Have Home Prices Increased Too Much Too Fast? Is A Correction Coming?

Not only has it become common today for homes to sell as soon as they hit the market but receiving offers from multiple buyers and at prices that equal or even exceed the asking price is common as well.  While this is an illustration of Economics 101, the rule and supply and demand, when the demand exceeds the supply (such as in the housing market in many price ranges and areas), prices increase this can also be a reminder of times past when home prices rose quickly for several years, then retreated rather abruptly.  The most recent example of this, and arguably the worst during my 40 years in the real estate business, was the housing bubble that burst in 2008 sending home prices into a downward trend that lasted about 3 years.

So, are we headed to another housing bubble?

My focus is primarily on the St Louis housing market so I will focus on that but I will point out what I see with regard home prices, St Louis has a better outlook than at the national level.

Is There a Market Correction Coming To The St Louis Real Estate Market?

This morning I watched a video from a firm that reports on the real industry and does so from a blunt, “call it as they see it”, perspective (pretty much my style too) in which they say “market correction indicators continue to roll in” and suggest that, to some extent, the party is over.   This report looked at the national real estate market as a whole and specifically looked at the west coast so is not necessarily indicative of what is happening in the St Louis real estate market, however, can often be an early indicator.

As a result, I spent my early morning looking closely at the St Louis real estate market in search of market correction indicators.  So, did I find indications that the St Louis real estate market is headed for a correction?

Yep.  It’s called “spring is over“.  :)

At about this time every year, we see a correction, of sorts due to the seasonality of the real estate business.  It’s no secret that spring and early summer are always the best time for the real estate market with increased home sales and prices.  As that season passes there is always a “correction” in home prices as they adjust downward for the decreased demand.

However, what I am really looking at is the “bigger picture”, is there an overall market correction taking place in St Louis or headed our way?

While it would be unrealistic to think that if a true market correction is going to be experienced by the bulk of the country that it won’t have an impact on the St Louis market, however, at this time there doesn’t appear to be any sort of serious correction imminent in the St Louis market.  That’s not to say we won’t see the normal downturn in home sales and prices we expect to see due to seasonality.

Below are some charts and tables that I think are good indicators of the health of the St Louis market as well as good indicators of things to come.  I’ll briefly give some comments on each as well as how I have applied the data shown to my opinion I have shared today.