When will the St Louis real estate market crash?

What strange and confusing times we live in! Some seemingly credible predictions made by qualified experts suggest that our banking system could collapse, our currency may become worthless, and our country may face a significant downturn. Meanwhile, others claim that there is no cause for alarm. Here in St. Louis, the real estate market continues to thrive as if everything is great in our economy, despite the fact that interest rates have doubled in the past year. I have been in this business for 43 years, and although I have seen many ups and downs in the market, I have never seen anything quite like this before. It appears that there is a stark dichotomy between the economy and the St. Louis real estate market at present, as if they are two entirely separate entities. Could this be the result of the low inventory and high demand for housing, leading homeowners to throw caution to the wind? Or is it possible that the St. Louis economy is stronger than the national economy? Whatever the reason may be, despite talk at the national level of a looming housing market crash, the St. Louis real estate market continues to thrive.

Is the St Louis real estate market going to crash?

Now, onto the question of whether the St. Louis real estate market is going to crash. This is a fair question, given the current issues outlined above. However, so far, there are no clear signs of a crash. That’s not to say that there won’t be any changes to the market, as I believe we’ll see some, but nothing that indicates a crash is imminent at this point. Almost a year ago, I wrote an article in which I stated that “I don’t think St. Louis home prices will come crashing down, in fact, I don’t even think they are going to decline necessarily.” This prediction has proven to be accurate. However, I also said in that same article that “I think the premiums buyers have paid over and above the value of the home they were buying are going to quickly come to an end,” and this has proven to be inaccurate.

Despite my prediction, there are still bidding wars happening between buyers on new listings. The STL Market Chart table below shows that last month, the median price of homes sold was equal to 100% of the current list price at the time of sale. Given that the median is indicative of the midpoint of the frequency of values, if the midpoint is 100%, then it appears that plenty of homes are selling in excess of the list price.

The data for the St. Louis real estate market shows that there is a strong buyer demand. In addition, the market is facing the persistent issue of low inventory. These factors have contributed to the resilience of the St. Louis housing market, making it unlikely to succumb to a crash at this point. However, if there is increased economic uncertainty, inflation, and rising interest rates, we may reach a tipping point and see St. Louis home prices decrease. Despite this possibility, it is unlikely to happen anytime soon based on current data.

St Louis 5-County Core Market Home Sold Data for March 2023

The inventory of homes for sale continues to be low…

As the table below illustrates, as of today there is less than a one-month supply of active listings in the St Louis 5-County Core market, well below the historical norm of 5 to 6 months.

St Louis 5-County Core Active Listing Data As Of April 27, 2023

Homebuyer demand continues to decline…

The number of home buyers in the St Louis market has declined over the past couple of years. However, due to the low inventory of listings, this has not had a negative impact on home prices. According to the STL Real Estate Trends Reports below, there were 3,075 new offers accepted last month, which is down 13% from last year, down 27% from March 2021, and down 24% from March 2020.

One could argue that the number of offers declining is not indicative of buyer demand, but more due to declining inventory. However, this would be an incorrect statement. Inventory actually increased by 21% from March 2022 to last month, so while the inventory increased, new contracts declined by 13%. This indicates less buyer demand.

Accepted contracts last month declined by 27% from March 2021, even though the inventory for those two periods is the same.

STL Real Estate Trends Report – New Accepted Offers

For the Month of March – 2020-2023

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