During the fourth quarter of 2018, 14.2% of the homeowners in St Louis with a mortgage, were underwater on their mortgage, meaning they were in a negative-equity postion, according to data just released by ATTOM Data Research. As the table below shows, this is the lowest rate since the 4th quarter of 2017 when the St Louis undertwater homeowner rate was at 13.8%. On a national level, just 8.8% of homeowners with a mortgage are underwater which puts the St Louis rate at 161.5% of the US rate.
Jefferson County, with an estimated population of 221,577 during 2018, had 317 foreclosure filings during 2018, giving it the highest rate of foreclosure filings per capita, at 1 foreclosure filing for every 699 in population, of the all the Missouri counties with a population of 50,000 or greater. As the table below shows, the three Missouri counties with the highest foreclosure rate per capita are all located within the St Louis MSA and Boone County, in the Columia MSA, has the lowest foreclosure rate in the State.
Yesterday, I wrote an article about the number of foreclosures in St Louis during 2018 dropping to the lowest number in over 12 years, however, in spite of that good news, St Louis still has the 8th highest rate of foreclosure among the 20 largest metro areas in the U.S.
According to data just released by ATTOM Data Research, as the table below shows, during 2018 St Louis had a foreclosure filing for 1 of every 180 housing units. This rate puts St Louis at the 65th highest rate of the 219 MSA’s in the U.S. with a population of over 200,000 and at the 8th highest rate of the 20 largest MSA’s. Worth noting is St Louis barely made the list of 20 largest MSA’s coming in at 19th largest based upon population.
As evidence of just how much the St Louis housing market has improved since the housing bubble burst a little over a decade ago, as well as a testimony as to the strength of our economy, the number of St Lous homeowners thatlost their homes to foreclosure last year dropped to the lowest level in over 12 years.
As the tables below show, during 2018, 6,882 homeowners in the St Louis metro area received a notice of a foreclosure filing from their lender on their property, a decline of 6% from the prior year when 7,323 homeowners received a foreclosing filing notice. The number of foreclosure filings in St Loius during 2018 was down 68.3% from 2010 when the number of foreclosures in St Louis hit a record high with 21,741 homeowners receiving a foreclosure filing notice.
There were 752 home “flips” in the St Louis metro area during the third quarter of this year, representing 6.5% of the homes sold during the period, according to data just released by ATTOM Data Research. This is a decline of 7.4% from the prior quarter and a decline of 2.0% from the same quarter last year.
What is meant by “flipped” home?
ATTOM Data considers any home or condo that was sold during the third quarter of this year in an arms-length sale that had previously had an arms-length sale within the prior 12 months as well as a “flip”. Since homeowners don’t tend to buy a home only to turn around and resell it within a year, when this does occur it is typically the result of an investor buying a property, renovating it, then reselling it.
During the housing bubble that peaked around 2006 and then burst in 2008 one of the things that got many homeowners in trouble was using their home’s as ATM’s. They did this by using, in most cases, home-equity loans to take advantage of the equity they had in their homes to give them access to tax-free cash to make improvements on their home, pay for vacations, buy cars, boats, whatever. This was fine until the value of homes began declining which resulted in many of these homeowners becoming “underwater“ meaning they owed more on their homes than they were worth.
Yesterday, I wrote an article about the record amount of equity homeowners in the U.S. have in their homes now, even more than in 2006, and today I read a report from TransUnion in which Joe Mellman, their senior vice president, and mortgage business leader, said “There are ample signs that the home equity lending market is poised for growth. Home prices have surpassed 2005 boom levels and household home equity has grown even faster.” The report goes on to say that HELOC’s (home-equity lines of credit) represented the “greatest number of home equity originations in 2017 at 1.2 million, showing a 2.3% year-over-year growth from 2016”
Hopefully, homeowner’s will remember lessons of the past and be wiser about the use of their equity this time around. Below is a table from TransUnion showing the top five uses of home equity loans.
Mortgage delinquency rates, the precursor to foreclosures, continue to fall as the real estate market continues to perform well. The 30-plus day mortgage delinquency rate for June 2018 fell to 4.3% of all outstanding mortgages down from 4.6% a year ago, according to a report just released by CoreLogic. Frank Nothaft, the Chief Economist for CoreLogic, attributed the good news to “A solid labor market” going on to say that June’s national unemployment rate of 4% was “the lowest for June in 18 years“.
St Louis distressed home sales falling quickly…
With the economy and real estate market doing so well, distressed home sales (short-sales and foreclosures) continue to decline. As our chart below shows, the 12-month trend line for distressed home sales in the 5-County core St Louis market (city of St Louis and the counties of St Louis, St Charles, Jefferson, and Franklin) fell to 1,137 sales for the 12-month period ending August 2018. This is a decline of 30% in distressed home sales in St Louis, from a year ago when there were 1,632 distressed home sales during the prior 12-month period.
House flipping, something that has become quite popular among investors over the past few years and has even spawned several reality TV shows, continues to decline in terms of the number of flips. This is certainly not due to a lack of interest but instead a lack of opportunities. Many flipping opportunities are the result of foreclosures and with the mortgage delinquency rates continuing to improve resulting in declining foreclosure rates, the end result is few opportunities for investors to flip homes.
In St Louis, during the 2nd quarter of 2018, there were 835 homes flipped in the St Louis metro area, a decline of 23.0% from the quarter before and a 4.7% decline from a year ago. This is down 32.5% from the peak during the 3rd quarter of 2005 when there were 1,237 homes flipped in St Louis.
The table below shows the 2nd quarter house flipping data for St Louis, from ATTOM Data Services and includes the median size and age of the homes flipped, as well as median time to flip, prices and profits.
As the interest in investing in real estate in St Louis continues to increase, whether to buy, fix and flip or to buy and hold for rental, the number of opportunities to do so continues to decline. The primary source of “deals” for investors is typically “distressed” sales; property that has been foreclosed on and being resold, short sales or property in poor condition needing work. However, as our chart for St Louis MSA below reveals, the number of distressed home sales in St Louis has been steadily declining over the past 5 years.
The chart shows both the number of distressed sales for each month (the pink line) as well as the 12-month trend (green line) and both are on the decline. During the month of July 2018, there were 187 distressed home sales in St Louis, down 14% from 217 the month before and down 31% from last July when there were 272 distressed homes sold. For the 12-month period ended July 31, 2018, there were 2,787 distressed home sales, down 30% from the prior 12-month period when there were 3,965 distressed homes sold in the St Louis MSA.
During the first quarter of this year, there were 600 home “flips” in St Louis or about 8.6% of the homes sold in St Louis, according to data just released by ATTOM Data Research. This rate of flipped homes is up 5% from the prior quarter, however, is down 7% from a year ago. The decline certainly doesn’t have anything to do with a lack of interest by investors in flipping, it has more to do with a low inventory and declining mortgage delinquency and foreclosure rates reducing the opportunities.
What is a “flipped” home?
In the report issued by ATTOM Data Research, any home or condo that was sold during the first quarter of this year in an arms-length sale that had previously had an arms-length sale within the prior 12 months as well, was considered a “flip”. Since homeowners don’t tend to buy a home only to turn around and resell it within a year, when this does occur it is typically the result of an investor buying a property, renovating it, then reselling it.
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The number of St Louis homeowners losing their homes in foreclosure declined to a total of 700 foreclosure actions in the St Louis MSA, according to the latest report from ATTOM Research. Aprils foreclosure rate of 1 in every 1,768 housing units in the St Louis MSA is a decline of 22.82% from the rate a year ago and a decline of 9.68% from the foreclosure rate for March 2018.
As the table below illustrates, of the 15 counties in the St Louis MSA covered, all but three have seen a decline in foreclosure rates from a year ago (and all of those double-digit declines at that) and two-thirds of the counties saw a decline from the month before.
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In today’s low-inventory real estate market here in St Louis, it’s common for would-be buyers to miss out on a house they want even when they make a strong offer only to find out they got beat out by another buyer offering a higher price or better terms. This is particularly true for people trying to buy a foreclosure with increasing demand and decreasing supply, it is not uncommon to have 5, 10 or even more offers for the newly listed foreclosed property.
Does the listing agent have to inform you of multiple offers?
No one likes to get beat out, particularly on the house of their dreams, so the whole offer and negotiation process can get a little emotional at times. This is particularly true when a buyer, who didn’t even know they were in competition, finds they were beat out by another buyer. This almost always results in the losing buyer asking their agent why they didn’t know there were other offers. This can even get contentious between the agents as well, with the buyers agent often feeling “wronged” if the listing agent didn’t make them aware that they had multiple offers.
There is not one black and white answer as to whether a buyer should be informed they are in a multiple offer situation or not. We have to dig in a little deeper. For starters, if the listing agent is not a REALTOR® then they are just obligated to follow Missouri license law as well as the rules and regulations established by the Missouri Real Estate Commission, both of which are silent on the specific issue of multiple offers. However, the license law and rules are very clear about the fiduciary obligation an agent has to a client, therefore, a listing agent is bound to act in the best interest of their seller. Therefore, if the seller does not want the listing agent to reveal the existence of multiple offers to buyers, then it is not in the sellers best interest for the listing agent to reveal it. If the listing agent is aREALTOR® (as are the majority of real estate agents in the St Louis area) then, in addition to state license law and rules, they are also bound to abide by the National Association ofREALTORS® (NAR) code of ethics. The code of ethics, specifically standard of practice 1-15 states “REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers approval, disclose the existence of offers on the property.” The key here is “with sellers’ approval”, so, without the sellers approval, the listing agent should not reveal that multiple offers exist to your buyers agent.
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Don’t I get a chance to increase my offer? What about “highest and best”?
Before I go further, I should mention that it is my belief, the existence of multiple offers is revealed by the listing agent (presumably with the sellers approval) many more times than it is not as, normally, it is generally in the sellers best interest to let buyers know so the “bidding war” can start.
So, speaking of bidding war, the next thing that comes up from buyers in multiple bid situations is the question as to whether they will get a chance to increase their offer. As in the question of whether to reveal multiple offers in the first place, it comes down to what is in the sellers best interest and what the seller has instructed the listing agent to do. Often, particularly on foreclosures, listing agents will employ a “highest and best” strategy in which they generally go back to all buyers that submitted an offer and give them an opportunity to increase their offer realizing they will probably just have one shot at it. Some buyers like this as they have an opportunity to sharpen their pencil and others deplore it feeling like they are bidding against themselves, in any event though, this tactic often works in producing a very good offer for the seller. However, there are many sellers that, in a multiple offer situation, will not go this route and may choose to negotiate with a particular buyer without informing the other buyers. This is often the result of a buyer standing out, usually with the offered price but also terms that the seller finds attractive, such as perhaps a cash deal, short closing, etc. As a result, the listing agent will often go back to one buyers agent and negotiate without going back to the others which, as long as he is acting in the sellers best interest, is fine.
My advice to buyers
Everything I have discussed here are reasons why, when you choose an agent to represent you as a buyer, you want to use better criteria than “they are the cousin of a friend”, “they are a neighbor”, etc. Your buyers agent plays a much more significant role than just “showing you houses” and their experience, knowledge, negotiation skills, reputation within the industry, relationships with the listing agents in the areas you are looking in, etc, will all be critical in the process. A strong buyers agent can make the difference between you suffering many disappointments and securing your dream home on the first try!
At MORE, REALTORS, we have some of the finest agents in town and invite you to check us out. STLRE.com.
Distressed home sales, foreclosures, bank and government-owned homes and short sales, continue to decline in St Louis as the economy and housing market continue to improve. The chart below illustrates this downward trend as, for each monthly data point, it shows the total number of distressed home sales in the 5-county core St Louis market for the prior 12-months. Plotting out the prior 12-month activity is a great way to spot trends and changes in the market. As the chart shows, for the 12-month period ending last month, November 2017, there were 1,484 distressed home sales, down over 34% from December 2015 when there were 2,263 distressed home sales during the prior 12 months.
St Louis 5-County Core Market – Distressed Home Sales- Prior 12-Month Period Monthly For Last 24 Months
(click on chart for live data)
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The real estate market in St Louis continues to improve and grow stronger, evidenced by the declining foreclosure rates being reported by ATTOM Data Solutions. For November 2017, there were 857 foreclosure actions taken on housing units within the St Louis MSA, a decline of 17.52% from the month before and a decline of 6.54% from a year ago.
St Louis MSA Foreclosure Rate – November 2017
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St Louis flipped homes accounted for 6.6% of home sales in the St Louis MSA during the 3rd quarter of 2017, the lowest level since the 3rd quarter of 2016 when flips made up 6.3% of the St Louis home sales. For the purposes of this report, a “flip” was defined as a property that was sold in an arms-length sale for the second time within a 12-month period.
Slow times are good flip times…
As the table below shows, with very few exceptions, for the 17 year period covered in the table, home flips have accounted for a larger percentage of the overall home sales in St Louis during the slow-selling seasons, the 1st and 4th quarters. This makes sense as lenders are more apt to make deals toward the end of the year to get foreclosures off the books before closing out the year.
Opportunities to flip homes in St Louis on the decline…
As our chart below the table shows, the number of distressed home sales (foreclosures, short sales, and bank-owned property) in the St Louis area has steadily declined during the past 2 years as the economy, including the housing market, continues to improve.
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Home sales in the city and county of St Louis this year have pretty consistently, from month to month, been at a pace roughly 5 percent higher than at the same time last year. As our chart below illustrates, we began this year with 747 homes sold (not including distressed sales) in St Louis city and county, an increase of 5.2% from January 2016 when there were 710 homes sold. As of the end of October, there were 12,824 homes sold this year, an increase of 5.6% from the same time last year when there were 12,145 in the city and county of St Louis.
Home Prices Rise Modestly In St Louis City & County…
As the chart and tables, below show, the price per foot that homes sold for (the most accurate way to compare prices) this year has with the exception of May, been higher than for the same period last year. For the past couple of months, the price per foot has been either side of 3% higher than the corresponding period last year. As the YTD table for 2017 shows, the actual median price of homes sold this year, in the city and county of St Louis, has been $194,900, an increase of about 1% from last year’s median price of $192,900 for the same period.
Plenty of Homes For Sale in St Louis City and County…
Referring to the tables below again, you can see that, as of today, there is a 6.57 month supply of homes for sale (non-distressed) in St Louis city and county, putting the market into buyers market territory somewhat, and an increase of a little over 7 percent from the same time last year when there was a 6.13 month supply of homes for sale.
Why You SHOULD Be A Data Nerd, or at least, Pick One For An Agent!
Ok, I’ll admit it…I’m a data nerd! I love analyzing the real estate market and trends. I could sit for hours studying the market, computing prices, and spotting trends. I also love teaching our agents to do the same as well as sharing the results I glean from the data with our agents, to help them stay informed, on top of the market and able to better serve their clients. I also love educating consumers about the real estate market to equip them to make smart decisions when buying or selling real estate, or when choosing an agent.
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Why is this so important?GIGO! That’s why!
What in the world is GIGO? A computer science term which means, to quote Wikipedia: “(GIGO) is where flawed, or nonsense input data produces nonsense output or “garbage…..The principle also applies more generally to all analysis and logic, in that arguments are unsound if their premises are flawed.”
So, in a nutshell, if you, or your real estate agent is getting “flawed” or “nonsense” data, then the output, or result, will be “garbage”. Considering that, for most normal folks, buying or selling a home is often the largest transaction they make, it’s worth avoiding making decisions about that transaction based on bad info.
This is why we work so hard at delivering the best St Louis area home sales, and prices data. I’ll now give you a couple of quick examples of how abundant bad data is out there and how it may differ from what I have here.
From a very popular national real estate search site: “The median home value in Saint Louis is $131,300. Saint Louis home values have gone up 18.3% over the past year“
From a website that gives “neighborhood information”, the median home price in St Louis is currently $136,192.
From a trade association in the real estate industry…”While the median sales price (in the city and county of St Louis) increased 7 percent from $160,000 in October 2016 to $171,000 this year”
Get the idea? Even what appears to be, or may, in fact, be, very credible sources of home price and market data for St Louis, can be very wrong. None of this is intentional, but, instead, a result of there being “too much” information available today and, without going through some effort to sort through it, it can easily be GIGO data.
How does the GIGOdata happen?
Much of the home price data you see quotee for St Louis is for the St Louis MSA, which includes 17 counties, 9 in Missouri and 8 in Illinois.
We clearly identify what data we are reporting, such as, in this article, data for the City and County of St Louis.
Most of the data sources are probably reporting data which includes distressed home sales (foreclosures, short sales, etc) which can, in some areas where there are a lot of them, such as the city of St Louis, dramatically affect home prices.
We often filter out distressed sales, particularly when reporting data for an area where they can impact the data significantly (like in the city and county of St Louis) and then clearly identify what the data represents..
“Home prices” is generally the term used, but often times, the data reported actually combines condo prices with home prices. Condo’s sell for different prices, and appreciate and different rates, than homes, so this can skew the data as well. If we report “home prices” we have filtered out condo sales.
In addition to all of the above, there are many other reasons why it is hard to find accurate and timely home price and sales information for the St Louis area. The large number of municipalities St Louis county is chopped up into is part of it, as is the fact that the city of St Louis is not within St Louis County and that the REALTOR MLS here requires subdivision names to be entered manually, giving rise to errors and difficulty in getting good subdivision level home price and sales data.
This is why at our firm, MORE, REALTORS, we have worked so hard and spent so much time and money developing our own proprietary softwareto assure our agents, and their clients, have access to, the most accurate and timely, St Louis area home price and sales data possible.
St Louis City/County YTD Home Sales & Price Per Foot – (chart)
There is little doubt that lower-income individuals and, subsequently, lower-income neighborhoods, were impacted more negatively by the housing market bubble burst in 2008 than other areas. This resulted in extremely high mortgage delinquency rates, high foreclosure rates, and declining home values. Afterward, citing “loose” lending standards, sub-prime mortgages, etc, the mortgage market tightened the reins on mortgage lending making it more difficult for everyone to get a loan, but particularly, those folks in the lower income brackets.
As time has passed, home loan requirements have eased and it is now easier to obtain a home loan. Some of the requirements that have eased are minimum credit scores, down-payment requirements as well as rules affecting seller paid closing costs, gifts, etc, which has, in particular, helped lower and moderate-income home buyers. The Consumer Financial Protection Bureau (CFPB), the government “watch-dog” of all things financial, tracks and reports data related to home mortgages which reveal that, in fact, home mortgage lending has increased to the highest levels in over a decade in low and moderate-income areas. The CFPB charts below reveal:
Home loan volume in low-income areas topped $3.8 Billion in November 2016, the highest level since the CFPB began tracking this data in January 2009. The CFPB forecast, predicts that, once the data is in, a record $4 Billion in home loans will be reported for August 2017.
Home loan volume in moderate-income areas hit $21.7 Billion in October 2016, also the highest level since the CFPB began tracking this data in January 2009. The CFPB forecast, predicts that, once the data is in, a record of $23+ Billion in home loans will be reported for July 2017.
The middle-income areas have fared well also with home-loan volume hitting a record $76.8 Billion in October 2016. Unlike the low and moderate income area forecasts, the CFPB is forecasting a slight cooling in the middle-income areas with home loan volume dropping to $73.5 Billion for June 2017 and then slightly lower in July once the data is in.
High-income areas are trailing the other areas in terms of home loan volume having peaked at $116 Billion over 4-years ago, in January 2013. The CFPB is predicting lending data will show $90.5 Billion in home loans in high-income areas for June 2017.
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Over the past couple of years, as the St Louis real estate market has continued performing well, mortgage delinquencies and foreclosures have continued to decline. Rising home value has also caused the number of “underwater” homeowners, also known as homeowners in a negative-equity position (meaning their mortgage balance exceeds their homes current value) to decline as well. As the table below shows, 5 of the seven St Louis area counties listed saw a decline in the number of underwater properties in the 3rd quarter of this year from a year ago. The largest decline in underwater properties was St Charles with a 35% decline. The two exceptions, the city of St Louis and St Clair County, Il, saw an increase in underwater property of 2% and 14% respectively.
St Louis Underwater (Negative-Equity) Properties – 3rd Quarter 2017
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As of the end of September, in thecity of St Louis, 7,265 of the 104,288 residential properties in the city were vacant, giving the city a vacant property rate of 6.97 percent, the 2nd highest of all the counties in the U.S., according to a newly released report by ATTOM Data Solutions. The number of vacant properties in the city of St Louis increased 4.4% from the same time last year. Baltimore Maryland had the highest vacant property rate at 8.14 percent.
As the table below shows, St Clair County, Illinois was the next St Louis area county on the list coming in at number 11, followed by Madison County, Illinois at #42, St Louis County at #47.
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St Louis Area Vacant Property Rate By County- 3rd Quarter 2017
More Than 100 Zombies In The St Louis Area!
“Zombie” is the name that has been given to vacant property which delinquent mortgages and destined for foreclosure, not but in foreclosure yet. These properties are in a “no man’s land” so to speak, and often become an eyesore and a burden on the neighborhood as well as city located in. As the table below shows (compiled from the ATTOM Data report), St Clair County, IL has the highest number of “Zombies” at 99 and also has the highest Zombie foreclosure rate at 14.39%.
St Louis Area Zombie Foreclosures By County- 3rd Quarter 2017
On a national level, according to a report released by Corelogic, the foreclosure rate is at a 10-year low and, for the most part, mortgage delinquency rates continue to fall as real estate markets around the country continue to improve.
The state of Missouri, as well as it’s two big metro areas, St Louis and Kansas City, are following suit with improvements in mortgage delinquency and foreclosure rates.
State of Missouri- Mortgage Delinquency/Foreclosure Rates:
30+ day mortgage delinquency rate improved from 5.3% of all mortgage loans a year ago to 4.5% for July 2017;
90+ day mortgage delinquency rate improved from 2.0% a year ago to 1.5% in July 2017;
Foreclosure rate improved from 0.5% a year ago to just 0.3% in July 2017
St Louis Metro Area- Mortgage Delinquency/Foreclosure Rates:
30+ day mortgage delinquency rate improved from 8.1% of all mortgage loans a year ago to 6.8% for July 2017;
90+ day mortgage delinquency rate improved from 3.7% a year ago to 3.0% in July, 2017;
Foreclosure rate improved from 1.7% a year ago to just 1.2% in July 2017
Kansas City Metro Area- Mortgage Delinquency/Foreclosure Rates:
30+ day mortgage delinquency rate improved from 5.0% of all mortgage loans a year ago to 4.1% for July 2017;
90+ day mortgage delinquency rate improved from 1.9% a year ago to 1.4% in July, 2017;
Foreclosure rate improved from 0.5% a year ago to just 0.3% in July 2017
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In the St Louis area during the 2nd quarter of this year, there were 30,407 (5.4 percent of all residential properties) with negative equity, or underwater, according to a report just released by Corelogic. This is a decline of nearly 20 percent (19.89%) from a year ago when there were 37,581 St Louis homeowners in a negative equity position.
In addition to the homeowners that are underwater, or in a negative equity position, during the 2nd quarter of 2017 there were 9.660 homeowners, or another 1.7 percent of all homeowners with a mortgage, that were in a “near-negative” equity postion (they have less than 5% equity), according to the report.
Negative Equity and Underwater Defined
Two terms that we didn’t hear much prior to the real estate market bubble burst in 2008 were negative equity and underwater. However, after the bubble burst, we heard those terms a lot and now, even 9 years later, still are. So, what is considered “negative equity” or being “underwater” for a homeowner? Basically, in a nutshell, it means the homeowners current home loan balance is greater than the current value of their home leaving them in a position where they cannot sell their homes without “bringing money to the table.” For homeowners in a “near negative-equity position” they are better off since they have some equity (5% or less) but, since the cost of selling a home and relocating typically exceeds that amount of equity, those homeowners could face the plight of having to bring money to the closing as well, making it hard to sell for many homeowners in this position.
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Home flipping accounted for 7.3 percent of all the home sales in the St Louis MSA during the 2nd quarter of this year according to a report released today by Attom Data Solutions. This is a decrease of 15% from the prior quarter when 8.6% of the homes sold were flips and is an increase of 10.6% from a year ago when 6.6% of the homes sold in St Louis were flips, according to the report. For the purposes of this report, a “flip” was defined as a property that was sold in an arms-length sale for the second time within a 12-month period.
St Louis house flipping profit margins…
During the second quarter of 2017, the median purchase price of houses that were flipped was $75,000 and the median resale price, 163 days later on average, was $129,900 for a gross profit margin of $54,900. Before you get too excited though, remember this is just the gross margin between the price paid and the price resold at. The actual net profit would be much lower as there would be costs related to the acquisition and sale of the property as well as rehab/repair costs and carrying costs, none of which is available publicly, so we can just talk about gross margins here.
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The housing bubble that led to the housing bubble burst in 2008 started a decline in the value of homes, including those in St Louis, for the following 3 to 4 years. This resulted in a much larger number of homeowners facing financial struggles including late payments, foreclosures, short sales, bankruptcy and the like, than was the historic norm. As a result, while maybe not a new concept but certainly one that had been more obscure in the past, credit repair, became a lucrative and growing business as consumers sought to repair the damage done and position themselves to buy a home.
In St Louis, there are many companies offering credit repair services, with many making some pretty enticing sounding claims with regard to removal of negative items from your credit, improving your credit score in a short time period and so on. While there are reputable companies out there doing a good job for St Louis homebuyers looking to improve their credit no doubt, there are also some that are probably not doing much more for the consumer than they could easily do on their own or, worse yet, perhaps very little at all for the fee paid.
How do you find a good credit repair company in St Louis?
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Ok, I’ll admit it, I know I’m sort of a big data nerd and not everyone is, so I may be in the minority when it comes to the attention I give, and time I devote, to market data, stats, trends and the like. However, while not everyone wants to study this stuff, anyone in the market to buy or sell real estate either needs to be up to date on what is going on in the market in terms of price (and the other stuff I mentioned) or be represented by a real estate agent that is. Otherwise, without this information or, worse yet, with bad information, home buyers and sellers can make some really bad decisions.
There is a lot of “bad” data out there and it can hurt you!
When I started in the real estate business, way back in 1979 and the age of 18, it was very hard to get much data on home prices, sales, etc, heck, it wasn’t even easy to find out what was listed for sale. Today, largely a result of the internet, things are much different. There is plenty of data and information available to home buyers and sellers today and it’s easy to find. The hard part today isn’t getting the data and information, it’s getting good, accurate and relevant data and information. You don’t have to spend much time online, whether on social media sites, real estate websites or even “news” sites, to discover all sorts of inaccurate, incomplete, dated, useless and conflicting data and information. For example, in the past week, I saw reports, even from people in the real estate profession in St Louis, indicating home prices declined last month from a year ago to the tune of about 3% or so, but I don’t believe that is the case. Bear with me and keep reading and you will see why I say this as well as what I think is accurate with regard to St Louis home prices.
Usually the source means well and the data is believed to be accurate, but….
With regard to real estate, I think most of the data published on real estate sites, social media sites, etc by real estate agents as well as others in the industry, is believed by the person putting it out there to be accurate, the problem is it often is not. The problem is, without really digging into the source of the data, or examining what criteria was used to compile the data or report, people are often passing along information they are just assuming to be accurate but often is not.
So, where can you find good, accurate and relevant information and data on the St Louis real estate market?
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St Louis continues to enjoy a pretty robust real estate market, albeit it a challenging one for buyers due to the low inventory of homes for sale in most areas, with St Louis home sales, during the past 12 months, up over 5 percent from the prior 12-month period and St Louis home prices up over 5 percent for the same period as well. As the table below shows, in the 5-county core St Louis market, there were 27,437 homes sold in the 12-month period ending May 31, 2017, an increase of 5.13% from the prior 12-month period when there were 26,099 homes sold.
Year-over-year for the month of May looks good as well…
As I frequently comment, looking at home prices and sales activity for a 12-month period is the best way to get a realistic view of the market, less affected by timing of sales due to weather, day of the week the last day of the month falls on etc, it’s still worth looking at the most recent month and comparing it to the prior month, as well as prior year, to help spot trends or changes in the trend. With this in mind, as the chart below shows, for the St Louis core market there were 3,070 homes sold in May, 2017, an increase of 21.2% from the month before when there were 2,533 homes sold, and an increase of just under 1% from May 2016 when there were 3,042 homes sold. As the chart also reveals, homes sold in St Louis during May, 2017 were sold for a median price of $185,000, an increase of 2.8% from the month before when the median sales price was $180,000 and a slight increase of just one-half of one-percent from May 2016 when the median price St Louis homes sold for was $184,000.
Franklin County has the largest increases in home prices and sales during past 12 months…
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The low inventory of homes for sale in St Louis comes up today in most conversations related to the St Louis real estate market. St Louis home buyers have struggled to get to new listings quick enough, and then make strong enough offers, to successfully beat out the competition. Well, while that may be the story for the majority of the St Louis real estate market, that is not the story for the $1Million+ market.
As the table below shows, there are currently 287 homes listed in St Louis County and St Charles County at a price of $1 million dollars or more which, based upon current sales rates, translates into more than a years supply.
St Charles County and St Louis County $1 Million+ Homes For Sale
(click on table for up to date chart and table)
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Home flipping accounted for 8.6 percent of all the home sales in the St Louis MSA during the 1st quarter of this year according to a report released today by Attom Data Solutions. This is an increase of 14.7% from the prior quarter when 7.5% of the homes sold were flips and is an increase of 6.2% from a year ago when 8.1% of the homes sold in St Louis were flips, according to the report. For the purposes of this report, a “flip” was defined as a property that was sold in an arms-length sale for the second time within a 12-month period.
St Louis house flipping profit margins…
During the first quarter of 2017, the median purchase price of houses that were flipped was $75,000 and the median resale price, 158 days later on average, was $129,400 for a gross profit margin of $54,400. Before you get too excited though, remember this is just the gross margin between the price paid and the price resold at. The actual net profit would be much lower as there would be costs related to the acquisition and sale of the property as well as rehab/repair costs and carrying costs, none of which is available publicly, so we can just talk about gross margins here.
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There are several ways to look at home prices and home affordability as well as to argue the merits of homeownership versus renting, however, one my favorite metrics to consider along these lines is the relationship between home prices and rental rates. Most home buyers, that are seeking a home to live in, never consider what the home they are considering purchasing would rent for, since that is not their intended use. However, there is a relationship between home values the potential rental income in that there is a tipping point reached when the cost of owning a home exceeds the cost of renting a comparable home in the same neighborhood by too much, there becomes an incentive to rent rather than buy. Along the same lines, if rental rates get so high that, for about the same money, or even less, one could buy the home they are renting, there exists a strong incentive to buy a home.
With this in mind, when you look at the chart below from the St Louis Federal Reserve, which shows the St Louis home price index, the blue line, and the Consumer Price Index for Rent, the red line, you can see there is a pretty significant gap between the two. The chart goes back to 1975 and, as you can see, historically the home price index and CPI for rents have increase at relatively similar rates, with home prices lagging slightly behind from about 1980 through around 2004 but, even then, there was a pretty similar trend. As the housing bubble in 2006 approached, you can see the home price trend shot upward and past rents only to fall sharply around 2008 after the housing bubble burst. Since hitting bottom around late 2011, home prices have been trending upward, but, as illustrated, there is a much larger gap between home prices and rents then is the historic norm which is a good thing with regard to home prices. Based upon what I see on the chart (you can click on the chart to be taken to our live, current version which is interactive) I would expect the gap between rents and home prices to close at some point in the near future. This can be accomplished in one of two ways: home prices can rise at a greater rate than rents rise, or rents can fall or remain flat, or, of course, some combination of the two. In either event I think this is good data to support sustained home prices and also shows that buying a home could well be a better investment than renting.
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According to a report just released by Corelogic, the 30-59 day mortgage delinquency rate in March (the most recent month reported) fell to just 1.7%, the lowest level since January 2000. The “seriously delinquency” rate (30+ days late) fell to 4.4% in March, the lowest level sine November 2007, according to Corelogic.
In addition, the “transition rates” all improved as well from a year ago. Transition rates show which way the borrowers are moving, from slightly delinquent to more delinquent, or from slightly delinquent to current for example. Below are the transition rates for March 2017, according to the Corelogic report:
Borrowers going from current to 30 days late – 0.6% for March 2017, down from 0.7% in March 2016
Borrowers going from 30 days late to 60 days late – 11.6% for March 2017, down from 13.2% in March 2016
Borrowers going from 60 days late to 90 days late – 20.8% for March 2017, down from 23.1% in March 2016
All of this is good news for the real estate industry as the trends are positive and are is a good “leading indicator” of what is to come. As mortgage delinquencies decrease, foreclosures, short sales and other distressed home sales decline, putting less downward pricing pressure on the housing market and providing sustainability to the improving housing market.
Speaking of mortgages, if you are considering refinancing, want to know what current rates and terms are, or would like to get pre-approved for a mortgage, I would highly recommend speaking with Ryan Derryberry, a mortgage loan professional with Movement Mortgage. Ryan is a great guy, is honest and knows his stuff. Movement is a great company, founded and operated on great principals and offer some mortgage products you won’t find anywhere else….More information on Ryan, including his contact info, can be found here.
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I am always marveled by great marketing and promotion therefore I must give a tip of the hat to Zillow® for their new “Instant Offer” program. First, it’s getting them tons of attention and press, particularly within the REALTOR® community, which is probably where it is the most beneficial to them since real estate agents are, after all, Zillows’® paying customers. Courtesy of Inman News, REALTOR.com and others, this new program has received the equivalent of thousands and thousands of dollars of free advertising, which is the type of thing I love and dream of getting this type of free publicity for my firm.
Instant Offer concept is not new…
So, why do I say it’s nothing new? I have nothing against Zillow® (although many in the REALTOR® community are not fans as they see them as a threat) however, I really don’t see anything “new” or revolutionary about their instant offer program. Basically, according to their website, what their program does is allows you to submit information on your home to them which then goes to a group of national investors who then submit you a cash offer for your home. Then, an inspection is done of your home (I’m guessing the offer is subject to this inspection being favorable) and if so, then you proceed to closing. Homes have been sold in this manner for decades, including right here in St Louis, so it’s nothing new. When I entered the real estate business here in St Louis in 1979, there were many “speculators” in St Louis, including the broker I worked for, that would make sellers a cash, as-is, offer on their home and would offer to close as fast as 24 hours. So, basically, the same thing as the “new” Zillow® instant offer program with a few exceptions including that our offers were typically unconditional (other than that the seller had good title), truly as-is and we were local, people the sellers could meet, talk with and establish a relationship with as they contemplated whether or not this approach to selling their home was a good decision. Over the years, I was involved in the purchase of over 2,000 homes in this manner right here in St Louis. Today, thanks to internet webinars, reality TV shows and just a wealth of information being readily available, there are many, many people, that, in addition to the established “professional investors”, out there trying to buy real estate in this manner.
Do you want an “instant offer” on your home?
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