For the last 4 years, the number of homes sold in the St. Louis region has been decreasing.

Fewer buyers means prices come down.

It’s all about supply and demand. When there are a lot of homes on the market for every buyer, sellers are forced to compete for those buyers. The result is that the only homes that sell are the ones that offer either the best features or the best price.

By adding foreclosed and short sale homes which are in good condition into the available pool of homes, prices are forced down even more.

The banks that own the foreclosures must sell. While they want to get as much money as possible to minimize their losses, they understand that they will only sell when they have the very best priced home in the area compared to homes with similar features.

While most buyers think that foreclosures are always a steal, it simply isn’t true. The banks initially price foreclosures based on what seems to be fair market value. But, in contrast to most private owners, they are prepared to reduce the price until the home sells.

St. Louis Homes Sales are Increasing:

The first step in getting the housing market to return to normal is for supply and demand to become more balanced. To do that, people need to start buying homes again.

Click to see full size chart

If you look closely in the chart above, you’ll see that each month starting in 2007 there were fewer sales in the St. Louis region compared to the same month in the year prior.

Up until 6 months ago, the only time since 2007 that there weren’t fewer sales than the year before was when the federal 1st time buyer tax credit was scheduled to expire. It was initially set to expire in November 2010, so you see spikes in sales as buyers rushed to go under contract in October & November (with closings about 30-45 days later). Then the tax credit was extended and the new expiration date required buyers to be under contract by April 30, 2011 and close by June 30,2011. While the closing date deadline was later extended, it didn’t result in new sales since it only applied to buyers who were under contract by the April 30 deadline.

Click to see full size chart

But the real story is the shifting market taking place now.

Take a close look at the last 2 years. In the last 6 months, there were more closed sales in St. Louis* than one year ago. If the trend continues, we should see supply and demand levels even out. We may not be there yet, but it’s a step in the right direction.

 * Sales statistics are based on closed sales for residential and condo properties listed in the MLS and located in St. Louis City, St. Louis County and St. Charles County.

Possibly Related Posts:

1. St. Louis Region Housing Market Report – 2009 Condo Sales
2. St. Louis Region Housing Market Report – 2009 Home Sales
3. St. Louis Region Housing Market Report – Condo Sales (Jan – June 2009)
4. St. Louis Region Housing Market Report – Home Sales (Jan – June 2009)

The housing market news for the last 5 years can be summarized pretty simply.

Housing prices are down.

Foreclosures are up.

Mortgages are harder to get, but interest rates are at historically low levels.

Inman News, an industry publication, just reported good news for a change. While I always caution people when discussing national trends that they may not reflect what is going on in their neighborhood, the national trends are worth watching because they do have a major impact on the overall economy and our market.

National Highlights:

Report from the data released by Zillow and CoreLogic August report:

• Nationally, home values were down from August 2010 to August 2011 by -4.4%
• Nationally, homes values remained flat from July 2011 to August 2011
• Since the peak of the market in 2006, national values have dropped approximately 30% (Zillow reports a 28.3% drop based on 157 largest metro areas and CoreLogic reports a drop of 30.5% drop)
• When CoreLogic excluded foreclosures, the home value drop since the market peak in 2006 was -21% (Zillow’s index automatically excludes foreclosures both when the bank takes back a home and when it resells to a private owner)
• Pittsburgh is the only metro area of the 157 largest U.S. markets tracked by Zillow to show appreciation from August 2010 to August 2011 with a 2.8% growth rate. It was also the only metro area to have essentially remained flat throughout the last 5 years, falling only -0.8% since 2006.
• The largest drops since 2006 were in Miami-Fort Lauderdale, FL & Orlando, FL, both losing -54.5% in home values in 5 years

St. Louis Housing Report:

St. Louis metro area data reported by Zillow:

• Home prices dropped in St. Louis -7.3% from August 2010 to August 2011
• Home prices were flat for the last few months with a drop of -0.2% from July ’11 to August ’11 and a drop of -0.4% when comparing the last 2 quarters.
• Home prices dropped in St. Louis -16.9% from 2006 to August 2011

While I challenge the accuracy of Zillow’s Zestimates on any single home, they do have access to closing sale prices so this data should be much more accurate than when they are trying to guess at what a buyer would pay for a particular home.

Possibly Related Posts:

1. St. Louis Housing Market ~ 10 Year Trends
2. PMI Report – St. Louis Market Update
3. PMI Report – St. Louis Housing Market at Low Risk for Price Declines
4. Housing Inventory has been Dropping – A Good Sign for the Real Estate Market

While economists debate what will happen with interest rates in the upcoming months, no one can definitively answer the question “Will mortgage rates go down?”

What we can do is to look at history and realize that today’s low mortgage rates are the best rates that home buyers have seen in 30 years.

Will they go up? Will they go down?

Even if they go down a little, getting a mortgage at today’s rates may be better than getting a lower rate later if home prices start climbing or the market shifts back to a balanced or seller’s market.

If you are in St. Louis, it’s a great time to buy now.

• Interest rates are low
• Home prices have dropped substantially in the last few years
• Most areas have an oversupply of homes for sale which gives buyers an upper hand
• Fall and winter brings even lower prices on homes since motivated sellers recognize there aren’t many buyers at this time of year

Mortgage Rate Charts:

Jay Thompson with Thompson Realty Group in Phoenix, AZ created the mortgage charts below and gave me permission to share them with you.

The majority of home buyers take out a 30 year fixed rate mortgage. Aren’t you glad we aren’t back to 1980s mortgage rates?

Buyers looking to pay off their mortgage so they can live in their home payment-free often opt for a 15 year mortgage. It’s also a good choice if you decide to refinance and have been paying on your current mortgage for a number of years. If you are able to get a dramatically lower interest rate on a new loan, a 15 year mortgage may still allow you to have a lower monthly payment than if you stretched it out for 30 years.

When I work with people relocating to St. Louis, one of the things I want to know is how long they think they will stay in the area. Often, they are in a career climbing track and expect to only be in the region for 3-4 years. These home buyers might be smart to go with an adjustable rate mortgage (ARM) instead of a fixed rate mortgage. While both mortgages can be paid back over 30 years, the ARM mortgage gives a lower rate for the first few years, then it can adjust up to reflect current interest rates.

While buyers can get into trouble if they use an ARM to buy more house than they can afford, it can be a great option for someone who knows that they will be moving soon or is confident that their financial situation will improve within the next few years.

There are very few situations where I can see the advantage of getting a 1 year ARM, meaning that the interest rate is only locked at the initial rate for 1 year and can then start going up. An upcoming divorce might be a good reason to go this route. Let’s say interest rates have dropped dramatically compared to the current interest rate on a couple’s mortgage. By refinancing, they might be able save enough money to cover the closing costs plus more. If they knew that they would be getting divorced and that the house would either be sold or one would buy out the other (and thus refinance again), then a 1 year ARM would make sense.

Another scenario that I could see would be if a couple was buying a home and one of them was graduating from medical or law school, and their income would dramatically increase later that year. The low 1 year ARM interest rate could help them finance a nicer home than they could currently afford at the 30 year fixed rates, and they could refinance once the new job was secured and their income had dramatically increased.

DISCLAIMER: I am not a financial adviser and recommend that you talk to a lender or financial adviser to discuss which type of loan is best for your situation.

Possibly Related Posts:

1. 1st Time Buyers – Buy Now for Once in a Lifetime Opportunity
2. Mortgage Interest Rates at Historically Low Levels
3. Refinancing Your Mortgage at Today’s Low Rates Can Save You Money
4. Housing Market Opportunity for Buyers that Act Now

Over the last few months, I’ve been surprised that our higher priced homes have been selling much more easily than low to moderately priced homes.

With about 40% of homes selling to 1st time buyers each year, good starter homes that are priced appropriately are usually easy to sell. Even in a tough market.

Last year, the federal tax credit fueled sales of inexpensive homes to 1st time buyers. Affluent families just didn’t seem to be buying. Only the very best of the higher priced homes were selling.

It looks like 2011 may be the year when the St. Louis housing market starts turning around.

Overall, homes sales are down this year compared to the same time period last year. But there definitely is a difference in which homes are selling.

Take a look below at the number of St. Louis County home sold from Jan 1 – May 9 in 2010 and 2011. The bold price ranges had more sales this year vs last year.

Did you see what I saw?

Every price range under $350,000 had fewer sales this year except for the very lowest priced homes (those selling for under $40,000). The increase in the extremely cheap homes is likely due to investors taking advantage of the market.

But about half of the price ranges $350,000 and above have had an increase in sales in 2011.

While there may only be a few more homes that sold this year compared to last year in some of these price ranges, any increase is a good sign. It means that people with good paying jobs are feeling comfortable selling their homes and buying a new one. It means that companies are hiring and new employees are relocating to St. Louis.

When middle class and affluent people start feeling more secure in their jobs and the economy, they spend money. And that’s a good thing for everybody.

Possibly Related Posts:

1. St. Louis Housing Report ~ 2010 Condo Sales by Price Range (Part 4)
2. St. Louis Region Housing Market Report – 2009 Home Sales
3. St. Louis Region Housing Market Report – Home Sales (Jan – June 2009)
4. St. Louis Region Market Report 2008 – Condo Sales

Video Highlights:

Check back each month for the latest video housing market report.

• Home buying affordability at a record high
• Economists are projecting housing shortages later this year
• Many areas are reporting low inventory and rising demand

Prior “This Month in Real estate Video” reports…

Possibly Related Posts:

1. Mortgage Interest Rates at Historically Low Levels
2. PMI Report – St. Louis Housing Market at Low Risk for Price Declines
3. Housing Inventory has been Dropping – A Good Sign for the Real Estate Market
4. Winter is a Great Time to Sell to a Rabbit

Don’t miss the beginning of this series:

Part 1 – St. Louis Sales Trends from 2001-2010
Part 2 – How Many Homes and Condos Failed to Sell?
Part 3 – 2010 Home Sales by Price Range
Part 4 – 2010 Condo Sales by Price Range

How Much Did St. Louis Sellers Reduce their Price to Sell?

In today’s housing market, buyers expect home prices to be negotiable. Sellers who are unwilling to negotiate the price shouldn’t even bother listing their home unless they are prepared to list it at such a low price that buyers will come running.

There are 2 things to consider when answering the question “How much do sellers come down?”

• How much did the listing price get reduced before the buyer made an offer?
• How much did the seller come down from the current listing price once an offer was made by a buyer?

Overpriced homes don’t get offers. Buyers simply screen them out when they are looking at online listings and trying to decide which homes to go see. Once a home gets to the right listing price, St. Louis homes average 4-6% from the current listing price to the final sale price depending on the location of the home.

The chart below shows how much St. Louis area home sellers came down from their original listing price in order to get an accepted contract during 2010.

DOM stands for Days on Market – how many days it took from the time the house went on the market until it went into pending status. In 2010, 50% of sold homes & condos had DOM of 60 days or less. Read more about how long it takes to sell a home…

Why did our clients do so much better than the typical seller in the St. Louis region?

Because we work hard to price our homes properly from day 1.

Rather than setting unrealistic dreams for our clients, we tell them the truth after we conduct a thorough pricing analysis. Knowing how much they can sell for allows our clients to make a decision about if they want to sell and if they should make improvements that will cost them money.

If they do decide to sell, they can make plans which are realistic.

We believe that it is about integrity.

We continue to sharpen our pricing analysis skills. We tell the truth, and then work hard to get our clients the best deal possible.

If every agent followed the same mantra, there wouldn’t be disillusioned sellers who have been trying to sell for months or overpriced homes on the market.

Possibly Related Posts:

1. St. Louis Housing Report ~ 2010 Condo Sales by Price Range (Part 4)
2. St. Louis Housing Report ~ 2010 Homes Sales by Price Range (Part 3)
3. St. Louis Housing Report ~ How Many Homes and Condos Failed to Sell? (Part 2)
4. Pricing Homes for Sale ~ How Much Should You Reduce the Price? (Part 3)

Don’t miss the beginning of this Series:

Part 1 – St. Louis Sales Trends from 2001-2010
Part 2 – How Many Homes and Condos Failed to Sell?
Part 3 – 2010 Home Sales by Price Range

Condo sales followed a similar pattern in St Louis City and County during 2010 except in the very high end of the price range, though the actual numbers of sold condos are small for properties priced over $300,000. St. Charles County’s sales distribution differed in that there were no sales above $500,000.

Regardless of the county, the majority of condos are selling between $100,000 – $200,000.

2010 Condo Sales by Price Range:

Take a look below to see how condo sales for the 3 major counties that make up the St. Louis region did in 2010. The charts below include condos, villas and cluster home sales that closed in 2010 and were listed in the MLS. The data is obtained through MARIS and deemed reliable but not guaranteed.

Is the Market Getting Better or Worse?

It depends on your price range and your county.

Compare the 2010 charts above to sales in 2009.

Highlights:

One interesting trend is that while the market share grew in all of the counties for properties under $100,000, it also dropped in moderate priced condos ($100,000-$299,999) in St. Louis City & County. This means that when you look at percentages, slightly more buyers purchased in the very low or high priced ranges this year in St. Louis City & County.

St. Charles County showed a different trend with the low end picking up more buyers while fewer buyers purchased over $300,000.

• St. Louis City:
  • 21% of condos sold for under $100,000 (compared to 18% in 2009)
  • 65% of sales were priced under $200,000 (compared to 70% in 2009)
  • 82% were priced under $300,000 (compared to 87% in 2009)
• St. Louis County:
  • 31% of condos sold for under $100,000 (compared to 25% in 2009)
  • 76% of sales were priced under $200,000 (compared to 79% in 2009)
  • 88% were priced under $300,000 (compared to 90% in 2009)
• St. Charles County:
  • 26% of condos sold for under $100,000 (compared to 20% in 2009)
  • 88% of sales were priced under $200,000 (compared to 89% in 2009)
  • 98% were priced under $300,000 (no change from 2009 sales)

Though there are clearly differences in the 3 counties for condo sales, the most dramatic difference is the difference in condo and single family home sales. With only 2,317 closed condo sales across all 3 counties, there is very low demand for condos compared to single family homes (15,474 closed sales). With only 13% of closed sales in the condo category, it’s simply much harder to sell a condo than it is a single family home. FYI…the number of sales dropped in both single family and condo sales from 2009 to 2010, but the 13% market share for condos stayed the same.

What does all this mean?

If you are trying to sell a condo, there just aren’t many buyers in any price range. If you aren’t priced between $100,000 – $200,000, it will be extremely hard to sell and you need to price it aggressively if you hope to get a contract offer. But in EVERY price range, you need to be competitively priced if you hope to sell at all.

If you are trying to buy a condo, you should have a lot to choose from compared to buyers of single family homes. With a high level of inventory available and very low demand for condos, buyers are getting great deals.

Part 5 – How Much did 2010 Home & Condo Sellers Come Down from their Listing Price?

Possibly Related Posts:

1. St. Louis Housing Report ~ 2010 Homes Sales by Price Range (Part 3)
2. St. Louis Housing Report ~ Sales Trends 2001-2010 (Part 1)
3. St. Louis Region Housing Market Report – 2009 Condo Sales
4. St. Louis Region Market Report 2008 – Condo Sales

Don’t miss the beginning of this Series:

Part 1 – St. Louis Sales Trends from 2001-2010
Part 2 – How Many Homes and Condos Failed to Sell?

For the last 2 years, I have reported that the majority of buyers were choosing lower priced homes and there was little demand in  higher price ranges.

Even with daily bad economic news, people continued to buy homes throughout 2008 and 2009. However, buyers concerned about the economy clearly made conservative spending choices. Homes appropriate for first time buyers and investors made up a big portion of the sales in the last 2 years.

2010 Home Sales by Price Range:

Take a look below to see how single family home sales for the 3 major counties that make up the St. Louis region did in 2010. The charts below include residential sales that closed between in 2010 and were listed in the MLS. The data is obtained through MARIS and deemed reliable but not guaranteed.

Is the Market Getting Better or Worse?

It depends on your price range and your county.

Compare the 2010 charts above to sales in 2009.

Highlights:

There isn’t much of a demand in any of the counties for high priced homes. The vast majority of homes that sold were priced below $300,000. However, there are big differences between the trends in St. Louis City, St. Louis County and St. Charles County.

All of the numbers are almost the exact same as in 2009, and I’ve noted the ones that showed a 3% or more change since last year.

• St. Louis City:
  • more homes sold under $100,000 than in any other price range (52%)
  • 87% of sales were priced under $200,000
  • 95% were priced under $300,000
• St. Louis County:
  • more homes sold under $100,000 than in any other price range (36%)
  • 66% of sales were priced under $200,000 (compared to 70% in 2009)
  • 82% of the homes sold under $300,000 (compared to 85% in 2009)
• St. Charles County:
  • 7% of sales were under $100,000 (dramatically lower than both other counties)
  • 60% of sales were priced under $200,000 (compared to 63% in 2009)
  • 87% of the homes sold under $300,000 (compared to 90% in 2009)

Even though there is a minuscule trend in St. Louis County and St. Charles County towards higher priced homes selling, the shift is barely noticeable. Given that the average sale price increased in St. Louis City & County in 2010 but there wasn’t an significant increase in the number of homes selling in the higher price ranges, it suggests that the bigger shift is within some of the price ranges away from the low end of the ranges.

If you are trying to sell a home that is priced over $300,000, less than 1 in 10 home buyers are looking in your price range. When you break it down by county, there just aren’t many buyers.

Let’s say you are trying to sell a house priced in the $600,000s in St. Louis County. About 2% of St. Louis County home buyers might be interested with only 1% of the region’s home buyers in the correct price range. With only 212 St. Louis County buyers closing on a home in this price point in the last 12 months…or 18 per month for all of St. Louis County, you can’t afford to overprice your home and miss out on the few buyers that are out there.

What does all this mean?

If you are trying to sell a home and it is priced above or below the average sale prices for your county, there just aren’t a lot of buyers. You need to consider pricing your home aggressively if you hope to get it sold. If you don’t need to move, it might be smarter to stay put for a year or two until sales pick up in your price range.

If you are trying to buy a home, don’t be surprised if you end up competing with other buyers if you are looking at the same price range as the majority of buyers. If you are in a position to purchase a higher priced home, you should be able to find a great deal.

Part 4 – 2010 Condo Sales by Price Range

Possibly Related Posts:

1. St. Louis Housing Report ~ 2010 Condo Sales by Price Range (Part 4)
2. St. Louis Housing Report ~ Sales Trends 2001-2010 (Part 1)
3. St. Louis Region Housing Market Report – 2009 Condo Sales
4. St. Louis Region Housing Market Report – 2009 Home Sales

Did you read Part 1 – St. Louis Sales Trends from 2001-2010

As we continue exploring the answer to “How is the St. Louis housing market doing?”, we need to consider 3 issues:

• how many homes are selling?
• how many homes are failing to sell?
• are prices climbing, falling or remaining flat?

We examined the first question in Part 1 of this series, plus we take another look at it below along with addressing how many homes are failing to sell.

How Many Homes are Selling…and How Many are Failing to Sell?

The charts below show the impact that the depressed housing market has had on the number of homes that have sold each year from 1999 to 2010.

In terms of supply & demand, fewer people buying homes means less demand and prices will remain low. Until more people start buying homes, the housing market won’t turn around.

Even more dramatic is the number of properties that failed to sell. Though the number of failed listings dropped in 2009, the trend reversed itself in 2010. The highest level of failed listings combined with the lowest number of properties selling in the last 10 years reflects that 2010 was a tough year for St. Louis sellers.

With over half of the the home sellers giving up or losing their home to foreclosure, simply putting a home on the market does not ensure a sale. Low demand combined with many options for the few home buyers out there means that only the homes priced appropriately for the features, condition and location will sell.

More Condos Fail to Sell than Single Family Homes:

The last few years have been hard on all St. Louis sellers, but condo owners have been harder hit than owners of single family homes.

There simply are not a lot of condos selling in today’s market.

The condo market also has a higher failure rate than single family homes.

In a market where 2/3 of listed condos will be taken off the market without selling, you can imagine the impact it has on pricing.

Condo owners who must sell (including banks who own foreclosed properties) will drop their price until they find a buyer. Anyone not willing to match the prices of the most motivated sellers will end up giving up without getting a contract offer.

The Charts Don’t Tell the Full Story:

Throughout the housing boom years, many agents got into the habit of canceling a listing so they could immediately re-list the property under a new MLS ID in hopes that the property would get buyer attention as a new listing. The technique wasn’t very effective at getting homes sold, but it didn’t stop agents from giving it a try when they had a property on the market that wasn’t getting showings.

A couple of years ago, the St. Louis MLS board cracked down on agents using this technique and it rarely happens anymore.

How Does This Procedure Change Impact the Charts?

Imagine we have a house that was put on the market and takes 200 days to sell.

Today, that house would have one MLS listing ID which would fall into the SOLD category. But in 2005, that home very likely would have 2 MLS listings (or more). At 100 days, the agent might have canceled the first MLS ID and immediately re-entered it into the system as a new listing. Under this practice, the home would show up as having one FAILED listing and one SOLD listing.

What this means is that the number of FAILED listings in the years before 2007 were inflated making the actual increase in failed listings more dramatic than the charts demonstrate.

Part 3 – 2010 Home Sales by Price Range

Possibly Related Posts:

1. St. Louis Housing Market ~ How Much Did Sellers Reduce their Price to Sell? (Part 5)
2. St. Louis Housing Report ~ 2010 Condo Sales by Price Range (Part 4)
3. St. Louis Housing Report ~ 2010 Homes Sales by Price Range (Part 3)
4. St. Louis Housing Report ~ Sales Trends 2001-2010 (Part 1)

How is the St. Louis housing market?

I get this question a lot. Over the next few days, I’ll be publishing several reports to answer that question.

Today’s charts come courtesy of Brian Copeland. Brian wanted to compare how a number of nearby cities were doing and he asked me to run the numbers for St. Louis. In return, he put together these charts for me.

NOTE: Brian wanted to compare cities as closely as possible, so he asked me to not include the outer ring suburbs. As a result, the charts below are based on sales in St. Louis City and St. Louis County only. Click on the charts to make them larger.

Highlights:

Single Family Homes:

While the number of single family homes sold each year has been dropping since 2006, the number of sales dropped dramatically in 2010. With 18,960 homes sold in the peak year (2004) and only 11,784 homes sold in 2010, it isn’t surprising that only the most aggressively priced sellers had offers.

At the same time, the average sale price increased for single family homes last year from $168,829 (2009) to $181,574 (2010).

Why are prices going up when fewer homes are selling?

Just because the average sale price went up, doesn’t mean that the value of your home went up.

My guess is that there were more current homeowners who decided to buy a more expensive home last year compared to the prior few years. The housing market became heavily weighted towards 1st time home buyers ever since the federal government established the housing tax credit for 1st time buyers in April 2008.

In November 2009, the tax credit was expanded to include some current homeowners, and that sent many people with bigger budgets in search of a new home. Then, the tax credit expired on 4/30/10. After 2 years of tax credits available for 1st time buyers, the number of 1st time buyers buying property dropped dramatically on May 1.

With fewer entry-level budget buyers purchasing homes, the average sale price was bound to increase.

Condos:

St. Louis condo sales followed the same trends as single family homes over the last 10 years. However, less than 1,700 condos sold last year compared to almost 12,000 homes.

With less than 1 in 10 buyers choosing a condo over a single family home, the only condos that sold were the ones that were priced the most aggressively.

One significant difference between single family homes and condos worth noting is when the market peaked. While both single family homes and condos had the highest average sale price in 2007, there was a big difference in sales volume. Home sales peaked in 2004 while condos sales were at their highest levels in 2006.

Final Thoughts:

Homes were definitely selling last year, but only the most motivated sellers who priced their homes appropriately got offers. The rest ended up either in foreclosure, leasing out the home, or deciding not to move.

Part 2 ~ How Many Homes and Condos Failed to Sell?

Possibly Related Posts:

1. St. Louis Housing Report ~ 2010 Condo Sales by Price Range (Part 4)
2. St. Louis Housing Report ~ 2010 Homes Sales by Price Range (Part 3)
3. St. Louis Home Sales Trends from 2006-2010
4. St. Louis Region Housing Market Report – 2009 Condo Sales