St Louis Home Prices In April Increased Just 1 Percent From Year Ago For Non-Distressed Home Sales

By Dennis Norman, on May 21st, 2016

There were 2,290 St Louis Existing Homes Sold in April (in the 5-county core market), an increase of 1.0 percent from April 2015 when there were 2,265 homes sold. The median home price of homes in the St Louis 5-county core market (city of St Louis and counties of St Louis, St Charles, Franklin and Jefferson) during April 2016 was $173,850, an increase of 4.4 percent from April 2015 when the median price of existing homes sold was $166,500.

For the combined markets of the City of St Louis and the County of St Louis, there were 1,241 existing single family homes sold during April 2016, an increase of 9.6% from the prior year and the median home price of homes sold during the month was $158,250, an increase of less than 1% from the prior year.

Distressed home sales still account for over 1 of every 10 home sales….

During the month of April in the St Louis core market, there were 243 distressed home sales (foreclosures, short sales, bank-owned property) which is 10.6% of the total home sales during the month. The median sales price of these distressed sales in April 2016 was $51,780, a decline of 1.0% from a year ago when distressed homes sold for a median price of $52,314.

St Louis home prices in April, on non-distressed existing home sales, rose just 1 percent from year ago…

In spite of some recent news reports boasting much bigger increases in home prices (as much as 17%) based upon the data I have compiled, courtesy of MARIS, the REALTOR regional MLS, the increase in home prices is nowhere near that. If we remove distressed home sales from the data, and look at what the “normal” housing market looks like, in April 2016 there were 2,045 homes sold, an increase of 5% from a year ago when there were 1,947 non-distressed single-family home sales in the St Louis 5-county core market. The median price of these home sales in April was $185,000, an increase of 1.0% from a year ago when the median home price for non-distressed single-family home sales in the St Louis 5-county core market was $183,000.

Why a 17% increase in home prices would not be good and 1% is better…

If St Louis home prices had in fact, as reported by some of the media, increased in the past year by as much as 17% that would mean home prices rose about 17 times more than the rate of inflation. As the table below from the US Labor Bureau shows, the St Louis rate of inflation from the 4th quarter of 2014 to the 4th quarter of 2015 was 0% and, the best I can tell, the most recent rate only indicates about a 1% rate of inflation. Therefore, a 1% increase in home prices in the past year, as I have reported above, is consistent with the current rate of inflation and is a good thing for the long term health of the housing market as we don’t want home prices to rise significantly faster than inflation. How do I know this? Well, as the chart below shows, where I have graphed historically, there has definitely been a relationship between home prices and CPI with the two normally rising at a fairly consistent rate with the big exception being in the early 2000’s. As the chart shows, being in early 2000, home prices began rising at a rate higher than the inflation rate eventually reaching the tipping point in the 4th quarter of 2007 when home prices had increased 42% during the prior 7 year period and the rate of inflation only 20%. We all know what happened next, the housing bubble burst and home prices plummeted back to where they should have been. So, during the period that lead to the housing bubble, home prices were, on average, just increasing just a little over double the rate of inflation and look what happened. Now do you see why I say a 17% increase in home prices in the past year would be bad and the actual 1% it was is good?

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