St. Louis Housing Outlook

The housing outlook for St Louis continues to look bleak.  After entering 2010 on a high note, when prices had rose in the fourth quarter of 2009, prices lost momentum as the year progressed.  With prices in decline throughout 2010 the expectations for 2011 appear to be the beginning of market stabilization.  Above average foreclosure rates, high unemployment and an uncertain economic climate have slowed recovery in the St. Louis area.

Local news housing coverage has focused on five key areas this past year.  With the focus on the housing and market outlook, home prices, foreclosure rates, unemployment rates and vacancy rates. This trend is likely to continue as we progress through 2011 as conditions remain similar to what we experienced in 2010.

Housing and Market Outlook

The housing and market outlook is perhaps the most prominent topic in the St. Louis Housing News Headlines. Housing and Market Outlook Reports are issued in January of each year and are based on more than 20 factors such as the volume of house sales, mortgage lending statistics, new home construction, regional economic growth and development, commercial building statistics, employment levels, historical trends, and consumer confidence.  

Dr. Lawrence Yun is the Chief Economist of the National Association of Realtors® and he recently spoke at a conference hosted by the St. Louis Association of Realtors®. During the conference Dr. Yun forecast that the housing market will continue to look “ugly” for the short term.   Part of the reasoning behind this statement is that there will continue to be above average foreclosure rates, high levels of unemployment and the national economic outlook continues to appear bleak.

Dr. Yun predicts that there will be a 300,000 unit increase in the number of resale houses sold in 2011 and a 170,000 unit increase in the number of newly built houses sold.   This a marginal increase over 2010 however it does point to stabilization in the housing markets.  This stabilization should lead to moderate price increases as markets continue to moderate and become less volatile.

The St. Louis market outlook will continue to have some influence on commercial investment as well as residential.  Investment dollars have flowed at a much slower rate as investors struggle with financing and liquidity in a struggling economy.  The trickledown effect of these market realities have a direct impact on unemployment levels as businesses have worked to minimize debts and increased profits as consumer confidence continues to be low.

House Prices

Understandably fluctuations in home values are a concern for any homeowner particularly when you are faced with having to sell your property in an unstable real estate market. Buyers are less confident during an unstable market. This, combined with an overabundant inventory, drives house prices even lower. Prices however will steadily increase but at a modest rate of 2-5% per year.

This increase is will be directly tied to improving consumer confidence, foreclosure rates and unemployment levels.  As economic outlooks continue to improve it should bring new job prospects for St. Louis.  It is unlikely that we will see the explosion in home values that preceded the financial meltdown but moderate growth in all sectors of the St. Louis real estate market is expected.

Homeowners throughout 2011 will continue to be subjected to a buyer’s market.  This will be marked by extended selling periods, lower home prices and a highly educated class of homebuyers that are patient and willing to aggressively negotiate.

Foreclosure Rates

There has been a lot of focus on Distresses Sales which include foreclosures, short sales and the sale of bank or realty holding owned houses. Foreclosure rates have remained high throughout the county. It is predicted that the housing market will stabilize as markets become more accustomed to the new economy.

There is a strong belief among experts that foreclosure rates in St. Louis will continue to be above the historical average for the region.  Short sales are a mark of the influx of property values that have dropped since the market peaks of 2007.  Bank assets have continued to increase with high foreclosure levels and these assets are being rapidly liquidated at reduced prices which have further depressed property pricing in St. Louis.

Unemployment Rates

The National Association of Realtors® Chief Economist Dr. Lawrence Yun spent a great deal of time during the conference discussing the high unemployment rates and the impact that they have on the housing market. He revealed that there is basically the same number of jobs in the United States today as there were 10 years ago.  The problem is that there are 30 million more people. Dr. Yun projects that it will take another 4-6 years to get the unemployment rates back down to 5-6%.

Since the housing market in St. Louis is driven by psychological factors, the unemployment rates have a direct impact on the confidence of consumers. Not only is steady employment a requirement for obtaining mortgage financing but it also gives homebuyers the confidence that once they purchase a house they will be able to afford it.

2011 will continue to see above average unemployment in St. Louis and surrounding areas as industry struggles to adapt to the new economic reality.  As markets stabilize industry will once again begin to expand creating new employment opportunities.  This will result in increased consumer confidence and will contribute to an improved national economic outlook.

Vacancy Rates

Vacancy rates continue to remain high as people double up. Doubling Up refers to the tendency of families to live together in the same house. Adult children are staying home with their parents longer and helping with finances while obtaining post secondary education. Senior parents are choosing to live with their adult children in their homes rather than downsizing to an apartment. This arrangement is a win-win situation as grandparents can watch the grandchildren saving the family money on child care.

Another form of doubling up is the taking on of room-mates or tenants. Homeowners rent out a room or portion of the house and in some cases there is also a sharing of utility costs.  Although this has resulted in a savings for tenants, landlords have been impacted by the increase in vacancies as a result.  Although this has a limited impact on employment and housing markets it is another indicator of a struggling economy.

Overall Outlook

The overall outlook for St. Louis for 2011 is one of slow and steady stabilization.  Home prices should stop dropping and slowly begin to increase at moderate levels throughout the year.  St. Louis homebuyers that are prepared to enter the real estate market can take advantage of low home prices and high foreclosure rates to maximize their buying power. 

With the real estate market reacting to market conditions buyers have an opportunity to educate themselves and operate from a position of negotiating strength.  Above average foreclosure rates, high unemployment and an uncertain economic climate have slowed recovery in the St. Louis area and the local focus on the negative is having an impact on the overall market.  

Five Questions to Ask Your Real Estate Agent

Thinking about selling your house without using one of the best real estate agents in your city? Even worse, are you considering trying to sell your house FSBO? Don’t make that mistake, it could cost you valuable time and money. Instead, take the time to find the best real estate agent, who will be able to effectively stage, photograph, market and sell your house in a timely manner. So, how do you know if you’re using the best real estate agent possible? It’s easy, ask the real estate agents you interview the following questions:

1. How long have you been a licensed real estate agent?

There are thousands of new real estate agents entering the field of real estate every year. It’s frequently the home sellers looking for a bargain that end up using a newly licensed real estate agent. New agents typically offer to reduce their real estate commission to attract customers. Don’t fall for this trick. To ensure that you’re working with a top REALTOR®, go with an agent that’s been licensed for at least five years.

2. How many homes have you sold?

If the answer is less than five you should run! Most of the top real estate agents in any given market have sold at least 50 homes. It’s not uncommon for the best REALTORS® to have sold 200, 300 or even more homes. We recently talked to a real estate agent in Minneapolis that sold over 1,000 homes during his career. The more homes an agent has sold, the more experience he has with home pricing, marketing, negotiations, repair issues, title problems, bank negotiations and short sales. You don’t want to choose a real estate agent who is learning as he goes. You want an agent that has already learned from past experience as a Minnesota Realtor.

 3. What is your focus in the real estate business? 

 Real estate agents specialize in all sorts of things, so make sure you choose a real estate agent that is suited for your particular set of circumstances. Do you need a buyers agent, sellers agent, short sale specialist, luxury homes specialist, neighborhood specialist, investment REALTOR®, etc. Choose the wrong agent and you could be stuck with a real estate agent who doesn’t understand your situation.

4. What is your real estate commission?

This is frequently a touchy subject for home sellers. Historically, real estate agents have charged a 7% real estate commission for home sales. What you need to remember is the sellers agent will pay at least 2.7% of that commission to the buyers real estate agent. Depending on the arrangement the agent has with his real estate broker, he might pay 50% of the remaining commission to his broker (employer). From what’s left he also had to pay the marketing expenses associated with selling the property.

There are some top real estate agents who are offering reduced commission rates in the 6% to 6.5% range, but don’t expect to find the best real estate agents in your area offering to sell your house for a 5% commission. If you want to pay 5% that’s fine, but don’t expect full service.

5. How connected are you?

Many of the best real estate agents today are available around the clock. Text messaging, Blackberries, Iphones, Ipads and cellphones allow REALTORS® to stay connected to their clients wherever they are. Find out what your real estate agents typical response time is to text messages, email and phone calls. If the real estate agent isn’t getting back to you in a timely manner, then there is a good chance they’re also not responding to potential buyers.

By asking your real estate agent these five questions you should ensure an enjoyable home selling experience. If everything goes well, the same REALTOR® will be able to assist you in finding your dream home. Minneapolis real estate agents offers a wide range of properties for sale.

If you’re looking for answers to your real estate questions, you can visit the real estate forum to have your questions answered for free by professionals in the real estate business.