There is a debate amongst economists,
REALTORS® and other analysts regarding the stabilization of the real estate
market in 2011. According to a report in Major
Metropolitan Market Forecasts in 2011 the St. Louis real estate market
ranks 21 out of the 230 markets included in the House Predictor results
released at the beginning of the year. Although this period continues to be very
trying for home sellers it presents great opportunities for those looking to
get into the St. Louis housing market.
Some argue that the real estate market in
St. Louis may not bottom out in 2011, while others predict that it will take
another year or two before the real estate markets stabilize. The reason for
the debate is that there are number of factors, both localized and nationally,
that are used to evaluate market conditions and establish forecasts. Things
like the volume of home sales, mortgage lending statistics, new home
construction figures, regional economic growth and development, commercial
building starts, employment levels, historical trends and consumer confidence
are all taken into account.
Last year the St. Louis Association of
Realtors® hosted an event in which the Chief Economist for the National Association
of Realtors® Dr. Lawrence Yun was the feature speaker. His Housing Market
Outlook projects the following:
- 5.6 million resale houses will sell this year (up 0.3 million from 2010)
- 570,000 new houses will sell this year (up 170,000 from 2010)
- There will only be a 2-3% increase in house values (compared to 0-2% for 2010)
- If there is a double dip in the market it will much milder than the first one
In a recent article by the St. Louis
Business Journal St. Louis home prices were compared to previous area statistics.
The figures paint a bleak picture indeed. Overall home sales (including
distressed sales) dropped by nearly 8% in November of 2010. Even when the
figures were analyzed to exclude the distressed transactions (which include
foreclosures, short sales, bank and real estate owned properties) the
year-over-year home prices were down 3%. Nationwide figures are not much
better. Overall sales figures (which include distressed sales) fell 5% while
figures which exclude the distressed sales still fell 2%.
The St. Louis real estate market first
appeared to be stronger in the spring and summer of 2010. The majority of this
was due to the $8,000 tax credit for first-time home buyers which according to
Tim Logan of SLToday.com “had an outsized influence in a modestly-priced
markets like ours.” Dr. Yun takes it a step further and claims that 1 million
of the buyers would not have purchased a house without the tax credit while 3.4
million buyers would have bought a house regardless. He credits the program for
reducing the inventory of houses for sale by 1 million and helped bring about
the early stages of stabilization.
Since psychology is one of the driving
forces behind the real estate market
today the unemployment rates and population figures are a valid determining
factor in market projections. Using these and other figures Dr. Yun predicts
the short term inventory conditions will look very unfavourable. The reason
being that there are “basically the same number of jobs today in the U.S. that
there were 10 years ago, but we now have 30 million more people than then.”
According to Dr. Yun several factors will
continue to affect the St. Louis real estate market. The high unemployment rate
is taking its toll on the area and it is predicted that it will take 4 to 6 years to get the unemployment rate back
down to 5-6%. Short sales and foreclosures account for 35-40% of house sales
(they should only account for about 5%) and these rates are expected to remain
for about two more years.
Furthermore, new housing starts have not
increased with the population. This means that although the population has
increased the demand for housing has not. This is due to the fact that many
people cannot comfortably afford to go it alone. More and more frequently
people and families are doubling up either by taking in room-mates, living with
parents longer and helping them to pay their mortgages; senior parents are
choosing to live with grown children.
There is a significant decrease in the
number of people who are moving “inter-state” and with the unfavourable
employment figures inter-stators are reluctant to relocate to areas which are
experiencing the brunt of the financial turmoil. Even within the state there is
a modest decrease in the number of people who are moving.
Economists continue to debate as to when
the St. Louis real estate market will stabilize and with so many local and
national factors to consider, it is a very daunting task indeed. The Clear Capital
One-Year Metro market Forecast claims that the wild spikes that the market
experienced in 201 will likely be replaced with more gradual price trends for
2011. The current St. Louis real estate market is being driven by psychological
factors and the high ratio of short sales and foreclosures and the rather
dismal unemployment statistics are not instilling residents with a great deal
of consumer confidence.
As 2011 progresses above average
foreclosure rates and low interest rates should promote buyer activity in the
St. Louis area. This will help offset
some of the prevailing doom and gloom sentiment created by an uncertain
economic forecast, above average unemployment and high foreclosure rates. A full St. Louis real estate market recovery
is heavily tied to the national economic outlook and will not experience a full
recovery to economic confidence is developed on a national level.
Savvy homebuyers can capitalize on the St.
Louis market environment by realizing housing values that may not be seen again
for generations. Home sellers
unfortunately will look forward to long sale times, lower prices and lots of
competing properties. Those homeowners
that are currently struggling are unlikely to find help in 2011 as support for
homeowners is limited at this time.
Without speedy government intervention foreclosure rates will continue
to rise as the year goes on.
