Real estate leaders say the local market is improving, but recovery is s-l-o-w
This article first appeared in the St. Louis Beacon, Nov. 5, 2012 - The housing market is on the road to recovery, say the presidents of local realtors associations, but no one’s promising a smooth ride or offering an estimated time of arrival.
Glenn Vatterott, president of the St. Louis Association of Realtors, noted that sales numbers and prices are still showing positive signs, but he adds that the market still has a long way to go.
Vatterott said he asked a group of agents he met with recently about their perceptions of the market.
“Almost universally they felt that we’re on the ramp upward, although it won’t be a steep climb but a slow, steady improvement. And they felt that the first and second quarter of 2013 would be significantly better than the current market so they’re seeing a trend of improvement -- and I do, as well. I think we’re past the bottom and are on our way back up. But there still are issues.’’
Cort Schneider, president of the St. Charles County Association of Realtors, says his county has seen a rebound of sales and growing consumer confidence.
"I would say we’re seeing light at the end of the tunnel,’’ he said.
Schneider said consumers – both buyers and sellers – are coming to grips with the realities of today’s market.
"Buyers are making decisions. They’re making moves. They’re purchasing. Sellers are being more realistic on pricing and are now on board with what the market really is. St. Charles County as a whole did not experience the high highs that [Las] Vegas and other areas [of the country] did, and we didn’t experience the low lows. So we have seen 14 months of consecutive month-over-month increased sales in St. Charles County. And with that, the days on market have gone down. The inventory is actually shrinking.''
Al Suguitan, president of the Greater Gateway Association of Realtors, which represents southwestern Illinois, also noted recent upward trends, but he pointed out that the benchmark for when the market “arrives” is not clear because the market has been so transformed.
"Everybody knows the recession was officially over months ago, but this recovery has been so tepid,’’ he said. “We’re in the middle of this recovery, but we don’t even realize it because we still have neighbors and friends and family who still can’t find a job. Or people who are doing jobs far below their skill level.’’
Location, location location
Realtors agree that recovery is uneven in the St. Louis region, just as it is throughout the U.S.
Schneider said that St. Charles County has been doing better than other areas and is, perhaps, a harbinger for the region.
“What we say in real estate is location, location, location, and St. Charles County has always performed very well,’’ Schneider said.
He predicts that the spring will bring more buyers and sellers, but his optimism is tempered.
“We’re going to notice a push of activity, but I don’t expect to see a dramatic increase in price ranges or any of those kind of things. I think it’s going to slowly but surely correct itself -- in a safe way rather than if it went too quickly,’’ he said.
Vatterott noted that agents are reporting a lack of quality inventory, particularly in the central corridor of St. Louis.
“And that’s not something we’ve seen in recent years,’’ he said. “It’s particularly in the $200,000 to $300,000 price range of well-conditioned properties. There’s a market for those kinds of properties and not an adequate supply, whereas, properties outside those areas and outside those ranges may have a longer months supply of inventory for certain price ranges.”
Vatterott says it could take years before home valuations rebound to the levels of 2005-2006, and that means that some people who might normally be entering the market are continuing to wait for further increases in property values.
Suguitan likened the housing market to an accordion that expands and contracts. Usually, when the market expands, it becomes a buyers' market, and when it contracts -- as it has now -- it would be a sellers' market, he said.
"Right now you would think it would be a sellers' market because of the fewer listings. However, it’s a buyers' market because some of these properties have been on the market for months,’’ he said.
Suguitan, whose association supports Realtors in the Illinois counties of Madison, St. Clair, Bond, Calhoun, Fayette, Jersey, Macoupin and Montgomery counties, said approximately 4,907 pre-owned homes are currently on the market in his multicounty area, about 2,000 fewer than the Multiple Listing Service (MLS) of old.
"Way back when the market was really cranking along, we would be closer to 7,000 residential listings on the market,’’ he said.
E is for the economy – and the elections
The Realtors say that because the housing market is economically linked to employment, they share concerns about joblessness and the lack of buying power of young potential homebuyers who are struggling with student loan debt and poor credit scores.
But Schneider, who believes that consumer confidence is returning, said agents are beginning to feel better after what has been a challenging four years.
"I would say there’s evidence in the statistics that we’ve seen the bottom,’’ he said. “I would say we saw bottom a year ago. We’re just now recognizing it. And the fact is, we never know we hit bottom until we get further out and can look back and say I guess that was it.’’
He said the market is making more sense today than it did four years ago. He attributes flat sales in September to the cyclical nature of real estate.
"In the spring we experience a big push and things are moving, and in the dead heat of summer it slows down. Then in the fall we get a push again. Thanksgiving comes around, and it goes slow. I think we are following the standard trends that we’ve seen year after year,’’ he said.
Schneider noted that the nation's focus on the elections might have contributed to the slowdown, but he thinks the effect is temporary.
"We know that election years do tend to impact the market a little because a lot of consumers are on the fence and waiting to see how those election results turn out. I don’t think it matters so much who wins. It’s just knowing and having that knowledge moving forward of what we’re dealing with,’’ he said.
The Realtors agree that it would take time for either presidential candidate to push programs or policies that affect the real estate market.
Vatterott said that while the year’s overall sales trends in St. Louis city and county have been encouraging, he, too, has noted the number of transactions falling back a bit.
"Some of that is seasonal slowdown,’’ he said. “Some people speculate that it is perhaps a little pre-election anxiety. Some of it may be people not quite ready to pull the trigger wondering where interest rates are going to go and wondering where home values are going to go.’’
In addition to news about jobs, Suguitan is watching government budgetary woes.
"One of the first questions that Congress is going to have to answer right after the election is how to prevent the United States from slipping into another recession because of the fiscal cliff that the federal government is facing,’’ Suguitan said. “The housing economy is just one sector in a bigger economy, and we’re all subject to the whims of the government, the regulators -- and whomever we work for.’’
Suguitan said he expects more of the same in terms of short-term economic recovery. He thinks that if the Federal Reserve can keep interest rates low, it will be a stimulus.
And he pointed out that buyers who have jobs in stable industries, or who have sufficient savings to carry them through tough times, have been making moves in the marketplace and taking advantage of the low prices and interest rates.
"Not everybody is as deeply entrenched or have their minds wrapped around this election,’’ he said.
Distressed properties still distressing the market
Although foreclosures and short sales have slowed, Schneider says they continue to affect the market. (In a short sale, a lender agrees to accept a price that is less than the amount owed on a mortgage. This is helpful when a seller is "under water,’’ owing more than the home is worth due to depressed prices.)
"We are still experiencing new foreclosures hitting the market, and I would guess we will see them for another year or two years. The amount has dramatically changed, but they continue to be a drain on prices,’’ Schneider said.
He added that streamlining the short sale process would be a tremendous help.
"The short sale process is not what it sounds like. It’s not short. It’s a challenging process,’’ he said.
Vatterott said that foreclosures continue to be costly to everyone – homeowners, lenders and neighborhoods.
"We’re a pretty affordable market, and historically St. Louis homeowners have enjoyed fewer encumbrances on their properties than in other markets, but anybody under water is in an unfortunate situation,’’ he said. “The trend toward higher average sales price is an encouraging one, but there are still too many distressed properties in the marketplace. It’s difficult to track, but the suggestion I’ve heard from many agents is it’s probably in the 20- to 25-percent range of total transactions.’’
Some local numbers:
* Statewide, home sales flattened in September, but houses were selling faster and at higher prices, according to the Missouri Association of Realtors. In September, 4,930 homes were sold in Missouri, about the same as a year ago. The number of days a home sat on the market decreased from 146 to 136 days. The average price rose 9.4 percent to $148,193, and the median price rose 10.5 percent to $121,500. (The median is the “middle” price; half of homes sold for more, half sold for less.)
* In the third quarter of 2012, home sales in Missouri increased 11 percent compared to the same period in 2011; 17,192 homes were sold.
* In St. Louis city and county, September brought a mix of news: Sales totaled 1,371, up 13.6 percent from September 2011 but down 9.5 percent from the previous month, according to the St. Louis Association of Realtors. The average home price -- $169,023 -- remained steady from a year ago, but prices dropped 10 percent from the previous month. The September median sales price of $114,000 decreased 4.2 percent from September 2011.
* In St. Charles County, 455 homes were sold in September compared to 460 in September 2011, according to SLAR. The average sales prices of single-family homes increased slightly -- to $168,749 from $167,375 last year. Median sales price increased 4.2 percent to $151,000 over the previous year.
* In Madison County, 2,221 homes were sold through Oct. 30, compared to 1,976 during the same time period in 2011. The median sales price was $117,000 compared to $113,450 in 2011; the average sales price was $133,860 compared to $128,353 last year.