This article first appeared in the St. Louis Beacon, May 29, 2012 - Five years after the collapse of the subprime mortgage industry, the president of the St. Louis Association of Realtors is expressing guarded optimism that the housing market is finally bouncing back.
“I’m reluctant to declare that we’ve arrived at a housing recovery, but certainly everything is encouraging,” said Glenn Vatterott, who heads the local 7,000-member trade association.
Vatterott noted that local home sales have shown a “modest but steady” increase in recent months.
“Activity has increased and that suggests to us that we may have turned the corner,” he said.
Nationally, sales of existing homes rose in April and remain above last year’s levels, according to the National Association of Realtors (NAR). Home prices also continued to rise.
Here are some facts worth considering:
- In St. Louis city and county, April home sales totaled 1,242 -- up 17 percent from 2011, according to the St. Louis Realtors association. Although April’s average home price of $178,169 was slightly down from last year’s average of $180,359, it was up from March’s $163,878.
- There were 1,242 homes sold in the city and county in April, the fourth straight month that showed an increase. By comparison, 1,058 homes were sold in April 2011.
- Existing home sales increased 3.4 percent nationwide in April, according to a May 22 report by the National Realtors association. The total includes single-family homes, townhomes, condominiums and co-ops.
- April’s seasonally adjusted annual sales rate was 4.62 million nationwide, which was 10 percent higher than the 4.2 million-unit level in April 2011.
- Improving sales and prices were reported across all regions. In the Midwest, existing-home sales rose 1 percent in April and were 14 percent above April 2011. The median price in the Midwest was $141,400; that is a 7 percent increase from a year ago.
- The national median price for all types of existing homes rose 10 percent from a year ago -- to $177,400 in April.
- Foreclosures and short sales remain a factor, accounting for 28 percent of April’s nationwide sales (17 percent were foreclosures and 11 percent were short sales), but that was down from 37 percent in April 2011. Foreclosures sold for an average discount of 21 percent below market value in April, while short sales were discounted 14 percent.
- Lawrence Yun, the chief economist for the National Association of Realtors, also expressed cautious optimism that the housing recovery is under way. “It is no longer just the investors who are taking advantage of high affordability conditions,” he stated in the May report. “A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices.”
'The key element is jobs'
Vatterott has noted steady increases in local home sales and prices since February.
“It’s looking like a recovery, although it’s ramping up slowly,” he said. “It’s not a dramatic climb, but it’s trending the right way.”
Local real estate agents are also reporting more traffic at open houses -- a sign that prospective homebuyers are thinking about jumping into the market, which has been largely made up of investors, he said.
“Investors are certainly still in the market, but individuals are coming back, and we’re seeing it in our open house traffic. And we’re seeing it in our web traffic -- and some of it is a traditional spring buying market right now, “ Vatterott said. “But I think it’s also a bit of an uptick in consumer confidence and pent-up demand.”
But, Vatterott added, the housing recovery is linked to employment.
“The key element is jobs,’’ he said. “The concern people have over their own employment situation and their willingness to purchase a home is directly tied to how secure they are about their own employment and their own income. Everything we can do in terms of job creation ultimately will benefit the economy and certainly housing. If there’s one magic pill, it’s jobs.”
Vatterott believes the housing market might have hit bottom months ago, when activity was at its lowest and inventory was at its highest.
“But we’re still a long way from the peak of the market, which was June 2005,” he said.
Vatterott, who is director of business development for Coldwell Banker, is a real estate veteran who has worked through both boom and bust. He has been licensed to sell real estate since 1973 and recalls selling homes in the 1980s, when interest rates on mortgages reached 17 and 18 percent, as opposed to the current record lows of 4 percent or lower on 30-year conventional fixed mortgages.
“I have seen my share,” he said. "I was active in the business in the early ’80s when we had interest rate issues. In those days, we said if interest rates ever fell to 12 percent the real estate market would open up -- and truly that happened. And then when they fell back into the 7 to 8 percent range, which we perceived to be a normal market, we were elated. And here we are today with interest rates under 4 percent, and the market is not as fluid as it should be and to me that’s remarkable.’’
Missouri Realtors at rally for American Dream
Vatterott was one of 130 Missouri Realtors who participated in a “Rally to Protect the American Dream” at the Washington monument on May 17. More than 10,000 Realtors participated in the event sponsored by the National Association of Realtors as part of an annual legislative meeting and trade expo in Washington.
Vatterott said the rally emphasized the importance of the housing recovery to the nation and to lawmakers.
“We’re convinced that every time a Realtor sells a house, the country is better off and at no point has that ever been truer,’’ he said. “Let’s hope that housing leads us out of this recession, and the quicker the better. I’m convinced the worst is behind us, and -- with the exception of the threat of a double-dip recession -- I think we’re going to look at a gradual but definite housing recovery over the next 18 months or so.”
Vatterott said the Realtors also voiced their concerns over regulatory action that they believe could affect a recovery, including the future of the secondary mortgage market -- Fannie Mae and Freddie Mac.
“Our feeling is that Fannie Mae and Freddie Mac certainly need to be reevaluated and altered and fine-tuned, but access to capital for housing requires a secondary mortgage market and Fannie and Freddie fill that role. Unless you have a good solid substitute they need to remain intact,” he said.
Vatterott said it is also important that Federal Housing Administration regulations are not so restrictive that they deny access to buyers who in a normal market would be purchasing homes with FHA financing.
The Realtors also oppose any proposals that would end the mortgage interest tax deduction.
“That is such a part of the fabric of homeownership in this country that we would hate to see that messed with and compromised. The fact is that homeowners have come to rely on that,” he said.
