It has only been recently that economists started using the word “recovery” in the same sentence as “housing market” and now there is talk about a possible housing bubble? CoreLogic, in it’s June MarketPulse report, citing a 12.1 percent increase in their home price index from April 2012 to April 2013 cautioned that the double-digit home price gains “prompt caution” and makes some ask “are we witnessing a new housing bubble?”
The CoreLogic report encompasses the largest metro areas in the U.S. so I decided to look at the St. Louis area specifically to see if what we are seeing here, in terms of St Louis home price gains, is cause for concern. In the table below, you can see the one year change in home prices for the 5 main counties of the St Louis MSA on the Missouri side of the river for the period ended April 2013 (same period as the CoreLogic report).
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Source: MORE, REALTORS – Based on information from Mid America Regional Information Systems, Inc., for the period April 2011 through April 2013
In looking at the St Louis home price gains shown above, it is interesting that 4 of the 5 counties shown have home price increases higher than the 12.1 percent in the CoreLogic report that they felt was cause for concern. In addition, all 5 counties showed increases in home sales, with 3 of the 5 being in the double digits. So, do the price gains above show St Louis is headed for another housing bubble? That is hard to say without more data, so I decided to also do as the CoreLogic report did for U.S. home prices, and look at the change in St Louis home prices from the peak in 2006 to the present. The chart below shows this data for the five counties.
Source: MORE, REALTORS – Based on information from Mid America Regional Information Systems, Inc., for the period April 2006 through April 2013
As the table above shows, we can see that, even though 4 of the 5 counties has seen double digit price gains in the past year, St Louis City, St Charles County and Jefferson County are still more than 10 percent below the 2006 peak (the city of St Louis still down almost 30%) and Franklin County is just under 10% at 9.74. St Louis County is the only county with home prices even nearing the peak of 2006 and, in fact, are only down about 6.5 percent from that peak.
Based upon everything above, I can’t say I’m too concerned about a St Louis housing bubble at this point, or at least not in the 5 counties addressed herein with the exception being St Louis County which I think we need to perhaps take a closer look at.
Sometime in the near future I’ll take this one step further and chart out where St Louis home prices “should be” now, based upon historic data and show how that compares to where St Louis home prices are currently. Be on the look out….
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