Did you know that you can save some serious money on your homeowners insurance with the right combination of smart technology? Not only can you save some money, but you can make your life safer and more convenient. Did you know there are roughly 50 million households with smart tech and the number one device present in these homes has nothing to do with saving money, convenience, or safety? Weird, I know. More on that later. Today, I’ll cover a few of the smarter items that can be integrated into your home that could pay for themselves.
More than 50% of all washing machine water damage claims can be traced back to a supply hose failure. How much water might that be? In most homes, it can be about 600 gallons of water. Per hour. You might be thinking, “I always turn off the valves before we go on vacation”. That’s definitely a good practice but what about before you go to bed? How about before you go out to dinner? Grocery shopping? What about your dishwasher valve? Did you turn that one off?
Lou Darden, with Kreismann Bayer Insurance Agency Inc. says, an automatic water shutoff is a big deal. “The discount could be anywhere between 10-15% annually.” Considering the hundreds of dollars you can save if you factor that over the lifetime of a home, it more than pays for itself. In addition to the savings, the number two claim they usually see on homeowners insurance is water related damage (whether it’s a leak or back up). So, if you’re not interested in receiving a non-renewal notice or having your premium increase by about 10%, water sensors in combination with an auto shutoff valve would be a smart choice. Some of the shutoff devices don’t need a plumber to be installed but if you’re not mechanically inclined, hire someone that is. Don’t forget, with a claim comes your deductible payment and that is just more money you could have kept in your pocket.
Let’s talk smoke and carbon monoxide detectors. You have them, right? Do yours report to a central monitoring station that sends the fire department when they’re triggered? Having these detectors not only save you insurance money, but they can save your life and help prevent catastrophic damage. Additionally, when the detectors are integrated with a smart thermostat, you can setup your HVAC system to shut down when the system senses fire or smoke. This feature is rarely thought of in residential settings but it’s important. You don’t want to send smoke through your ductwork to other parts of the house that might be unaffected. Plus, moving air will just help the fire burn.
You might be wondering what all this has to do with real estate. Well, the fact is insurance claims on your property also affect your property’s marketability. Some buyers don’t want a house that has had insurance claims related to water and fire. And, sometimes, too many claims lead to your home becoming uninsurable for future buyers.
These are just a few of the more important smart technologies that can get you some serious returns on your investment—unlike a smart tv which is the #1 piece of smart tech in U.S homes. To find out MORE about insurance savings, contact Lou Darden.
Interested in knowing MORE about Smart Home tech? Contact the only Smart Home Certified CRS agent in the Greater St. Louis area. *
*Based upon actual knowledge the author has at the time of publication”;
Interested in knowing MORE about Smart Home tech? Contact the only Smart Home Certified CRS agent in the Greater St. Louis area*.
*Based upon actual knowledge the author has at the time of publication
There were 4,486* building permits issued for new single-family homes in the St Louis area during the 12-month period ended August 31, 2022, a decrease of 8.93% from the same period a year ago when there were 4,926 permits issued, according to the latest data from the Home Builders Association of St. Louis & Eastern Missouri (St Louis HBA). Six of the seven counties covered in the report saw a decrease in building permits from the same period a year ago with four of the counties have a double digit decline.
*The city of St Louis did not report building permit data for August 2022. Last year there were 54 permits issued in August, if we assume the same number for this year, the City of St Louis would of had an increase of 5.6% for the period, and the overall drop in building permits for the St Louis area would have been 7.8% rather than the 8.93% shown…
A little over two weeks ago I wrote my most recent article addressing St Louis home prices titled “Will St Louis Home Prices Decline?” in which my short answer was “yes”, but kind of tongue in cheek and based upon the seasonality of home prices, but my longer answer was more vague. I mentioned that there certainly is a correction coming but pointed out that there are so many variables that will affect prices that it is hard to say to what extent this correction will be. While this is still true, a lot has happened in the short time period since that article that has caused me to become more bearish on the St Louis real estate market to the point where I’m confident St Louis home prices will decline.
What has changed in the last 16 days…
While it doesn’t directly impact the St Louis market, hurricane Ian has wreaked havoc on a lot of Florida and other areas and will no doubt impact the overall housing market and economy and likely in more of a negative way.
Interest rates have risen another 1/2% hitting and staying near 7%.
The Mortgage Bankers Association (MBA) just announced that mortgage applications dropped over 14% during the last week of September, the biggest one-week drop in 17 months and pushed their index down to the lowest point since 1997.
The percentage of active listings that have reduced the asking price at least once broke the 40% mark.
The 12-month home sales trend for St Louis for the period ending September 30, 2022 fell to the lowest point in over 2-years.
Active listings in St Louis have been for sale a median of 43 days over four times higher than the median time to sell during the past 2 years of 10 days.
Market data pointing to lower St Louis home prices…
The declining sales trend mentioned above. As chart 1 below shows, home sales during September in St Louis were down nearly 19% from last September.
The declining home price trend. Chart 1 also reveals the median price of homes sold during September 2022 was $267,500, only 2.8% from then September 2021 when the median sold price was $260,000 which was a 8.3% increase from September 2020 when the median price was $240,000.
Showings on active listings continues to decline. Chart 2 shows there are almost 10% fewer showings of active listings now then there were in the first week of January (the slowest time of the year). Last year at this time showing activity was over 30% higher than now and in 2020 it was abut 55% higher. Fewer showings mean fewer sales in coming.
The widening gap between home prices and rental rates. Chart 3 shows the home price index (blue line) rising above the rental rates (red line) at a fairly steep rate. Historically, such as the late 1980’s – 2000 shown on the left side of the chart, these two lines track closely with home prices slight below the rental rates line. The last time home prices started increasing more than rents was in the early 2000’s and this continue until the gap widened to the point that something had to give…either home prices had to fall or rents had to increase. In 2008, the bubble burst and home prices fell. While the present gap is not as large as it was during the height of the housing market bubble in 2006-07, we’re headed that way.
CPI and St Louis Home Price Index are hitting bubble levels. Chart 4 shows the rate of change (year over year) in CPI and the St Louis home price index. The rate of change in both has already exceeded what in the past (with the exception of 1979 when it went a little higher) has triggered home prices to fall.
Home price and interest rate increases are killing St Lous home affordability. Table 5 shows that currently, based upon median home prices and interest rates, one year of house payments (principal and interest only) take about 30% of the median household income for St Louis. In 2007, at the peak of the housing bubble, it was only 21% and in 2000, which many economists use as a “normal” or baseline year, it was 20%. So the real cost of a typical St Louis home to a typical St Louis family is about 50% higher now than normal.
There are many headlines out there talking about home sales down 20% from last year on a national level but here in St Louis we are not seeing as large of a decline in home sales. As the chart below shows, for the 12-month period ended August 31, 2022, there were 27,891 homes sold in the St Louis 5-county core market, which as the trend line (dark green) depicts is a declining trend we’ve seen for the past 11 months now. This 12-month trend is the lowest trend since September 2020 when there were 27,572 homes sold in the prior 12-months. However, year to date there are have been 17,480 homes sold in the St Louis area (lighter green line on the chart) which is only a little over 9% less than this time last year when there were 19,875 homes sold.
St Louis 5-County Core Market – 12-Month Home Sales Trend and YTD Home Sales
Today, the interest rate for a 30-year fixed-rate mortgage hit 7.08% marking the first time in over 20-years the rate has gone above 7%. Historically speaking, as the 2nd chart shows, this is not that high of an interest rate and, in fact, lower than the median rate over the past 50 years, however, it’s a very high rate based upon the the recent past.
The affect of interest rates on home prices…
Interest rates just began increasing in the past few months, rising above the 4% level in February, so it will take time to see the impact of this on home prices. We’re beginning to see the effect in prices somewhat, particularly with the decrease of “overbids” and an increase in reduced prices on active listings, but nothing too dramatic yet. For example, as the bottom chart shows, the median price of homes sold in St Louis in August was $280,000, a nearly 11% increase from the median price of $252,450 a year ago. Since home prices typically peak around June, they are usually lower in August than June or July. If we examine this to see if perhaps there was a bigger decline in those months this year than last we find that last year prices dropped 3/4 of 1% from June to July and then dropped 4% from July to August, for a total decline of 4.7% from June’s peak to August. This year, prices dropped 3.9% from June to July, then 1.7% from July to August for a total decline of 5.6%, only slightly higher than last year. I do think we’ll see a larger impact than this, but thus far it’s not so bad.
Mortgage Interest Rates Based Upon the MND Rate Index
It’s no secret that the real estate market slows down in the winter and typically nearly screeches to a halt from shortly before Christmas to shortly after New Years. Therefore, when tracking showing activity in the St Louis area, the first week of January of each year is used as the base, or “0” value and then each rolling 7-day period afterward is compared to that first week.
As the chart below shows, in 2020 and 2021 all weekly averages of showing activity were above the baseline of January until getting close to Thanksgiving, with the one exception being late March and Early April of 2020 which was a result of the COVID-19 pandemic beginning. The orange line depicts this year and it shows showing activity all year has been below the levels of the prior two years for the most part, even dropping below January levels five times so far this year and has spent the bulk of September below the January levels. For the most recent 7 day period, ended September 25th, there were over 4% fewer showings in the St Louis area than during the first week of January this year.
Listing Showing Activity For the St Louis Metro Area (along with other markets served by MARIS)
The short answer is yes. They decline every year as we head into winter due to the seasonal nature of the business. If you look at the first chart below which depicts the median price of homes sold in the St Louis 5-County core market since 1998, you will notice a very consistent pattern of prices rising in the spring and summer, then declining in the fall and winter. For the most part, the other pattern you will see is that the peak each spring is higher than the spring before and the bottom each winter is higher than the winter before, but there are exceptions to that such as after the bubble burst in 2008.
So, as we head into the fall season, we can expect home prices to decline. The question is, given all that is going on in the economy, including mortgage interest rates in excess of 6%, will the decline be more than the typical “seasonal adjustment”? To address this, the first thing we can look at is the percentage decline we’ve seen in the recent past from the summer peak to September which is as follows:
2019 – Summer peak to September –10.9%
2020 – Summer peak to September – 0% (no change)
2021 -Summer peak to September –1.9%
2022 -Summer peak to September –10.2%
What this reveals is this years decline, while definitely larger than the last two years, is actually less than the decline in 2019 (which was a good market) so this doesn’t jump out as particularly alarming. I think it’s worth saying that we are no doubt going to have a market “correction” or “adjustment” at a minimum because home prices could not simply keep increasing like they have been so this years seasonal adjustment may just be a return to normal. Having said that though, since the “bottom” of the winter market price-wise doesn’t usually come until January or February, we will need to watch the next couple of months to see if this downward price trend remains consistent with historic norms or in fact picks up steam and looks like it’s headed for a bigger decline than normal. My guess is at this point it the latter. While I’m not a “gloom and doomer” in fact, I like to think of my self as an opportunist and see opportunities in challenging markets, I just think I’m being realistic. There are a lot of moving balls in the air right now with regard to our economy and more unknowns than certainties in my opinion.
We can’t underestimate the impact of interest rates either…
On Monday of this week, a federal lawsuit was filed in the United Status District Court for the Western District of Washington by Natalie Perkins and Kenneth Hasson against Zillow Group, Inc. and Microsoft Corporation. The suit was filed as a class action complaint on behalf of “All natural persons in the United States and its territories whose Website Communications were captured through the use of Session Replay Code embedded in Zillow’s website”.
In the complaint, the plaintiff’s allege that the defendants, Zillow and Microsoft, violated the Washington Wiretapping Statute (Wash. Rev. Code §9.73.030, et. seq.) through the use of Microsoft’s Session Replay Code “…on Zillow’s website to spy on, automatically and secretly, and to intercept Zillow’s website visitors’ electronic interactions communications with Zillow in real time”. The second Count of the complaint, Invasion of Privacy – Intrusion Upon Seclusion, alleges that, using the same code as well as other methods which violated the plaintiff’s “…reasonable expectation of privacy in their Website Communications..” which violates the plaintiff’s “….right to privacy is also established in the Constitution of the State of Washington which explicitly recognizes an individual’s right to privacy under Article 1 §7.”
The lawsuit is asking the court for relief in the form of a judgment as follows:
A. Certifying the Class and appointing Plaintiffs as the Class representatives; B. Appointing Plaintiffs’ counsel as class counsel;
C. Declaring that Defendants’ past conduct was unlawful, as alleged herein; D. Declaring Defendants’ ongoing conduct is unlawful, as alleged herein;
E. Enjoining Defendants from continuing the unlawful practices described herein, and awarding such injunctive and other equitable relief as the Court deems just and proper;
F. Awarding Plaintiffs and the Class members statutory, actual, compensatory, consequential, punitive, and nominal damages, as well as restitution and/or disgorgement of profits unlawfully obtained;
G. Awarding Plaintiffs and the Class members pre-judgment and post-judgment interest;
H. Awarding Plaintiffs and the Class members reasonable attorneys’ fees, costs, and expenses; and
I. Granting such other relief as the Court deems just and proper.
The entire lawsuit filing, NATALIE PERKINS and KENNETH HASSON, individually and on behalf themselves and of all others similarly situated, Plaintiffs, v. ZILLOW GROUP, INC. and MICROSOFT CORPORATION, can be accessed here.
There were 4,600 building permits issued for new single-family homes in the St Louis area during the 12-month period ended July 31, 2022, a decrease of 8.06% from the same period a year ago when there were 5,003 permits issued, according to the latest data from the Home Builders Association of St. Louis & Eastern Missouri (St Louis HBA). Five of the seven counties covered in the report saw a decrease in building permits from the same period a year ago with three of the counties have a double digit decline.
The 12-month home sales trend in the St Louis 5-county core market declined in August to 27,840 homes sold in the 5-county area during the prior 12-months, marking the lowest 12-month sales number since September 2020. As the chart below illustrates, the 12-month home sales trend in St Louis has declined now for 11-months in a row landing just slightly higher than the 12-months sales of 27,573 for September 2020.
The St Louis home sales trend is still higher than any period after August 2006 and prior to September 2020…
At the current level, the St Louis home sales trend is slightly above the trends prior to September 2020 going back to the peak of the bubble in August 2006 when there were 27,974 homes sale in the prior 12-months. However, if it declines further will be in the range of the years 2016 through mid-2020.
St Louis Home Price Trend Outpacing Sales…
The chart below also shows the median price per foot for homes sold during the prior 12-month period. As it shows, the home price trend has continued to increase while the sales trend has been declining however that changed in June when the price trend started declining. If you look back t prior years you will see that is earlier than when the normal seasonal adjustment comes so it is likely indicative of the market.
There have been 21,164 homes sold in the St Louis Metro area during the first 7-months of this year which, as the STL Market Chart below illustrates, is a decline of 10.7% from the same time last year when there were 23,709 homes sold.
2022 home sales fairly consistent with 4 out of 5 prior years…
As I stated above, St Louis YTD home sales are lagging behind last year however, last years sales appear to be the market peak and the difference, as shown below, between current YTD sales and the years prior to last year is not as significant.
Through July 2020, there were 21,344 homes sold in the St Louis MSA, less than 1% more than this year.
Through July 2019, there were 21,702 homes sold in the St Louis MSA, 2.5% more than this year.
Through July 2018, there were 22,095 homes sold in the St Louis MSA, 4.4% more than this year.
Through July 2017, there were 21,994 homes sold in the St Louis MSA, 3.9% more than this year.
St Louis slowing home sales trend appears to increasing….
Below the chart is our STL Market Report for the St Louis metro area, which shows there were 40,171 homes sold during the 12-month period ended July 31, 2022, a decline of nearly 6.5% from the prior year. This, in contrast to the double-digit decline noted above for the most recent 7-months of that 12-month period indicates that the slowing home sales trend is increasing. We’ll get a lot more clearer picture of this in the next month or two as we see what happens in the economy, interest rates, etc.
We continue to see more price reductions on listings, or, as some agents prefer to refer to them as “price improvements”, throughout the St Louis area. As the infographic below depicts, as of today one-third of the active listings in the St Louis 5-County core market have a current asking price that is below their original price.
Apparently a lot of consumers are concerned about the housing market crashing or at least concerned enough to be online searching for answers. According to Google Trends the search phrase “Will The Housing Market Crash?” has hit it’s 5-year peak in terms of interest level during the last 4-5 months. In addition, according to Google Adwords tools, there are 10,000 – 100,000 searches for month for the phrase “Will The Housing Market Crash?” and 100,000 – 1,000, 000 monthly searches for “housing market crash“.
Will there actually be a housing market crash in St Louis?
I guess first we should define “crash” as the word itself sounds rather harsh. But if we agree that a market crash would be less severe than the housing market bubble burst we witnessed in 2008, then I would say a “crash” is more likely than a bubble burst. However, what may seem like a crash in the St Louis housing market may in fact not be as much of a crash as well as a correction. Given that the St Louis real estate market has been flying high for a few years now and many seller’s have felt like they died and went to heaven and buyer’s just felt like they died from the competition and difficulty in buying a home, a correction is really needed.
How bad will the St Louis housing market correction be?
I saw dozens and dozens of headlines yesterday reporting that mortgage interest rates had fallen below 5% on a 30-year fixed rate mortgage. The catch is on the day that was reported, yesterday, interest rates were actually above 5% on a 30-year fixed-rate loan. As our chart below shows, the MND Rate index was reporting 5.09% and, below that, Optimalblue was reporting 5.326%. Both of the aforementioned charts are updated daily and considered by many in the industry to have the most current and accurate information.
How could all the big headlines be wrong?
Well, actually the articles I scanned were not wrong in what they were reporting, the headline would just give many home buyers a different impression perhaps than what was actually being reported. What prompted the headlines was yesterday, like every week on Thursday, the Freddie Mac Primary Mortgage Market Survey® (PMMS®) results were released. In Freddie Mac’s report, it showed the average 30-year fixed rate mortgage was 4.99% (see the Freddie Mac chart at bottom). The catch is, the survey is done from Monday through Wednesday of the week and then the results reported on Thursday. Many lenders submit their rates to Freddie Mac on Monday meaning by the time the report comes out they are 3-days old. A lot happens in the mortgage market in 3-days, in fact a lot can happen during one day. Oh yeah, the other thing worth noting is if you read the details on the Freddie Mac survey the stated rate was only obtained by paying 0.80 in points, so 8/10 of 1% of the loan amount would be paid up front to get that rate.
Freddie Mac’s Survey Is Very Valuable and Relevant
During the 14 year period prior to the housing bubble bursting in 2008, there were 92,065 building permits issued for new single family homes in the 3 most active home building counties in St Louis. As the table shows below, over half the permits issued during that period were in St Charles County alone, with the other half in the counties of St Louis and Jefferson.
Needless to say, when the housing bubble burst in 2008 and the market collapsed, new home construction came to a screeching halt. However, after about 5 years, the market quickly regained lost ground and for the past several years it seems home builders couldn’t build homes fast enough. We’ve had a low inventory of homes for sale for so long it’s starting to seem normal. But still, over 14 years have passed since the bubble burst and we are still way behind on new home construction. In the 14-year period after the bubble burst, there have been 40.528 building permits issued for new single family homes in the St Louis area counties mentioned above, a decline of nearly 56% from the prior 14-year period.
St Louis New Home Building Permits -1994 through 2007 and 2008 through 2021
There were 4,516 building permits issued for new single-family homes in the St Louis area during the 12-month period ended June 30, 2022, a decrease of 12.05% from the same period a year ago when there were 5,135 permits issued, according to the latest data from the Home Builders Association of St. Louis & Eastern Missouri (St Louis HBA). Five of the seven counties covered in the report saw a decrease in building permits from the same period a year ago with three of the counties have a double digit decline.
Maybe you’ve received an unsolicited offer recently to buy your home via email or postcard from Opendoor, a home buying firm. OpenDoor will make an offer on your house, bypassing the traditional method of selling your home via a REALTOR® using the MLS (which reaches 13,000+ REALTORS®) and entices you with catchy phrases on their website like “Get an instant offer and get paid” and “Skip showings and repairs”. It can sound good and SIMPLE but, according to the FTC complaint against OPENDOOR LABS, Inc. (Opendoor) and the agreement and consent order, “…consumers who sold to Opendoor have lost money compared to what they would have received through a traditional sale.”
According to the latest data from HUD and the US Census Bureau, there is a 9.3 month supply of new homes for sale in the U.S. as of June, 2022. As the chart below illustrates, this is the largest supply of new homes for sale since May 2010 when there was also a 9.3 month supply. It wasn’t that long ago, August 2020 to be exact, when the supply hit a record low level of 3.3 months.
St Louis New Home Supply is a little lower…
It’s a little hard to pinpoint the new home supply in St Louis for several reasons. One, not all new homes that are for sale are listed in the MLS and then the MLS allows new homes to be listed in two categories, both new construction and normal residential, so that can skew the data as well. Nonetheless, we do the best we can to sort through the data. As our table at the bottom shows, there is currently a little over a 7-month supply of new homes for sale in St Louis, so still higher than a historical “norm” but about 2-months less than at the national level.
Interest rates on a 30-year fixed-rate mortgage peaked at 6.28% a little over a month ago on June 14th, sending shockwaves through the St Louis housing market. After peaking however the rates have subsided, today dropping to 5.5%, the lowest rate since July 5th. This decline brings the mortgage rates down to the range they were I for most of May this year.
The inventory of homes for sale in the St Louis core market area increased to a 1.04 month supply in June 2022, an increase of nearly 12 percent (11.8%) from a year ago when there was a 0.93 month supply. As our chart below illustrates, this is the first time since August 2019 there has been a year-over-year increase in inventory and then the increase was just 3.1%. While a double-digit increase is significant, we do need to keep in mind that, at just over a one-month supply of listings for sale is still crazy low! The median listing supply in St Louis was 3.5 months in 2015, 2.9 in 2016, 2.5 in 2017, 2.4 in 2018, 2.6 in 2019 then dropped to 1.5 months in 2020 and down to a record low 1.2 months in 2021. So, even after this double-digit increase we are still at a level this even low by last year’s record low standards.
St Louis 5-County Core – Year Over Year Percentage Change In Listing Supply
If you’re heard it once, you’ve likely heard it a hundred times, “all real estate is local”. This is why you can’t put too much faith in national news or data if you are interested in buying or selling a home in St Louis. This is also why at MORE, REALTORS®, we put so much time, effort and money into producing the best and most accurate local data we can. We think it’s important to bring the data and information down to the local level.
“Homebuyers are canceling deals at highest rate since start of COVID” was the headline earlier this week on Inman News, an online real estate industry publication read by many brokers and agents. My usual response to news like this is “I wonder if that’s true in St Louis?” and I set out to pull the data to see.
There is not really a way to count “canceled” deals…
While I don’t know exactly what the writer of the Inman article was referencing in terms of “canceled” deals. However, in a typical contract to purchase a home in St Louis only gives the purchase one way to “cancel” a contract and that is in the building inspection contingency where the purchaser has the right to terminate the contract for no reason. When that happens it is not reported to the REALTOR® Multiple Listing Service (MLS) as a “canceled” listing however, it is simply put back on the market. There are certainly other reasons contracts fail and listings come back on the market such as the buyer’s inability to get financing, appraisal issues, etc.
Price reductions are quickly showing up more and more on real estate listings in the St Louis area. As the Infograph below illustrates, 31% of the current active listings in St Louis have had at least one price reduction. Since the price homes sell at isn’t known until closing and a home sale typically takes 4 to 6 weeks to close, the actual sold prices won’t reflect these price reductions for a while. For example, in the past 30 days (through today) there have been 2,381 closings of home sales in the 5-county St Louis core market at a median price of 104% of the original list price. In about a month we’ll revisit that stat and see how things look.
Ever heard the expression “It’s not if, but when..”? That is something that I’ve heard for a while now about a recession. With everything that has happened to our economy including rising interest rates, rising inflation, the government printing more and more currency and running up greater debt, it seemed inevitable we would see a recession. To officially be in a recession, the GDP (Gross Domestic Product) has to fall for two successive quarters. For the first quarter of this year, GDP declined at an annual rate of 1.6%. The second quarter GDP numbers won’t be released until later this month (July 28th) however, the GDPNow forecasting model of the Federal Reserve Bank of Atlanta is forecasting a decline of 2.1% in GDP for the 2nd quarter of this year at this point. If their forecast is correct, we will officially be in a recession.
What happens to St Louis home prices during a recession?
There are many factors at play in every recession that make them unique, such as unemployment rates, interest rates, etc, making it unrealistic to think that home prices are going to behave the same way during every recession, however, I thought it would be worth looking at what happened during the last couple of recessions.
2020 Recession (Q1 and Q2)
We had a short recession in early 2020 caused primarily by COVID that only lasted the minimum period of two quarters. During this period, as the chart below shows, St Louis home prices continued to increase at a fairly consistent rate. In 2019 the median price of a home in the St Louis MSA was $188,575 and in 2020 it was $208,000, an increase of 10.3%. Then in 2021, the year after the recession, the median St Louis home prices was $227,000, an increase of 9.1% from the year before.
It’s no secret that the real estate market slows down in the winter and typically nearly screeches to a halt from shortly before Christmas to shortly after New Years. Therefore, when tracking showing activity in the St Louis area, the first week of January of each year is used as the base, or “0” value and then each rolling 7-day period afterward is compared to that first week.
As the chart below shows, in 2020 and 2021 all weekly averages of showing activity were above the baseline of January until getting close to Thanksgiving, with the one exception being late March and Early April of 2020 which was a result of the COVID-19 pandemic beginning. The orange line depicts this year and it shows showing activity all year has been below the levels of the prior two years for the most part, however, the gap has widened in the past couple of weeks. On July 4th, for the prior 7-day period the number of showings was less than the first week of January and it dipped further on July 5th to 6.9% fewer showings during that 7-day period than the first week of January. Granted, it is always going to dip around a holiday but last year for the period ended July 5th there were 9.1% more showings than the first week of January, for a difference of 16% from this year.
Rising interest rates and increased inflation are no doubt two of the big reasons for this along with a low inventory of homes for sale.
After hitting the highest rate in over 13 years just two weeks ago at 6.28%, as the chart below shows, mortgage interest rates on 30-year fixed mortgages declined today to 5.75%. The likelihood of interest staying under 6% is hard to to say at this time but I would say enjoy it while it lasts!
Mortgage Interest Rates – 30 and 15-Year Conventional Loans, FHA Jumbo and and 5/1 ARM Loans
Price reduction, what’s that? All we seem to have heard about the last couple of years with regard to home prices is how much OVER the list price buyers were having to pay in order to buy a home. So, to be talking about price reductions today seems odd. However, as the infographic below illustrates, there have been listings with price reductions over the past couple of years, it’s just the current level of them is higher than we have seen in a while.
For the first three weeks of June there were 1,475 new listings of homes for sale in the St Louis 5-county core market, according to the STL Real Estate Trends Report from MORE, REALTORS®. During the same period, there were 1,194 new contracts written on homes for sale resulting in a new listing to new contract ratio of 1.25. This ratio of listings to new sales is higher than it was 3 weeks ago when I shared the last update from the STL Real Estate Trends report and it was 1.05 at thattime for the period reported which was the first 3 weeks of May.
It was at the end of last week that the mortgage bond market blew apart forcing mortgage interest rates up so when our new report for this week is release next Thursday we’ll see what effect that had on the market.
After over 40 years in the real estate business in St Louis I’ve seen many times just how fast a good, or even great housing market can turn sour as well as the other way around. Two years ago, economic conditions relevant to the housing market included:
A St Louis housing market that is showing signs of slowing as well as concern and even fear among real estate agents and consumers.
Does this mean St Louis home prices will come crashing down?
First off, I’m not an economist, in fact I didn’t even attend college and I certainly don’t have a crystal ball showing me the future, but I am a data junkie that has lived through a variety of markets spanning more than 4 decades. My experience as well as my study of past markets as well as current indicators of things to come certainly give me an opinion. In times past, my opinions on the market have been spot on, almost to the point that I even surprised myself (such as in October 2006, at the peak of the housing boom when I predicted the collapse) and other times I’ve been wrong, sometimes way wrong. The reality is that the housing market is affected, or can be affected by so many different economic factors, as well as social issues, consumer sentiment and more that I don’t believe anyone can predict what it’s going to do accurately consistently.
The bond market had one of the worst days in history yesterday resulting in mortgage interest rates on a 30-year fixed rate mortgage hitting 6.0% and above. This is the highest rates have been since November 20, 2008 when the mortgage interest rates were 6.04%, according to Freddie Mac’s Primary Mortgage Market Survey®.
Is there a silver-lining to the higher interest rates?
Given that the reason for the higher interest rates has to do with our high inflation rates and declining economic conditions, it’s hard to find much positive to say about what is happening. Having said that, the one thing that comes to mind is these rate increases will no doubt slow down the rapid price growth on homes we’ve seen over the past couple of years. This will likely cause home prices to flatten and the premiums buyers have paid over and above what the buyer, seller and agents involved knew the home was actually worth are history in my opinion.
So, while as a buyer, you will be facing higher interest rates than you would have a year ago, you should receive some relief in the price not being as high as it would have if the low rates were still here, less competition due to some buyers leaving the market and being able to purchase a home without paying a significant premium above the value to get it.
Missouri Online Real Estate, Inc. 3636 South Geyer Road - Suite 100, St Louis, MO 63127 314-414-6000 - Licensed Real Estate Broker in Missouri
The owner and authors this site are providing the information on this web site for general informational purposes only and make no representations, warranties (expressed or implied) or guarantees of any kind whatsoever, as to the accuracy or completeness of any information on this site or of any information found by following any link on this site. Furthermore, the owner and authors of this site will not be liable in any manner whatsoever for any errors or omissions in information on this site, nor for the availability of this information. Additionally the owner and authors of this site will not be liable for for any losses, injuries or damages in any way from the display or use of this information or as the result of following external links displayed on this site, or by responding to advertisements displayed, or contained, on this site
In using this site, users acknowledge and agree that the information on this site does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of the tax information on this web site is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.
All of the information on this site is provided as is, with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
This site contains external links to other sites not owned or controlled by the owner of this site, therefore the owner of this site does not control or guarantee in any manner the accuracy or relevancy of any information obtained through following such links. Links contained on this site are for users convenience and users should exercise extreme caution when following links. Including a link on this site does not constitute an endorsement of the site linked to or any views or opinions expressed on the site, products or services offered on outside sites or the companies or organizations that own and operate outside sites.
This site may accept payment for advertising, for displaying advertisements, through affiliate relationships with companies or may receive referral fees or commissions from companies as a result of recommending or referring people to a website. This site may also accept free product samples, free services, gift cards or cash to review a product or service. All paid and sponsored content may not always be identified as such. Any product claim, quote or other representation about a product or service should be verified with the manufacturer or provider.
