The Real Cost of a Home In St Louis Is Lower Now Than It Was In 2006

You are probably saying I’m nuts to be saying that a home in St Louis costs less today than it did 13 years ago, back in 2006, but, note I said the “real cost” of a home.  Since nearly all people buying a typical home in St Louis are going to do so with a mortgage, I think to really determine the cost of a home, and certainly, it’s affordability, we have to look deeper than just the price.  Therefore, as the table below shows, I analyzed the cost of a home in St Louis during two periods of time, the most recent 5-year period and the 5-year period leading up to and including 2006 (the last year of the boom before the bust).  In determining the real cost, I looked at the median price of homes sold but then also the mortgage interest rate at the time and the resulting payment.

As the table illustrates, the current cost of a median-priced home in St Louis, from a mortgage payment perspective, dropped 5.5% from a year ago thanks to lower mortgage interest rates which more than offset the increase in home prices.  The impact of interest rates on the true cost of a home is further illustrated by looking that the change in the mortgage payment for a median-priced home in St Louis from 2014 to today which was an increase of 17.8% over the period.  However, the median price of homes sold during the same period increased by 23.4%, over 30% more than the payment increased!

The real cost of a St Louis home today is even less than in 2006

Now, to go one step further, if you look at the second table below, which is for the period of July 2001 through July 2006, you will see that, while the median price of homes in St Louis was lower, mortgage interest rates were much higher.  In fact, the median mortgage interest rate from 2001 through 2006 was 6.245% while it was just 4.0% from 2014 through 2019.  This resulted in the mortgage payment of $1,084.26 on a median-priced home in St Louis in 2006, $76.56 per month more (7.5%) than today’s mortgage payment on a median-priced home in St Louis.

St Louis Home Affordability

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