2018 STL Home Sales Review

Here is a rundown on how 2018 was for the St Louis housing market:

We began the year hot with low inventory and rising prices, leveling off thru summer, than losing some steam in the fall. STL Metro has been on a steady upward price climb since 2012, and kept the pace up with a 4.9% appreciation rate for 2018 and an average price of $245,800 (homes and condos). Last January, I accurately predicted “an increase of 5%, maybe 6%” due to the strengthening economy and low unemployment. The number of sales, however, dipped by 1.2%, likely caused by the tight supply. Average and median days-on-market dropped again, now at 42 and 14 days respectively. Months of Inventory (ratio of homes on market to rate of sales) indicating supply, also dropped, now at 2.4 months.

Zeroing in on the 7 submarkets, North County led the pack with a 9.0% price gain! This time, their greatly improving supporting stats backed up their gain, likely due to being the lowest average price in the region at $103,650, and buyers taking advantage of the affordability factor. West County surged back in 2018 with a 5.6% price gain, after a lackluster 2017. They are still working off some high days on market and home supply, but easily hold onto the 2nd highest price average with $356,343. The South County region, as I also predicted last year, came on strong with a 5.2% price gain with their $203,300 average, and among the best indicators. St Charles lost some headway and clocked in at a 4.2% rise ($246,125 ave) after 2 successive years of 5.5%. Although their supporting stats are still the best in 2 other categories, the percent change was smaller there too. The Central Corridor (mid STL County) slipped to a 3.8% gain, but still have the highest prices in the Lou at $415,872 average. Their stats are mid-range but impressive at those prices, which tend to take longer to sell. STL City (3.5% up) and Jefferson County (3.6% up) rounded out the region with respectable price increases and very similar prices, $183,200 and $181,800. Jeff Co holds onto the distinction of the highest inventory and coming off their price the 2nd least, only .6% (St Charles .4%). The city holds large disparities, with some neighborhoods being pricey and in demand, while others only blocks away may languish, creating more opportunities but with risk.

What does 2019 hold in store for St Louis? We ended 2018 with a shaky stock market, the federal government at odds, volatile interest rates (lower right now!), and very low unemployment but ticking up. I feel confident about our region’s outlook as we continue to import tech and entrepreneurial jobs, rebuild many areas of the city and county while cracking down on crime, and not taking ourselves too seriously. If we grow, great! If we don’t, that’s OK too, as evidenced year after year by our strong support for charitable causes, cultural institutions, sports, education, and the arts. I predict this year will see a 3% increase in home prices, as the cycle is wearing thin. Sellers can take advantage of the significant runup in prices the last 7 years, and buyers can take advantage of still-historically low mortgage rates, and home prices among the lowest of any major metro area in the country.

Downtown STL real estate update

Downtown STL real estate update: The number of sales is steadily climbing, days-on-market are steadily dropping, and prices are making some headway. From 2012 to 2017, the number of units sold – condos/ lofts in high rise buildings – has increased from 96 to 124 (30%), time on market has dropped from median 109 days to 57 (48%), and average sale price increased from $164,839 to $180,818 (10%). YTD numbers for 2018 are indicating a higher number of units sold and not coming off the asking price as much, but an increase in days-on-market and a decrease in price. This could be more of the smaller units selling, or sellers getting more anxious as they sit on the market longer.

I ran the same stats for the Central West End condo market, the only other large concentration of condos/ lofts in the city, especially high-rises. Over the same period, # of units sold rose 87%, almost doubling, days on market dropped 76% to 24 days, and prices went up about the same, 10.2%. Overall the St Louis market had another strong first half of 2018, but a softer 2nd half. I will have complete figures next month to compare. At this point, it seems that the city high-rise market, appreciating at roughly 2% a year, is running about half what the rest of the region’s homes are running, at about 4%.

How Do Hiking Trails Affect Home Values?

Last week, I ran a study for a client whose subdivision is having a trailhead installed adjacent to them. Residents are concerned about property values, traffic, aesthetics and crime. Since this is becoming more common around St Louis city and county, I thought it was worth sharing.

My study points were 6 parking lots serving as trailheads along the Grant’s Trail in South County running from Crestwood to Hwy 55, about every mile. For each of the 6 locations, I ran two sets of 3 statistics, a 1/4 mile circle and a 1 mile circle, with the 3 statistics being average sale price, days-on-market, and list price to sale price ratio. The small set (1/4 mile) focuses on any negative effects the parking, traffic, noise and crime, if any, may have vs. the positive effects being close access to the trail and greenspace, may have on the desirability of homes in the immediate area. Then compare that to a larger area (1 mile) surrounding it. This keeps as many factors as possible the same – age and style of home, school district, seasonality, etc, and attempts to find a pattern by looking at 6 different points along the trail. Of course, with the relative small sample sizes and other factors affecting the outcomes, this study is far from scientific. However, I believe it is valuable. I also spoke to a couple residents for their thoughts, and looked up prior studies around the country (found quite a few) that have paid for similar research. A home right next to the trailhead that may experience overflow parking and more commotion would be more affected than a home 1 or 2 blocks away, which this study does not discern.

What I found is this:

3 of the 1/4 mile groups (neighborhoods closer to the parking lot/ trailhead) were higher average sale price than the larger, surrounding areas, and 3 of the 1/4 mile groups were lower. Comparing all 6 of the differences, the average price (judging by percent difference to control variances, not by actual price) was 3.7% higher in the 1/4 mile groups. Judging by actual prices came out 7.5% higher in the 1/4 mile groups. Do not take this as interpreting that you should expect 3.7% higher sale price if you live within 1/4 mile of a trailhead, (and certainly not 7.5%) as I would need to control my comparisons much more to be somewhat more reliable. However, with my brief study, and my understanding of statistics and percentages, that is the figure that came out at the end.

To go a step further, 4 of the 1/4 mile – closer neighborhoods – sold quicker than the larger surrounding areas, and 2 took longer to sell, as evidenced by days-on-market. 4 of the 1/4 mile neighborhoods sold for closer to list price, or even above list price, than the surrounding areas, while 2 came off their list price more, as evidenced by sale price to list price ratios. These stats support the slightly higher average sale price found in the 1/4 mile groups.

I believe this all goes to support the argument that was presented almost universally in the other studies I found around the country, that being close to a trailhead and/or parking lot does not hurt your property value, and in fact may enhance it. However, I would caution that if you are right next to it, I do expect a negative effect due to aesthetics of structures, cars, and commotion. I would not anticipate any crime increase, although a phone call to your local police department may give you a better answer on that.

Happy Trails!

Gary is Bullish on 2018 Home Values, Plus 2017 Sales in Review

Greetings and welcome 2018!

2017 bestowed another solid increase on the real estate market in St Louis, and across the country. Our local residential market notched a 4% annual gain, similar to the past 4 years, and pushed the average sale price for homes and condos to $234,339. Some parts of the metro experienced more, of course, and some less. The number of sales was up 2.3% from 2016, so home supply is really not shrinking, it is a faster increase in buyers than homes coming on market. Average days on market decreased 15% to 44, with median days a meager 16! Months of Inventory (ratio of homes on the market to how many are selling) shrunk 11% to 2.5 months showing the higher demand.

As for submarkets, I compared 4 factors: days-on-market (DOM), average price negotiation (list price to sale price ratio), months-of-inventory, and sale price increase, to determine hot and cold areas of our metro. I found St Charles County and the Central Corridor (Mid STL County) to be in the highest demand with price appreciation between 5.5% to 6%, shorter DOM, and lower supply. The Central Corridor had the highest average sale price in the region, no surprise, at $400,000. South County showed only 3% appreciation but had strong indicators otherwise, so I anticipate a higher price increase there in 2018. North County had the highest value increase at 7%, but the other factors were sluggish – among the highest DOM and most supply, although every category in every submarket across the area improved. I believe the dropping number of distress sales in North Co helped push the average price up. West County showed a 2.3% price increase, and average indicators. My experience here is that homes below $500,000 were selling faster, and higher prices were slower, keeping the average just average. I believe the big spenders in 2017 were staying closer in, as evidenced by the Central Corridor rise. The city of STL (2.3% up) and Jefferson County (4.3% up) were on the slow side, with higher DOM and home supply. Jeff Co, along with their solid appreciation, had a very low negotiation factor of 99.3% list price to sale price (sellers came off price only .7%), a close second to St Charles, so don’t expect to get a low offer accepted there!

Looking ahead to 2018, economic indicators are almost all positive. With the STL unemployment rate now at 3.4%, and running below the national average, now at 4.1%, for about 2 years; the stock market at all time highs, wage growth increasing, the global economy strengthening, and our region’s reputation for affordability, I anticipate an increase of 5%, maybe 6% in home values this year. Now is the time to be planning and prepping for a move in 2018 – contact me now to take advantage of the best market we have seen in 12 years!

Go Home Values!

HEC Yeah! The Home Equity Coach

To build on my article from 2 weeks ago – accelerating home equity to Increase your Net Worth Faster – I have now coined it the Home Equity Coach program and have purchased www.TheHomeEquityCoach.com.  I plan to expand this free program over the next 12 months, as I strongly believe in building wealth thru real estate ownership, among your other investments such as stocks and businesses.  Since the road is not always clear on how to get there, I am offering my service on this important financial asset that can be easily overlooked and taken for granted .  Of course, I will continue my main occupation as a Realtor representing home sellers and buyers for years to come.  This program is a supplemental guide for homeowners to realize a larger payoff upon selling, which can then be used for a larger down payment on the next home, pay down other debts, invest in retirement funds, or however you wish! 

 

Financial experts seem to agree that the proper percent of home equity compared to your total net worth should be in the 20%-30% range, meaning if your net worth is $500,000 that your home’s value minus the loan(s) is $100,000 – 150,000.  This percent will fluctuate substantially over your lifetime – smaller when buying your first home, and higher when selling your last one.  Currently, the average person’s home equity is a much higher % of their total financial worth, as the average savings/investing rate is lower than it should be.  So even though my goal is to build your equity faster, I also believe you need to be properly invested and balanced in different asset classes.  You should not be house-rich and cash-poor.

I have represented 365 clients buying and selling a wide variety of homes and locations over a 27 year career that includes managing other agents for five years.  This experience has given me many insights on how to make a financially-smart purchase, to grow that value while enjoying your life there, paying down the debt sooner, and eventually selling it with a larger check in hand.  I can enter the picture in any of these stages to lend guidance in achieving these goals with you.  It can apply to your own home or to rental homes you own.  This is NOT a get-rich-quick scheme; buy-for-zero-down investment; flipping-houses-with-other-people’s-money; or anything you have heard advertised.  Nor is it designed to sell you a larger home (unless you want to of course, then I am happy to :).  I simply feel bad for folks that have missed opportunities to accelerate their wealth during their home ownership using tools already available to them.  In the end, I hope to earn/ keep your business when it is time to buy and sell homes.  That’s it!

If this terminology intimidates you, don’t worry, I can simplify.  If it is too basic, it is supposed to be.  The concept here is not difficult to grasp, just difficult to maintain the discipline, that is where having a coach can be invaluable.  Contact me soon to arrange a home visit where we can begin your plan.  Time to bring in the Coach!

Happy HEC-ing!

Increase your Net Worth Faster

Home “equity” is simply your home’s value minus what you owe on it.  Many of us have a rough idea of what our home is worth and also what we owe on it.  Several years ago, 25% of home owners had a negative number, severely hampering their ability to move or refinance.  Fortunately today, few owners are in that position as average home values have risen steadily for 5 years.  I believe you should have a clear picture of these two numbers, and how to drive them further, as it can be a large percentage of your net worth.  It can harm you, and it can help you, in house matters and in other life pursuits.  Your home equity is an important figure – you should have more than a vague idea of what it is and how to increase it.   Even as you closely track your assets and investments, this may be a higher priority as you can take several steps to build it, and limit your risk of losing your home.

I am offering to assist you in focusing closely on (1) what your house is truly worth; (2) how to increase that value without overspending; (3) evaluating how and where to get maximum return on repairs and improvements; (4) comparing home loan options on purchase and refinance that work best for you; and (5) making that mortgage work for you.

I offer these services for free in the hopes of earning your business in the future, and referrals of those you know in the immediate term looking to sell or buy homes.  Consider me an unbiased third party on home improvements and loans, as I do not financially gain from the choices you make.  I would not steer you wrong in these matters knowing that you may come to me later to sell your home, and I have to answer to my recommendations.  Also, I can give you hard figures to track your home equity amount so you have a clear number to work with, which can benefit you in several ways; plus I can document your repairs and improvements for an easy record (now required by title companies for 12 month period prior to sale) of paid receipts, lien waivers and warranties when it is time to sell.

If you don’t own a home, let’s change that and start building your equity for 2018.  It can be exciting to watch how leveraging a down payment on a home purchase that is appreciating in today’s market can dramatically magnify your net worth!  Leveraging works in reverse too, I can show you how to be mindful of that.  If you are not completely sure of how this works, take the time to understand this basic principle of finance.  Another principle worth understanding is the magic of compounding – it is not just for interest on your savings, it works on your mortgage payoff too!

Happy equity building!

2016 Stats for St Louis Home Sales

2016 ended up as another strong year for home sales in the St Louis area.  We were predicted by the National Association of Realtors to be one of the hotter selling markets in the country, and we were not disappointed!

Price appreciation, which is always difficult to determine exactly, went up around 4% for our area as a whole.  The number of sales was up 7%, average days on market was down 12%, and months of inventory (ratio of homes on the market to how many have sold) was down 18%, showing a decreasing supply with higher demand.  It was a blessing to buyers that prices did not increase more than they did, but that is a benefit to being in the Midwest.  Historically, even considering the recent recession, home prices have averaged an annual appreciation between 3 and 5% around the country, so a 4% rate is very sustainable, and slightly above long term inflation rates.  Bear in mind that this entails an average amount of repairs and improvements being spent on the home every year.

There are always differing submarkets with hot/cold school districts and ZIP codes in a metro the size of St Louis.  After reviewing days-on-market, average price negotiation amount, months-of-inventory and sale price increase; it appears that St Charles County was the hottest, followed closely by South County, West County, and the Central Corridor.  STL City, Jefferson County and North County followed behind but showed surprising strength.  Those 3 markets took longer to sell with less demand, but prices rose above average, perhaps catching up a bit to the higher priced areas.  Single family homes came out ahead on all statistics over condo sales, and continue to have higher demand, especially one stories.

One of the biggest surprises to me was the 2016 list price to sale price ratio – the average amount the seller negotiates off the list price to sell and close the sale – was only 1.5%!  That is the lowest I can ever recall in 27 years of home sales, quite amazing.  Only 5 years ago this number was 5%, the highest amount I can recall.  Note this percentage does not include any closing credits from seller to buyer, which was likely higher 5 years ago in the slow market.

Here’s to a prosperous 2017!  If you are planning a move this year, please contact me to get going!

Housing Affordability

With steadily increasing housing prices, affordability has been gaining more attention this year and is a concern of a great number of potential homebuyers and renters.  While home prices took a big hit from 2008-2011, rents did not drop much, just temporarily slowed.  Both have been rising the last 3-4 years faster than inflation.  Sale prices in most markets around the country between last year and this year just eclipsed the peaks from 10 years ago, including St Louis.  Remember that, when it seems like prices keep going up and up, most of the increase was simply making up for the loss of recent years.

Generally speaking, the larger the metro, the higher the housing costs.  There are certain hotspots like San Francisco and Honolulu that command extreme prices.  Relocating buyers take this into account on moves, and quite a few locations are determined in part by cost of living.  Here in STL, we are commonly ranked among the most affordable metros when searching the largest 50-100 metro areas nationally, by an Affordability Index that compares median income to median home/rent prices.  Take our relatively low prices, add in the very low mortgage rates (holding at 3.5% on a 30 year fixed and 2.8% on a 15 year fixed) and stronger jobs market (local unemployment under 5% for the last 15 months), and this makes for a good time and place to be purchasing a home.  In fact, this area boasts a 72% home ownership rate vs. the national 64% rate.  We have even been plagued with low home inventory to choose from the last 2-3 years due to higher demand.  According to the latest Realtor.org figures, STL is more “affordable” than Kansas City, Chicago, Nashville, Indy and Minneapolis, and of course both coasts.  Cincy, Cleveland and Detroit edge us out.

St Louis has been garnering extra love recently with a vibrant startup culture, and growing industries of science, technology, healthcare and financial brokerages.  We toss in highly rated cultural amenities and varied housing stock that make this town a destination for thousands of families each year who relocate, tens of thousands who opt to stay here, and millions who visit.  True we may not be adding population as much as some other metros, but how is that a bad thing when we are growing in a steady and more controlled fashion that keeps our prices more affordable and traffic better?  Overwhelmingly, St Louisans like living and raising their families here!

*** I had my 350th home closing yesterday! ***

Tailoring Home Price Estimates

Greetings!  Fall is almost upon us, and the housing market is holding strong in St Louis.  Although not as crazy as this past spring, newly listed homes today attract immediate attention, and many are still selling in the first few days.  Interest rates are staying VERY low.  I can have you moved before the holidays!

Let’s face it – most of us have homes that are not “show ready” if we were to sell them tomorrow.  We may be in the middle of one project with two more on the to-do list.  Or we have just become comfortable the way it is; or perhaps we are short on cash and unable to make the improvements we long for.

Realtors for years in the past have, and will for years to come, valued homes by viewing and estimating the home with one figure or range in mind – the way it stands.  Some Realtors take the next step and inform sellers that if they complete certain improvements, what the sale price would be.  I have been coming across more and more sellers who contact me sooner in the selling process and need to decide what to do with the condition and appearance of their home.  More times than not, I am providing 2 or even 3 estimated sale prices tied to how much they are willing to do, and how the payback figures in.  Ultimately, each seller decides what is right for them, but most center on spending several hundred to several thousand dollars for a 2 to 3 times higher return on that investment, if not higher.  It is critical to have a Realtor with the experience to view your home and give the right advice of what pays back and what doesn’t, and apply it to your home’s current condition.  There are many resources for standard tips on this, but some of these lists have you rebuilding your entire home.  My own company has a 92 point list, good grief!  I was tired after viewing the first 10.  People deserve to know how THEIR home measures up, and what to prioritize: Is my carpeting OK?  What about this kitchen?  Should we keep these drapes or remove them?  I have told clients “If you are going to change this, then you should also change that” as often as “If you do these two things, no need to do that one” and the occasional “I wouldn’t touch a thing!”.  Then relate the end game to rough costs and how it affects the sale price.

Even with the market as strong as it is, buyers are willing to pay significantly more for a home that is move-in ready, especially if it is very inviting.  Oftentimes, two similar homes with 35 year old kitchens will look very different, one selling for thousands more than the other due to minor updates, cleanliness and décor.  Savvy sellers learn this and put it into play, and seek out guidance if needed.

Game On.