Showings On St Louis Listings Drop Below To Lowest Levels Of The Year

It’s no secret that the real estate market slows down in the winter and typically nearly screeches to a halt from shortly before Christmas to shortly after New Years.  Therefore, when tracking showing activity in the St Louis area, the first week of January of each year is used as the base, or “0” value and then each rolling 7-day period afterward is compared to that first week.

As the chart below shows, in 2020 and 2021 all weekly averages of showing activity were above the baseline of January until getting close to Thanksgiving, with the one exception being late March and Early April of 2020 which was a result of the COVID-19 pandemic beginning.  The orange line depicts this year and it shows showing activity all year has been below the levels of the prior two years for the most part, even dropping below January levels five times so far this year and has spent the bulk of September below the January levels.  For the most recent 7 day period, ended September 25th, there were over 4% fewer showings in the St Louis area than during the first week of January this year.

Listing Showing Activity For the St Louis Metro Area (along with other markets served by MARIS)

(click on chart for live, interactive chart)
Listing Showing Activity For the St Louis Metro Area (along with other markets served by MARIS)

Will The Housing Market Crash?

Apparently a lot of consumers are concerned about the housing market crashing or at least concerned enough to be online searching for answers.  According to Google Trends the search phrase “Will The Housing Market Crash?” has hit it’s 5-year peak in terms of interest level during the last 4-5 months.  In addition, according to Google Adwords tools, there are 10,000 – 100,000 searches for month for the phrase “Will The Housing Market Crash?” and 100,000 – 1,000, 000 monthly searches for “housing market crash“.

Will there actually be a housing market crash in St Louis?

I guess first we should define “crash” as the word itself sounds rather harsh.  But if we agree that a market crash would be less severe than the housing market bubble burst we witnessed in 2008, then I would say a “crash” is more likely than a bubble burst.  However, what may seem like a crash in the St Louis housing market may in fact not be as much of a crash as well as a correction.  Given that the St Louis real estate market has been flying high for a few years now and many seller’s have felt like they died and went to heaven and buyer’s just felt like they died from the competition and difficulty in buying a home, a correction is really needed.

How bad will the St Louis housing market correction be?

Inventory Of Homes For Sale In St Louis Increases Year Over Year For First Time In Nearly Three-Years

The inventory of homes for sale in the St Louis core market area increased to a 1.04 month supply in June 2022, an increase of nearly 12 percent (11.8%) from a year ago when there was a 0.93 month supply.  As our chart below illustrates, this is the first time since August 2019 there has been a year-over-year increase in inventory and then the increase was just 3.1%.  While a double-digit increase is significant, we do need to keep in mind that, at just over a one-month supply of listings for sale is still crazy low!  The median listing supply in St Louis was 3.5 months in 2015, 2.9 in 2016, 2.5 in 2017, 2.4 in 2018, 2.6 in 2019 then dropped to 1.5 months in 2020 and down to a record low 1.2 months in 2021. So, even after this double-digit increase we are still at a level this even low by last year’s record low standards.

St Louis 5-County Core – Year Over Year Percentage Change In Listing Supply

St Louis 5-County Core - Year Over Year Percentage Change In Listing Supply

National Headlines Say Homebuyers Canceling Deals At Highest Rate Since Start of Covid…Is this true in St Louis?

If you’re heard it once, you’ve likely heard it a hundred times, “all real estate is local”.  This is why you can’t put too much faith in national news or data if you are interested in buying or selling a home in St Louis.  This is also why at MORE, REALTORS®, we put so much time, effort and money into producing the best and most accurate local data we can.  We think it’s important to bring the data and information down to the local level.

Homebuyers are canceling deals at highest rate since start of COVID” was the headline earlier this week on Inman News, an online real estate industry publication read by many brokers and agents.  My usual response to news like this is “I wonder if that’s true in St Louis?” and I set out to pull the data to see.

There is not really a way to count “canceled” deals…

While I don’t know exactly what the writer of the Inman article was referencing in terms of “canceled” deals.  However, in a typical contract to purchase a home in St Louis only gives the purchase one way to “cancel” a contract and that is in the building inspection contingency where the purchaser has the right to terminate the contract for no reason.  When that happens it is not reported to the REALTOR® Multiple Listing Service (MLS) as a “canceled” listing however, it is simply put back on the market.  There are certainly other reasons contracts fail and listings come back on the market such as the buyer’s inability to get financing, appraisal issues, etc.

“Back on the market” is something we can count…

St Louis Area Housing Market Report For June 2022

St Louis Real Estate Report for June 2022

(click on infographic for complete report including other counties)St Louis Housing Report for June 2022 - St Louis Realtors

Showings Of St Louis Listings Fall To Levels Below January

It’s no secret that the real estate market slows down in the winter and typically nearly screeches to a halt from shortly before Christmas to shortly after New Years.  Therefore, when tracking showing activity in the St Louis area, the first week of January of each year is used as the base, or “0” value and then each rolling 7-day period afterward is compared to that first week.

As the chart below shows, in 2020 and 2021 all weekly averages of showing activity were above the baseline of January until getting close to Thanksgiving, with the one exception being late March and Early April of 2020 which was a result of the COVID-19 pandemic beginning.  The orange line depicts this year and it shows showing activity all year has been below the levels of the prior two years for the most part, however, the gap has widened in the past couple of weeks.  On July 4th, for the prior 7-day period the number of showings was less than the first week of January and it dipped further on July 5th to 6.9% fewer showings during that 7-day period than the first week of January.  Granted, it is always going to dip around a holiday but last year for the period ended July 5th there were 9.1% more showings than the first week of January, for a difference of 16% from this year.

Rising interest rates and increased inflation are no doubt two of the big reasons for this along with a low inventory of homes for sale.

Will Home Prices Come Crashing Down?

After over 40 years in the real estate business in St Louis I’ve seen many times just how fast a good, or even great housing market can turn sour as well as the other way around.  Two years ago, economic conditions relevant to the housing market included:

Today, the above conditions are:

Does this mean St Louis home prices will come crashing down?
First off, I’m not an economist, in fact I didn’t even attend college and I certainly don’t have a crystal ball showing me the future, but I am a data junkie that has lived through a variety of markets spanning more than 4 decades.  My experience as well as my study of past markets as well as current indicators of things to come certainly give me an opinion.  In times past, my opinions on the market have been spot on, almost to the point that I even surprised myself (such as in October 2006, at the peak of the housing boom when I predicted the collapse) and other times I’ve been wrong, sometimes way wrong.  The reality is that the housing market is affected, or can be affected by so many different economic factors, as well as social issues, consumer sentiment and more that I don’t believe anyone can predict what it’s going to do accurately consistently.

Consumer Sentiment Toward Now Being A Good Time To Buy Hits Record Low

Every month Fannie Mae surveys consumers to gauge their sentiment toward whether its a good time to buy or sell a home and publishes the result in their Home Purchase Sentiment Index® (HPSI).  In the most recent HPSI report, 79% of the people surveyed said they felt now was a bad time to buy a home, which is the highest percentage of people feeling this way since the survey was begun in 2012.  Seventeen percent of those surveyed felt it was a good time to buy a home and 4% didn’t know whether it was or not.

Fannie Mae Home Purchase Sentiment Index Chart

(click on chart for live, interactive chart)

nie Mae Home Purchase Sentiment Index Chart

 

St Louis Home Sales Doing Well In Spite of Rising Interest Rates & Inflation

There have been a lot of reports over the past month about rising interest rates (mortgage rates on a 30-year fixed-rate mortgage hit 5.27% last week) as well as rising inflation rates (8.5% in March) and the effect these things will have on the housing market.  It’s no doubt they will have some affect on home prices and sales and I have been watching the data on St Louis home prices and sales closely and so far there does not appear to be much impact.

St Louis home sales increase in April from March…

There are two ways we analyze home sales at MORE, REALTORS®;  the traditional manner, which is what almost all public reports are based upon, closed sales (which are really indicative of what the market was like 1-2 months previously since that is when the contracts were typically written) and then by use of our STL Real Estate Trends Report, which gives us a better idea of the current activity.  Our trends report shows the number of new contracts written on listings, so current sales activity as well as the number of new listings entering the market.  The good news is, when looking at St Louis home sales activity for April, both closed sales and newly written contracts increased from the month before.

As our chart below shows, there were 2,134 homes sold in St Louis (5-county core market) during April, a 6.4% increase from March when there were 2,005 homes sold.  As the STL Real Estate Trends Report shows, there were 3,279 new contracts written on homes during April in the St Louis 5-county core market, an increase of 5% from the prior month when there were 3,124 contracts written.

Missouri Releases Complaint Report For Missouri Insurance Companies

The Missouri Department of Commerce and Insurance (DCI) is the state agency that investigates complaints against insurance companies made by consumers in Missouri.  Annually, the DCI releases its complaint report reporting on the complaints made in the preceding year by company, type of insurance, etc.  In compiling the report the DCI assigns a “complaint index” to each company, based upon the number of complaints the department received for a consecutive three-year period relative to the amount of product-specific premium a Missouri licensed company experienced that same period.  An index number of 100 means that the department received the normally expected number of complaints about that company, an index number less than 100 indicates the company was the subject of less than the normally expected number of complaints and an index that is greater than 100 shows the department received more than the normally expected number of complaints about that company.

Below, I have compiled a list of the top 20 providers of homeowners insurance in Missouri (based upon market share) ranked by their complaint index with the companies with the worst complaint index first.  The companies list with a red background have a complaint index above 100 and the ones in green have a complaint index below 100.  As the table shows, Auto Club Family Insurance Company as the worst complaint index on the list at 166, followed by Allstate Vehicle and Property Insurance Company (145), Auto Owners (131), Travelers (121) and State Farm (117) rounds out the top 5 with the worst complaint indexes.

To obtain the complete report showing all companies as well as complaint indexes for all lines of business click here or on the table below.

St Louis Area Housing Market Report For March 2022

St Louis Real Estate Report for March 2022

(click on infographic for complete report including other counties)
St Louis Real Estate Report for March 2022

Inflation Rate Increases to 8.5 Percent in March…What will the effect be on home prices?

This week it was announced that the U.S. inflation rate in March had increased to a staggering 8.5% the highest rate in over 40 years as illustrated by the chart below.  The last time the inflation rate was higher than this was in December 1981 when it hit 8.9%.   The “inflation rate” that I’m referring to, and is the most commonly reported, is based upon the Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average.  One of the categories included in the CPI-U is “shelter”.  The report shows the shelter inflation rate at 5% which, on the surface sounds low however, the median price of homes sold in St Louis in March was $250,000 an increase of just over 4% from March 2021 when the median sold price was $240,000.

What does an inflation rate of 8.5% mean for the real estate market?

With everything going on in our economy, country and world now I think it’s literally impossible to predict what is going to happen on any front with any level of accuracy however, a good guide would be what has happened in the past during similar times.   With this in mind, lets look at what the market looked like the last time inflation was at this level, December 1981:

  • Mortgage interest-rates on a 30-year fixed mortgage were an average of 17%-18% (see chart below)
  • The inflation rate actually reached a peak of 14.4% in March of 1980
  • St Louis home prices peaked during the 1st quarter of 1979 then declined until bottoming-out during the 2nd quarter of 1981 (see chart at bottom)

Two-Thirds Of Consumers Say They Would Buy A Home vs Rent If There Were To Move

Yesterday, I shared that, according to the Fannie Mae Home Purchase Sentiment Index (HPSI), nearly three-fourths of consumers think now is not a good time to buy a home.  However, the same survey that produced that data also showed that tw0-thirds of the consumers that responded said if they would buy a home vs rent if they were in fact going to move.  As our chart below illustrates, for 3 of the last four months, 66% indicated they would buy.  While the percentage that indicated they would buy was as high as 72% last May, it was in fact the same, at 66% a year ago in March as well as the year before that in March.  So, while consumers don’t think now is a good time to buy, it appears many are doing it or would do it, anyway.

Nearly 75 Percent Of Consumers Think Now Is A Bad Time To Buy a Home

Every month Fannie Mae surveys consumers about owning and renting a home as well as about other issues related to the housing market and economy and from the results publishes its Home Purchase Sentiment Index (HPSI).  One of the components of the index is what the sentiment is on whether now is a good time to buy a home or sell a home.  In April 2022, HPSI consumers’ sentiment on whether now is a good time to buy a home hit an all-time low with just 24% of respondents saying now is a good time to buy a home.  As the charts below illustrate, 73% of respondents said now was a bad time to buy a home.

Home Remodeling Projects That Bring You The Best Return On The Cost

Some remodeling projects are done by homeowners that plan to stay in their homes for the foreseeable future and want to get the most enjoyment and functionality out of living there.  These homeowners typically aren’t as concerned, if at all, with getting a monetary return on their investment as their return is the enjoyment of the improvements.  However, other homeowners, particularly those that may only be in their homes a couple of years or so before their next move, tend to focus more on making sure the remodeling they do will bring them a return on their investment to make it worthwhile.  Granted, the return may be less than the cost but, after factoring in the enjoyment from the improvement the improvement may be worth it.

What are the remodeling projects that bring the best returns?  

National Association of REALTORS® 2022 Remodeling Impact ReportAccording to the National Association of REALTORS® 2022 Remodeling Impact Report, below is the cost recovery of the top interior and exterior remodeling projects:

  • Interior
    • Hardwood flooring refinish- Return on cost – 147%
    • New wood flooring – Return on cost – 118%
    • Insulation upgrade – Return on cost – 100%
  • Exterior
    • Roofing – Return on cost – 100%
    • Garage door- Return on cost – 100%

See the complete report (you can download a copy as well) by clicking the photo or HERE.

 

St Louis Area Housing Market Report For February 2022

St Louis Real Estate Report for February 2022

(click on infographic for complete report including other counties)
St Louis Real Estate Report for February 2022

Stop! Who Goes There? A Smart Lock Knows…

How ‘smart’ can a smart home be if its locks can’t tell you who is coming and going and when they came and went? In my opinion, that’s not a very ‘smart’ house. Nowadays, we use our phones for much more than talking to other people. To name a few, we use them for directions, email, and paying for groceries. So why wouldn’t we use them to remotely lock and unlock our doors too?

From my previous articles you might remember that one of the primary requirements in a smart home is either smart temperature control or a smart security feature. A smart lock meets the security feature requirement and it’s one of the simplest additions to your house. Many of these can be installed using the standard pre-drilled holes that likely already exist in your doors. Usually, in under 25 minutes, you can go from fumbling around for the keys to your door automatically unlocking as you approach.  

Have you ever been running a little late to an appointment and get 10 minutes down the road only to wonder if you locked your door? Yeah, me too, but with a smart lock, you could just get to the next stoplight and check your phone to verify the lock status. If you did forget, no worries—just tap the lock icon on the phone app and problem solved. 

Another great feature of most smart locks is knowing who accesses the house and when. This can be done either through the assigned app or individual user codes. For peace of mind, you can track who comes and goes. 

One of my favorite features is the autolocking function that can be tied to arming your security system. You no longer need to walk around and check all your doors because the system will just lock all the doors when you arm your alarm. Of course, you’ll need a security system for this feature, but some smart locks can be programmed to lock automatically at preset times throughout the day. If you have toddlers, this is a great feature. Mine love randomly unlocking doors and not telling me, so without that feature, the door would remain unlocked until I notice it.

Do you own an Airbnb? These locks are great for creating temporary access codes for each paying guest. Just like magic, once their reservation is up the code no longer works. Overall, smart locks are a great addition to modern lifestyles and they’re an affordable addition to virtually anyone’s home security. Plus, you don’t need an engineering degree to install one.

Interested in knowing MORE about Smart Home tech? Contact the only Smart Home Certified CRS agent in the Greater St. Louis area. *

*Based upon actual knowledge the author has at the time of publication”;

Interested in knowing MORE about Smart Home tech? Contact the only Smart Home Certified CRS agent in the Greater St. Louis area*.

*Based upon actual knowledge the author has at the time of publication


Interest Rates Hit Highest Level in Over 2-Years

Mortgage interest rates were at 3.69% for a 30-year fixed-rate loan as of this past Thursday, February 10, 2022., according to Freddie Mac’s Primary Mortgage Market Survey®.  As the chart below illustrates, mortgage interest rates hit a low of 2.77% in August of 2021 and have pretty much been trending upward since.

Within the last few days, there have been a lot of reports in the media projecting mortgage interest rates to go higher this year.  A lot of it is based on the current inflation rates which are not good so if the economy and rate of inflation improve, so would mortgage rates but time will tell.  Personally, as of today and subject to any new major disruptions, I think rates in 2022 will stay in the mid 3% range and climb to the upper 3’s, perhaps 3.9% but could very well go over 4% if the Federal Reserve raises rates as much as is currently rumored now.

Mortgage Interest Rates – 30 Year  Conventional Loan

(click on chart for live, interactive chart)

Mortgage Interest Rates - 30 Year  Conventional Loan 

 

Seventy-Percent of Consumers Think Now is a Bad Time To Buy a Home-83% Of Millennial’s Feel That Way

According to Fannie Mae’s® Home Purchase Sentiment Index® (HPSI), 70% of consumers say it’s a bad time to buy a home while 25% feel it’s a good time to buy.  As the chart below illustrates, this is the highest level reached for it not being a good time to buy in the 3-year period the chart covers.  Actually, this is the highest level it’s reached since Fannie Mae began tracking the data in 2010.

Millennials are pessimistic about home buying…

The bottom chart also reflects the sentiment of consumers in the survey about buying a home now but is broken down by age group.  This chart shows the net percentage of those saying it’s a “good time to buy” less those saying “it’s a bad time to buy”.  The higher the line goes on the chart the more the good time to buy folks outweigh the bad time to buy.  As you can see, the black line, which depicts consumers in the 35-44 age group is the lowest on the chart with a net of -68.  This is the result of 83% of the consumers in this age group saying it is a bad time to buy and just 15% saying it’s a good time, resulting in a net of -68%.

Seniors have a better feeling about the market…

The red line depicts the sentiment of those 65 years and older and the net percentage there is -26%, so, while the percentage of people that feel now is not a good time to buy still outweighs the ones in this age group that think it is a good time, the resulting difference is about 40 points better than the millennial group.

Total New Homes Built In St Louis During 2021 About The Same As Prior Year

There were 4,825 building permits issued for new single-family homes in the St Louis area during 2021 which is 9 more permits than were issued in 2020, according to the latest data from the Home Builders Association of St. Louis & Eastern Missouri (St Louis HBA).  For the past few years, St Louis has experienced a strong seller’s market due to the low supply of homes for sale.

This demand certainly seems to be something that would encourage builders to increase the number of homes being built significantly.  However, there are many challenges facing St Louis builders today that prevents this.  The challenges include a shortage of developed lots, or even ground in areas of demand, as well as increased construction costs, a result of regulatory issues, material prices and construction worker’s wages.  If the builder can deal with the increased prices, then there are supply chain issues and labor shortages to deal with as well.  Selling new homes is pretty easy today, the challenge is developing them.


  

St Louis New Home Building Permits -December 2021

St Louis New Home Building Permits -December 2021

 

How Much Of An Impact Does Your FICO Score Have On The Cost Of A Home?

Today, thanks to many apps and access to information, all consumers have ready and easy access to their FICO (credit) score.  Anyone thinking of buying a home no doubt knows their credit score will come into play in terms of qualifying for a mortgage but just how significant is your credit score?  Is there really that much difference between a 670 and 700 credit score, or between a 700 and 741 score?  Well, when it comes to mortgage rates, it does make a difference!

A 670 FICO vs a 741 FICO will run up the typical cost of St Louis home over $17,000 over the life of your loan!

For example, as the table below illustrates, the median interest rate for a mortgage for a person in St Louis (borrowing over 80% of purchase price) with a FICO score of less than 680 is 3.962% versus an interest rate of 3.611% for someone with a FICO score above 740.  The median price of homes sold in St Louis during the past 30 days was $245,055.  So, to make it simple, if we assume that for the loan amount a person with a 679 score would be looking at a house payment of $1,153 per month (principal and interest) while someone with a 741 credit score would be looking at a payment of $1,104 or $49 per month less.  That may not sound like much, but over the 30-year life of the mortgage that means the person with the lower credit score will pay $17,640 more in interest than the borrower with the higher score.  Or, to look at it a different way, for the same payment of $1,153 that the lower score borrower will pay for a $245,055 home, the borrower with the higher score can buy a home that costs $255,823.

Mortgage-Interest Rates Hit Highest Level In Over a Year

Mortgage interest rates were at 3.667% for a 30-year fixed-rate loan as of this past Thursday, January 13, 2022.  As the chart below illustrates, after dipping slightly the week prior, the rates this most recent week hit the highest level in over a year.

Mortgage rates for an FHA mortgage also hit the highest level in over a year too with rates hitting 3.743%.

Mortgage Interest Rates – 30 Years Conforming Conventional Loan -Past 12 Months

(click on chart for live, interactive chart and other loan types)

Mortgage Interest Rates - 30 Years Conforming Conventional Loan -Past 12 Months

Mortgage Interest Rates – 30 Year FHA

(click on chart for live, interactive chart and other loan types)

Mortgage Interest Rates - 30 Year FHA

 

December 2021 St Louis Real Estate Report

St Louis Real Estate Report - December 2021 - St Louis Housing Report - St Louis Realtors

Smart Temperature Control and What Are the Benefits

Smart Home Certification - Smart Home Realtors

Do you like inconvenience? Spending more money than needed? Do you like things to be more difficult than needed? Do you like not knowing how much energy you use and when you use it most? Do you desire suboptimal temperature control? If you answered ‘no’ to these questions then whether you knew it or not, you’re already convinced that a Smart Thermostat is worth a couple of hundred bucks to you.

One of the primary requirements in a ‘Smart Home’ is either smart temperature control or a smart security feature. Of these two, the one to likely pay for itself first is the smart thermostat. It may sound a little creepy but most smart thermostats are self-learning which means they adjust the temperature based on your habits and schedules. The simplest example is that they know when you are sleeping, and they know when you’re awake. They know when you’re away from the house too, and because of this intuitiveness, it can adjust the temperature accordingly. How does it know these things? Glad you asked. These types of thermostats use a combination of scheduling, geofencing, and motion detection to know how to adjust.


What Is a Smart Home and What Does It Mean for a Homeowner?

Smart Home Certification - Smart Home Realtors

Simply put, a Smart Home means your home has a control system that connects with your various appliances, systems, and features to automate specific tasks and is typically remotely controlled. The real estate industry, in conjunction with CNET, accepted definition is: 

“A home that is equipped with network-connected products (aka “smart products,” connected via Wi-Fi, Bluetooth, or similar protocols) for controlling, automating, and optimizing functions such as temperature, lighting, security, safety, or entertainment, either remotely by a phone, tablet, computer, or a separate system within the home itself.”


St Louis Beating Region On Percentage Of Homes Selling At Full Price Or Above

Last week I published an infographic in an article illustrating that 65% of the homes sold in St Louis sold at or above the list price.  As the infographic below shows, this is a significantly higher percentage than was experienced in the midwest region as a whole where 55% of the homes sold at or above full price.  

Two-Thirds Of Homes Sold In St Louis Core Market In October Sold At Or Above List Price

Two-thirds of the homes sold in the St Louis 5-County core market (St Louis city and the counties of St Louis, St Charles, Jefferson, and Franklin) during October sold for the asking price or above.  As the infographic below shows (exclusively available from MORE, REALTORS®) there were 2,888 homes sold during October in the St Louis 5-County core market with 65% of them selling at the list price or above.  One thing to remember about home prices though, and something you won’t hear from too many people reporting prices, is that not all sold prices are the “real” price.

Have St Louis Home Prices Finally Increased Too Much?

For the past few years now, we’ve experienced quite the seller’s market in St Louis fueled, in part, by a low supply of homes for sale.  As a result, St Louis home prices have increased over the past few years at rates close to double the historic norm.  Of late, we’ve heard a lot from people within, and outside of, the real estate industry expressing concern that home prices have gotten too high and even some have made comparisons to 2008 when the housing market saw the bubble burst.  Being the data nerd I am, I’ve tried to keep emotion out of it and instead turn to the data to see if there were indications that perhaps St Louis home prices have increased too much and we are in for a correction.  Up until now, the data has led me to believe that St Louis home prices were ok and can be sustained.  However, based upon current data, I have a little different opinion as I write this.

So what has changed in the data to indicate home prices are too high?

For starters, I haven’t said St Louis home prices are too high yet, I’ve just said that the current data has changed my opinion.  Having said that, prices may in fact reached levels that cannot be sustained and may need a downward correction to put them back in line or they may have just peaked and will remain rather flat for a period of time to allow the market to “catch up” with the prices.  And, of course, data over the next month or two could change for the positive and show we’re not there yet and home prices can still go higher without a problem.  For now, I’m going to say that, based upon the data as well as the normal seasonal adjustments we see this time of year, I’m going to expect to see St Louis home prices to   decline somewhat during the winter months like normal, but then perhaps remain relatively flat come spring rather than increase in the spring like normal. 

My opinion is based upon several pieces of data that, collectively, are indicating a coming adjustment in home prices to me.  I have the charts below that illustrate this point and here’s my recap on them:

Mortgage Interest Rates Hit Highest Level In Six Months

Mortgage interest rates were at 2.65% for a 30-year fixed-rate loan at the beginning of this year, according to Freddie Mac’s Primary Mortgage Market Survey® and rose through the late winter months and started the spring housing season with rates hitting 3.18% on April 1st.  This rate was the highest rate since June, 2020 when rates hit 3.21% and was the highest level for interest rates in 2021.  This past week, according to the same market survey, the 30 -year fixed-rate mortgage interest rate hit 3.09%, the highest level in six-months, but still below the peak rate for the year of 3.18%.

As the chart below illustrates,  mortgage interest rates for a 30-year fixed-rate mortgage have spent most of the time this year between about 2.75% and 3.0%. This is a pretty narrow fluctuation range and, even at the high of the range, or at the peak rate of 3.18% for this year, is still historically very attractive as evidence by the second chart below, one that shows mortgage interest rates for the past 10-years.

Mortgage Interest Rates – 30 Years Conforming Conventional Loan -Past 12 Months

(click on chart for live, interactive chart and other loan types)Mortgage Interest Rates - 30 Years Conforming Conventional Loan -Past 12 Months

Mortgage Interest Rates – 30 Years Conforming Conventional Loan -Past 10 Years

(click on chart for live, interactive chart and other loan types)

Mortgage Interest Rates - 30 Years Conforming Conventional Loan -Past 10 Years

 

Buyer’s Agents Aren’t Free

Like the majority of real estate companies in St Louis, our firm, MORE, REALTORS® is a member of the National Association of REALTORS®.  One of the things that go along with membership is to agree to abide by the Code of Ethics.  Within the code of ethics, is Article 12 which states, in part,  “REALTORS® shall be honest and truthful in their real estate communication and shall present a true picture in their advertising, marketing, and other representations.”  As with every article in the code of ethics, there are “standards of practice” to serve as examples of how that article should be applied.  For this article there is Standard of Practice 12-2 which states “REALTORS® may represent their services as “free” or without cost even if they expect to receive compensation from a source other than their client provided that the potential for the REALTOR® to obtain a benefit from a third party is clearly disclosed at the same time.

I have always taken exception to that standard of practice for a couple of reasons, including:

  1. I don’t believe the statement is true.
  2. I think good buyer’s agents work hard,  know the value they bring to their clients and earn what they are paid.  To think that an agent has to represent that their services are free in order to get a client to use them I feel is an insult to a professional agent.

The reason behind my first issue above is that while in a traditional home sale, the buyer may not directly pay the agent representing them (the buyer’s agent) they pay them indirectly.  Typically, when a home is listed and sold using a REALTOR®, the seller agrees to pay commission to their agent (the seller’s agent) as well as to the Buyer’s agent.  Why would a seller agree to do this?  Well, they basically have no choice as, if they want their home listed in the REALTORS® MLS system (who doesn’t?), they must offer a commission to the agent that sells the home as it’s a rule. So, like it or not, the seller is going to “agree” to pay the buyer’s agent’s commission.  To say the total commission the seller is paying does not affect the price they accept I think would be disingenuous.   So, if the commission the seller has to pay affects the price they will accept from a buyer and the commission the seller is paying includes the buyer’s agents commission, I think it’s safe to say the buyers agents services to the buyer are not “free”.

The Department of Justice must feel the same way…

Clearly, I’m not the only one out there that feels this way.  Last November the DOJ (Department of Justice) and NAR (National Association of REALTORS®) entered into a settlement agreement to end an investigation.  One of the things NAR had to agree to was to no longer permit buyers agents to advertise that their services were free.  Recently, this agreement fell apart and the DOJ and NAR are involved in legal battles now so we’ll see where that goes.

Why a good buyer’s agent is more than worth the cost…

So now I’ll get to my second point.  A good, professional buyer’s agent is worth every dollar they make on a transaction and, quite frankly, often don’t really get paid enough.  Before you roll your eyes and think I’m just another one of those people that have “drank the REALTOR® KOOL-AID®”, stick with me.  I assure you I’m not one of those, I hate KOOL-AID®, avoid sugar as much as I can, and I don’t like hypocrites.  I like to tell it like it is.  Often, I’m very supportive of the real estate industry, the people in it the practices, etc, however, there are times I am not.  But, getting back to buyer’s agents, I want to add another caveat…note the adjectives I used; “good and professional”.  I’m not in any way saying all agents are created equal nor that all agents are worth what they get paid.  However, there are a lot of great ones that are very dedicated to their profession, love serving their clients, do so in an exceptional way and more than earn the commission they make.  I feel blessed in that in our firm, MORE, REALTORS® I’m literally surrounded by agents like that.

What are you going to do for me that makes you worth the price I’m going to pay for your representation?  This is a good question to ask an agent you are considering to represent you as a buyer’s agent.  If it were me, here are some of the things I would like to hear in the response as well as be convinced that this is what past clients have experienced and what I can expect from the agent:

  • Their knowledge and experience of the local market.  They should know what the housing market is like, the prices, the trends, the inventory, etc.
  • Their knowledge of the type of real estate you are looking for.  For example, if you love older homes, such as the 80+-year-old ones that exist in Kirkwood, Webster Groves, you are going to want an agent with extensive knowledge of older homes.  This will be invaluable to you when evaluating the condition of the home, reviewing your building inspection, etc.  If you are looking for a mid-century modern, it would help to have an agent that knows what you are talking about as well as where to find that style of home.
  • Their knowledge of the process and guidance they will give you.  Today, we are very much in a seller’s market and buyers are having to compete with often a dozen or more offers on a home.  You want an agent that is detailed, knows the process, the contract, and has a great grasp on how to best prepare you so that, when the time comes, your offer is seen in the best light possible by the seller.  A good agent will not leave anything to chance in this area.
  • Their relationship and reputation in the industry.  There is a fine line on this one, as you don’t ever want to choose an agent that is more concerned with what the agent on the other side of the deal thinks of them rather than fearlessly representing your best interests.  However, you don’t want an agent that has a bad reputation in the industry or is known as someone that is impossible to work with.  I would want to find one that I’m convinced will always have MY best interest in mind, that understands their fiduciary obligation to me, and is well respected by their peers.
  • Their commitment to my best interest.  I would want an agent that is laser-focused on my interests and is going to work to do their best to get me what I want under the best terms and price.  But, at the same time, someone that is confident and professional enough to also “stand up to me” if necessary to set me on the right track or to keep me from shooting myself in the foot.

When you take the time to go through some of the things above with an agent and find one that stands out as the best and most professional to represent you, I can almost guarantee that you are more than getting your money’s worth.  I see it time and time again with our agents, where through knowledge and advice, negotiation or strategy, they save their clients not only money (and likely often more than the agent is being paid) but also time and frustration.

So, as my headline says, Buyer’s Agents AREN’T Free and as the things I point out above nor should they be.

Now it’s time for a shameless plug…do you want to be connected with a great, professional agent that is a Master of Real Estate?  Just give me a call at 314.332.1012 or email me at Dennis@stlre.com and after I understand your wants and needs, I’ll connect you with the perfect agent for you!