more comfortable because they know a rate is temporary.”

However, local lending institutions like Green State Credit Union report that mortgage rates have not been directly lowered by the Fed rate cut, demonstrating more complex factors affecting real estate sales.

Chief Consumer Lending Officer Ryan Doehrmann at Green State Credit Union wrote in an email statement to the DI that mortgage rates increased in October, reducing buyer demand and refinancing pursuits.

“Many folks were waiting for the Federal Reserve to drop rates in October hoping for a decrease in mortgage rates, however the opposite happened,” he wrote.

Doerhmann also wrote rates are lower right now than a year ago. This partially affirms what the Iowa City Area Association of Realtors indicated as a general increase in demand this year, compared to last year.

July of 2023 was the last time the Federal Reserve raised its rate, leading to a long-term relief in pressure once the rates were lowered this fall. Month to month, some statistics can have little meaning.

In the big picture, however, trends can be tracked through years. Much of selling comes down to perspective, O’Brien said.

“Don’t let something temporary trump something that is permanent,” he said.