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.

3rd skyline in STL

Looking east from Art Hill in Forest Park, I now realize we have a 3rd skyline in STL. The always popular Central West End has been busy re-building itself the last few years, mostly with health care and residential, plus entrepreneurial Cortex. This view captures the Kingshighway side, with the Chase on the left and BJC on the right. The crane at left middle will be the One Hundred, a strikingly modern 36 floor apartment tower that will reach 75 feet taller than the Chase.

Several of the newer residential towers in the CWE are condos for purchase, including a renovation of the Chase Park Plaza. These high end units mimic Clayton prices, at the top of STL pricing. Downtown has more affordable space, with many renovated lofts in the last 20 years, and a new 29 story apartment tower going up in Ballpark Village.

Feeling a bit more suburban? There are smaller scale developments in Kirkwood, St Charles, and Creve Coeur, among other growing walkable communities. If you have a desire to purchase a piece of the sky, and be in the middle of the action, contact me now to get into some of these units and decide if it is right for you!

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!

Appliance Colors

Kitchen appliance colors and styles change like everything else. When one goes kaput, you need to decide quickly what to replace it with. When you are renovating, you have a little more time and can match as desired. What will it be?

Silver stainless steel has been the number one choice for a good 10 years now, black 10 to 20 years ago, and white 20 to 35. The 70s colors speak for themselves! High end kitchen appliances have almost always had silver stainless or wood paneled fronts to match the cabinetry, or even brightly colored finishes. The last 3-5 years, however, has seen 2 noticeable trends: Ice (pure) white and black stainless (dark charcoal); with another – slate (lighter charcoal) – the latest challenger.

My experience in seeing many homes is that silver stainless is still the king; white never caught on (lots of white cabinets right now), plain black is fading unless it is high end and fits your scheme, and black stainless and slate are fighting to be the next long term trend. I believe silver stainless will retain a classic, high end look and stay around for years to come, and it goes with so many things. Matching cabinet panels come and go, right now more in than out *if your cabinets are more in than out*!

After checking with an appliance store and a new home sales center, they agree that silver stainless is still their number one seller, and white is the least. In between, it seems that slate is edging out black stainless and plain black is below those two.

If you are replacing just one appliance, it is easiest and safest to replace it with a similar color and model, although you should consider replacing it with the direction your kitchen is going, even if it is an obvious mismatch in the meantime, and you are not selling the house anytime soon. I have seen some different colors, brands, even styles that still look good overall, especially in the premium lines where different manufacturers specialize in separate components: Wolf and Thermador ranges, Subzero refrigeration, Bosch and Fisher Paykel dishwashers, Miele oven and dishwasher. Also consider repairing if it’s newer or you need just one more year out it before gutting the kitchen, or even finding a reliable used model. If replacing all items at once, Samsung, GE, Whirlpool, etc are marketing the four main appliances as a package deal that is worth exploring, but don’t hold yourself to that, it can pay off to shop around in price and quality.

Keep in mind when it comes time to sell, buyers notice your appliances instantly on photos before ever setting foot in your home. Many times, even if they work great, outdated appliances that stay with the home are worth replacing for resale value. The washer and dryer do not matter nearly as much, as almost all sellers take those with them, although I admit a new $2000 W/D set does make a home show better than an old, outdated set, like a type of staging, but certainly not worth purchasing just for selling purposes. As always, contact me if you want a professional opinion on this, I can review with you on the phone, view photos, or visit your home.

Happy shopping!

Wirings Funds is now Risky Business

Scammers have caught up to the real estate transaction. Most of us are familiar with having our email hacked, or know others who have. This is how the home purchase wire fraud begins, by scammers trolling and hacking individual’s email accounts. Although not new, our company has been warning clients for several years now, it has become more frequent and aggressive. FBI data reports that $969 million was diverted or attempted to be diverted from real estate transactions in 2017, and wired to criminally controlled accounts. That is an increase of almost 6 times from 2016. Typically, a cybercriminal will access an email account of any party to the sale – buyer, seller, Realtor, title company, even attorneys – to collect details about a transaction, then use that information to send bogus instructions that seem reasonable to transfer funds to the wrong account. Once that happens, recovering it is nearly impossible.

A central issue, according to Theft Resource Center in San Diego, is that many people do a poor job of protecting themselves online with weak passwords for their email accounts. If one party to the transaction doesn’t practice “online hygiene”, everyone involved can be at risk. A 2017 Data Breach Investigation found about 80% of hacking last year took advantage of passwords that were stolen or easy to guess. Once the thief obtains a few transaction details, they compose a legitimate-looking email to the purchaser, ostensibly from the title company, to transfer closing funds to the fraudulent account. This can result in the loss of not only thousands, but hundreds of thousands of dollars, since people are inclined to follow instructions that appear legit from a title company they trust.

Making sure the devices you use have the latest patches and secure passwords is a good start to deter cybercriminals, and backing up your data on separate devices is critical. Regarding the sale process, all parties should verify by phone, using a known number – not one in a suspicious email, any instructions of where to send money. This is the most critical, as this fraudulent email typically arrives just days before closing when buyers are busy and often don’t take the time to consider whether an email is real or not. The receiver of the money, usually the title company, will send “wiring instructions” containing the name of the institution, an account number, a routing number and other brief information that you will relay to your bank. They are hesitant to send this by email now, and may send by fax or even text. You can avoid this issue by exchanging funds with a cashiers or certified check, if feasible. As your Realtor in a transaction, I will discuss this situation with you at least once, and even have a document that outlines this potentially hazardous issue. Even though this is generally a buyer beware item, it can affect a seller who is bringing money to closing, or having their sale proceeds sent to their bank electronically.

Practice Safe Wiring!

Is Brass In….or Out?

How much brass is in your home today? And is it the newer – softer finish?….or the 80s – high polish style? I have not seen a groundswell for bringing brass back in St Louis, at least not yet. I’m sure some will say it is all the rage, and others not so much. Keep this in mind: Most of what you tend to see in photos and opinions is not produced locally. And every item, texture and color in the photo was likely coordinated by a professional. I have seen some new brass lighting that looks very good in a shade called winter or brushed gold, which is a muted yellow color, not loud or shiny. It tends to be installed in modern décor, and lightly colored rooms, although it can be mixed with various materials. This look is working its way into lighting, and faucets in the kitchen and baths. I have not seen it reach shower frames or door knobs/hinges yet.

Still king today in STL is antique/ oil rubbed bronze (dark) metals in most of the home’s hardware – doors, bath and kitchen accessories, and lighting. Brushed chrome (soft, not shiny)/ nickel is a solid second. Light fixtures are in flux, as they turned dark first, 15-18 years ago, and the kitchen, baths and door hardware followed. Funny thing about baths, though, is that polished chrome has remained a staple for all bathroom fixtures (except cabinet pulls) for many, many years, and brushed chrome/nickel in the kitchen for the last 20. The only metal that has really been out of style the last 10-15 years was.. .brass. Of course, the brass from way back when, if you have the mass produced fixtures and hardware from the 70s-80s, still is.

If you are considering a change in any of these items, I suggest going with whatever you like on an item that is less costly, like a small light fixture or two, a faucet or two. If you are re-doing everything, you should research it more, to see (1) what you like, (2) what is popular in your part of town (sometimes trends are spotty even around St Louis, like really hot in Chesterfield but not in the city or South County), (3) how it goes with the rest of the room, and (4) what has staying power if you are not selling in the next 3 years. These steps will make you feel more certain about spending thousands vs hundreds. Here is one of the ways I realize whether a style is just a trend or a true mainstay – when clients stop asking if they should use it, and start asking what variation of it to use.

There you have it, brass is in….and out, depending on the style!

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!

Drop Ceilings – Love ’em or Hate ’em

Go into a recently finished lower level/ basement and look up.  Will you see painted drywall or ceiling tiles on a grid, known as a drop or suspended ceiling?  Chances are good it will be drywall.  How about one from 20 years ago?  Chances are it is a drop.  That’s the direction ceilings are moving.  We bought our house 20 years ago with a drop ceiling in the finished part  of the basement.  When we renovated it this year, the decision was easy to have drywall installed.  It becomes rather obvious after walking thru hundreds of homes, so you can take my word for it – this is what buyers will want in the foreseeable future, a basement that does not look like a basement.

Reasons given for staying with drop include easy access to pipes and wiring, by far number one.  Followed by easier to install for DIYers; lower cost (?); and more design choices.  Reasons for drywall include much better appearance, by far number one.  Followed by higher ceiling height; matches rest of home style; and better resale value.  You will need to decide which is better for you, but I implore you to go with drywall, as my guess is 75% (and climbing) of owners are going this way.  Yours will stand out that much more in the future if it is drop style.  If you need help deciding, get 2 or 3 bids and ask the contractor for pros and cons.  When I considered how often I had to access underneath the main floor joists over the last 20 years that was not in the unfinished area or would not have an access panel for a shut off, it was very infrequent.  The cost of installing it was not all that much, I am estimating it cost $1600 for 750 sq ft of ceiling for materials and labor, as it was lumped in with the other drywall areas.  How much would that area cost for a drop?  I am getting online estimates starting at $1000 for materials and labor and going up sharply.  It may even cost you more to pay for a drop ceiling to be installed, although if you can do a professionally looking job yourself, you should be able to keep it under.  But for the amount of $500-750 of savings, is it worth it?  I estimate a gain of $2000 in an average price home by having the ceiling drywall vs drop upon selling the house, and $5000-7000 on a large home.  More if your ceiling tiles are over 20 years old.  Even with paying a contractor to break into your new ceiling to fix a leak or run wiring, and someone to repair it, I believe you are still coming out ahead in the end, plus the enjoyment factor in the meantime.  You can compromise by drywalling the main part and do the drop in one room where you need more access to things.

The lighting may cost you as much as the ceiling finish.  Can lighting is used almost exclusively now in lower levels, whether drywall or drop.  This is a nice improvement from the 4 foot fluorescent fixtures from years past, so at least install cans as part of your lower level renovation project.  You may be able to save some money buying and installing the fixtures yourself, and have the electrician run the wiring.  But if something goes wrong after the drywall is installed, oh boy.  I just paid the electrician to do all of it for proper spacing and to head off future problems.

Happy drywalling!

Home Repair Permits

Does the thought of getting permits for mundane jobs around the house make you groan?  That would make you perfectly normal.  Unfortunately, when you go to sell your home, you may be groaning even more.

Depending on where you live, your city or county planning & zoning or public works department controls building permits.  This differs from a code inspection and occupancy permit (which can be required by your city/county and fire dept) upon transfer, which is an overall safety inspection.  A building permit is issued for specific repair and improvement jobs done to your home during your ownership.  They can be very large or very small, and typically include structural, electrical, plumbing and heating/air conditioning work, but also for fencing, solar panels, termite damage, some drywall installations, exterior drainage, even tie walls and playsets above a certain height.  Most of us understand and comply with the permit process for major renovation projects on kitchens, decks and room additions.  Some are questionable like minor remodeling projects.  And then there are those that don’t make much sense – replacing the toilet seal or replacing a window with a smaller one.  Many folks think this is just another revenue producer for the government.  I believe that most of this is for our safety and protection, but can be conservation related (some plumbing regs) or for aesthetics (which way the fence faces).  The revenue certainly offsets the cost to the city/county, but I do not believe it makes them any money in the end after paying their staff and can even be a financial loss.  This process is mainly for the health and benefit of the resident population.

So permits – Did You or Didn’t You?  Upon selling your home, the Realtor will have you complete a seller’s disclosure.  This is very detailed and (the STL version) includes a section addressing repairs to structural elements and “all significant additions, modifications, renovations and alterations to the property during your ownership”; and asking if required permits were obtained.  Many of us assume the contractor applied for any required permits.  Unfortunately, that does not always happen.  Time and money are two important commodities in business, and contractors like to save both, besides not having a regulator nitpicking their work, and wanting to give a competitive bid.  Some ask if you want one, or even require YOU to apply for it.  Read your agreement with them.  There are also many jobs that don’t seem big enough to require one.  In fact, St Louis County, which does unincorporated areas and many municipalities that contract with them, posts a list of things that do NOT need a permit in addition to the list that does.  Seems like they are the same length!  See http://www.stlouisco.com/YourGovernment/PublicWorks/Permits/BuildingPermits.

** A common misconception is that you do not need a permit if you don’t “move the plumbing”, which is not always the case.
** Some appliance stores are charging for permits for dishwasher replacement.  St Louis County requires a master plumber for this job, and to submit a Certificate of Replacement in lieu of a permit, unless it is in a different location which does require a permit.
** St Louis County allows a homeowner to do their own plumbing work that requires a permit if they can pass a test.
** I have had two client cases where a city or fire department, being called by a seller applying for a code inspection after going under contract, realized that a recently finished basement or plumbing work was not permitted, and required some drywall to be removed to check things out.  This cost the owner $800 on one and $2500 on the other to redo and patch.  This is rare but can happen.

If you ask me, I would have to advise you to get the permits as needed.  If you decide not to, or have already completed work without, just answer the question honestly and say no, or I don’t know.  Be aware that the public can call a city or county and ask for the permit history on your home.  If it is a common area not to get permits, most buyers do not consider this an impediment to buying, especially if you produce the paid receipts and lien waivers from professional contractors.  And the longer ago it was, the less likely to be an issue.

Happy permitting!

House passes tax bill

How does the pending income tax legislation affect homeowners?  It is a bit premature perhaps to discuss as the Senate must still agree, but hey, why not.  I am viewing this as a real estate pro, not a tax pro, please consult a tax accountant to verify any information discussed below.

The current House version keeps the real estate property tax deduction but caps it at $10,000, which will not affect most people here in STL.  It also keeps the mortgage interest deduction but lowers the cap from $1,000,000 to $500,000, which again will not affect most homeowners in STL.  Bear in mind, these deductions only count if you have enough to itemize on Schedule A of your tax return to include mortgage interest and property tax on your principal residence, charitable donations, high medical expenses, and various other expenses, over and above the standard amount granted.  With the standard deduction almost doubling to $24,000 for married couples, it takes a lot more expenses to top that standard.  This, in effect, will make the valuable homeowner deductions meaningless for many more folks in years to come, assuming this configuration goes thru.  Your tax bill may be lower on the bottom line, or it may not, but are there enough incentives to purchase and own a home?  Are they even necessary?

I know our industry – Realtors, lenders, home builders, and others connected to residential homes – is fighting cuts to homeownership benefits.  Our National Association of Realtors is reporting a possible 10% drop in home values.  While I find that a bit dramatic, it certainly could stall the current expansion of purchasing activity, and even cause a slight drop in values in the short term on fear of the unknown.   Long term, however, I feel that the overall desire to own your own home will remain high and prevail over renting.  Even if rental activity did pick up, as it has the last few years, someone has to own the home to rent it out, keeping a certain level of demand for housing purchases.  It is even feasible that since no one is talking about changing tax cuts for investment property, that more investors buy up single family homes to rent them out, and drive demand higher.

Another facet of income taxes that face homeowners is the capital gains tax.  Currently, you owe no tax on the gain you make between buying a house and selling it at a higher price, up to a difference, or a “gain” of $250,000 as a single person and $500,000 as a married couple, and taking certain expenses into account, if you lived in it at least 2 of the previous 5 years.  This is a very important exclusion now in the tax code, and will affect many people at all price ranges if not retained.  There was talk of adjusting this to having lived in the home 5 of the last 8 years, disqualifying anyone who moves out in less than 5 years and subjecting them to a surprise tax, although I am not aware of the current status on this issue.

Another possible outcome is this:  High end homeowners stand to lose more of their deductions on the mortgage interest and property tax caps.  If they scale down in price, it puts more buying pressure on homes under $600,000 or so, and conceivably more folks will move from high cost metros to lower price ones, like St Louis.  Being one of the most affordable regions in the Top 25 around the country, our area could actually come out a winner in this tax overhaul!

Happy taxing!