Increasing Unemployment and lack of population growth in St. Louis hurts the housing market

Dennis Norman

The U.S. Department of Housing and Urban Development (HUD) has issued their report on St. Louis Housing Market condition as of second quarter of this year.  The report from HUD labels the St. Louis area as a “hub for shipping and transportation” and a “center for manufacturing and biomedical sciences.”  Among the “positives” for St. Louis, HUD identifies that St. Louis is the home to several institutes of higher learning, including St. Louis University and Washington University which, between the two, have an estimated annual economic impact on the region of nearly $3 billion.More people moving out of St. Louis than in:

The HUD report points out however, that our area lacks population growth. From 2003 to 2007 the St. Louis area population has increased by about 0.6 percent per year, however the report says this was due entirely to net natural increase (births to existing residents in excess of deaths).  Take this out of the equation and the actual net in-migration average only about 3,200 people a year from 2003 to 2007 and dropped sharply with the recession to the point that it has been negative to the tune of about 1,300 people per year for the past three years.

Rising unemployment in St Louis doesn’t help:

Another problem area cited in the report was St. Louis’ loss of jobs and increasing unemployment rate.  St. Louis saw 4 years of economic growth but then in 2008 saw job less and a rising unemployment rate.  The unemployment rate in St. Louis for the 12 months ending May 2010 was 10.3 percent, a staggering 28.8 percent increase from the 8 percent unemployment rate during the prior 12 months.

Lack of population growth and weak economy means a soft housing market:

The HUD report says the slower population growth and a weak economy have lead to the current soft housing market in St. Louis.  The homebuyer tax credits did provide a temporary boost to home sales in St. Louis as evidenced by the 17 percent increase in home sales during the first five months of this year versus the same period the year before.

St. Louis new home construction in the tank:

The report shows what we all know, there are very few new homes being built.  As bad as this is for employment and the economy I still feel this is needed for the long-term health of the housing market. Until we burn off some of the housing inventory and/or the economy starts a sustainable recovery, we don’t have a need for many new homes.

The report states single family home construction peaked in the St. Louis metro area in 2004 and 2005 when permits were issued for more than 13,000 homes a year.  New home construction activity dropped in 2006 and continued to drop through 2009.  For the 12 months ending May 2010, there have been 4,600 building permits issued for single-family homes an increase of 19.5 percent from the same period a year earlier.

 

 

 

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