Missouri homebuyers are approaching the 2011
St. Louis market with cautious optimism.
Above average foreclosure rates and high unemployment levels have
created an environment that fosters lower home prices. With the help of St. Louis REALTORS®, buyers
are making a conscious effort to better educate themselves to the realities of
the local real estate marketplace. With
the stabilization of home prices, St. Louis homebuyers have a rare opportunity
to capitalize on low interest rates and the substantial home values that are
currently available. REALTORS®
throughout Missouri are being approached by first time home buyers who are
excited about current home prices and low mortgage interest rates.
Although the economic forecast for St.
Louis is still shaky there seems to be some room for optimism in
homebuyers. The number of buyers has
been greatly reduced due to high unemployment levels and this is a benefit for
homebuyers looking to get into the market at this time. Sellers are experiencing above average sale
times and with reduced buyer activity they have been forced to lower prices and
offer incentives to attract homebuyers.
Home prices have basically stabilized and
are expected to remain low, only increasing by about 2-5% per year for the next
2 years. This is an indication that home
prices have bottomed out which means St. Louis homebuyers are currently getting
the best possible value for their real estate dollar. This is partially a result of the fear of
foreclosure, high unemployment levels and low buyer activity.
Foreclosures make up a substantial portion
of the St. Louis real estate market at this time. The number of distressed sales
(which include short sales, foreclosures, bank owned and real estate company
owned houses) account for 35-40% of the inventory. Ideally, the foreclosure market should only
account for about 5% of the housing inventory. Due to an explosion of distressed sales
homebuyers are entering into a market with a huge housing inventory that is
competing for the limited number of homebuyers looking to purchase a home. Homebuyers have the opportunity to negotiate
homebuyer incentives and lower prices as a result of this glut of properties.
Last year, the St. Louis Association of
Realtors® hosted a conference in which Dr. Lawrence Yun, the Chief Economist
for the National Association of Realtors®, predicted that 570,000 new homes
will sell this year. This is a 170,000 home increase over 2010. There has been a steady increase over the
last three years. Although this is a
modest year over year increase it is a sign of slowly improving buyer
optimism.
Dr. Yun also predicted that 5.6 million
resale houses will sell in 2011, up from 5.3 million in 2010 and 5.15 million
for 2009. This further supports the slowly
improving buyer sentiment in the St. Louis marketplace. The modest sales increases support the idea
that pricing has finally stabilized in St. Louis. For prospective homebuyers this indicates
that home prices have finally bottomed out and should begin to steadily increase
in the near future.
Home purchases have many psychological
factors. The fear of unemployment,
foreclosure and unstable housing markets has created more cautious and better
educated homebuyers. Homeowners are
finding ways to save money and create personal security. One of the ways they are doing this is by
“doubling up” also known as taking in borders, room-mates and letting children
stay home longer so they have additional financial contributions to the
household. This is creating a stronger
marketplace for homes with additional living space, in-law suites and the
ability to accommodate larger groups of people comfortably.
Due to the prevailing market conditions
buyers have an opportunity to fully educate themselves not only on market
conditions but to the real estate process as a whole. There is no sense of urgency as there is a
wealth of suitable properties available for most homebuyers at all budget
levels. As a result buyers are educating
themselves better than ever before. They
are prepared to exercise patience and extend their home buying search as they
familiarize themselves with the St. Louis market.
St. Louis homebuyers are experiencing far
fewer competitive bidding environments as foreclosure rates have continued to
soar. Although these competitive
situations do exist they have become a rarity in this market. Buyers are prepared to move on to the next
home rather than get involved in a bidding war with other homebuyers as there
are plenty of suitable homes available in St. Louis for most homebuyers.
Short sales and foreclosures in Missouri
have improved the ability of homebuyers to negotiate the best deal for each
property. They may experience additional obstacles with the sale process as
they negotiate with financial institutions.
This has created an environment that involves longer wait times for
responses and limited ability to negotiate extras into sales agreements. Foreclosures and short sales require
additional paperwork that is not present when dealing with a typical home
sale. Foreclosures report to a financial
institution which means the wait times for a response can be more than 48
hours. Costs such as appraisals, repair
estimates and inspections are the responsibility of the homebuyer in many of
these cases. These costs can be offset
by the buyer’s ability to negotiate a more favourable price for the homebuyer.
When dealing with traditional Missouri home
sellers that do not have a distressed home for sale extras such as assistance
with closing costs, inclusions of furnishings and appliances are available. These extras are becoming more commonplace as
sellers compete for buyers in the St. Louis area. Home sellers are experiencing increased sales
time, more competition due to high levels of foreclosures and as a result they
are seeking new ways to attract potential homebuyers.
Interest rates for mortgages continue to be
favourable for St. Louis homebuyers.
Even with the additional hoops that buyers have to jump through to get
financing due to reforms to the mortgage markets. As a result qualified homebuyers are being
allowing tremendous buying power.
Homebuyers are seeing lower home prices,
lower interest rates and high foreclosure rates in St. Louis. This has created an environment that allows
for greater negotiating power for homebuyers.
Home prices appear to have stabilized which is an indication that they
are the lowest they are going to get.
Home prices should begin to increase gradually over the next couple of
years creating an opportunity for buyers to rapidly build equity as home prices
improve. As we progress through 2011 St.
Louis homebuyers can realize the unlimited potential of investing in the local
real estate market.
