The ‘Real’ Real Estate Market

for 2010 in St. Louis

Presented at The Lodge, Des Peres, MO
February 11, 2010
St. Louis, Missouri
Kevin Cottrell – Chief Economist
kevin@kelseycottrell.com / 314-779-3600

Shawn Kelsey – Managing Broker

shawn@kelseycottrell.com / 314-434-2222

http://www.stlouisrealestatetoday.com/
 Who is Correct about the St. Louis
Metro Real Estate Market?
Housing Market Prepares for Renewed Plunge
• “Housing
Following Removal of Supports .” – Dean Baker
founder of center for economic policy 1-27-10
1

• “Lifeline Needed for Underwater Home Owners” -

Suggested that "4.5 Million home owners owe 75%
more than their homes are worth". NAR – Realtor
Magazine Website 2-3-10

• “Foreclosures Down 10% in January 2010” –

RealtyTrac - 2-11-10
 Who is Correct about the St. Louis
Metro Real Estate Market?
• “44 Million Foreclosures in 2010? It’s A Real
Possibility” – MoneyWatch – 12-15-09

The inventory of unsold homes remains stubbornly

• “The
high largely because more people are trying to sell
their homes to avoid foreclosure”
foreclosure – SLAR President –
8/09

It's still a buyer's market…sellers to expect to wait

• “It's
90 to 100 days for an offer – SLAR President 1/10
 19 Years of National Market Shifts
Months Million

Housing Inventory (left axis)

Buyers Sellers
Market Market

Existing Home Sales – Single Family Homes (right axis)

Source: NAR
 Historical Real Estate Sales
8 1400

1200

1000
5
800

600
3
400
Existing: 5.16M transactions in 2009
200
Existing: 4.98M transactions in 2008
0 0
New: 433K transactions in 2008
1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006
 Mortgage Rates
Fixed Rate - 30 Year
1971--2007

Rates have not been

below 5.37 in 45 years

5.0%

Source: Freddie Mac

 Comparison of Income to Home
Price
Income and Price set to Index of 100 in 1970
1970--2007

Source: NAR
Housing Affordability & Home Price
1970--2007

Affordability (right axis)

Median Home Price (left axis)

Source: NAR
Affordability is, and always will be,
the primary real estate issue.
• When interest rates go up, affordability comes down.
down

• When home prices rise, affordability drops.

• When affordability drops too low or too fast, the

number of home sales decrease and selling prices will
ultimately drop.

• The more dramatic the run-up

run in home appreciation,
the steeper the decline in sales and prices.
 What has Happened with
Affordability in St Louis?
• Interest Rates have dropped to 5% - over 6% in 2005

• Affordability Index is over 80 in STL (Peak of Market

was 8 in Las Vegas and San Diego)

• FHA Financing Available up to $291,250

• Median Price in US – down from $214K to $173,500

• Aside from unemployment and consumer confidence

– market should be stabilizing

• Unemployment Rate was 4.6% - 2005 now +/- 10%

Housing Affordability & Home Price
1970--2010 2010 – Median $173.1

Affordability (right axis)

2010 – Index 167

Median Home Price (left axis)

Source: NAR
Who’s Buying Homes in St Louis?

• 73% of Contracts in past 30 days – Below $300K

• 90% of Contracts in past 30 days – Below $400K

• FHA Driven Market - $291,250 Loan Limit

• High end – especially in St Charles and Ex-Urban

Ex
Markets hardest Hit

• Unemployment too high – Lack of Confidence is

tempering market
 Annual Sales in St Louis Metro
2004 2005 2006 2007 2008 2009

STL 14,640 14,345 13,470 12,171 10,634 10,761

-2.0% -6.1% -9.6% -12.6% 1.2%

STC 4,504 4,766 4,262 3,912 3,285 3,350

5.8% -
-10.6% -8.2% -16.0% 2.0%

CITY 3,748 3,990 3,593 3,272 3,180 3,032

6.5% -9.9% -8.9% -2.8% -4.7%

Active Inventory in St Louis County
2007 2008 2009 2010

STL 5,994 5,794 4,782 3,740

-3.3%
3.3% -17.5% -21.8%
 What’s up with Foreclosures?

• Nationally – Up 1% in 2009 – Media Loves Filings and

think all go to courthouse and sell

• 869,812 vs 861,336 – Fact: 99.49% of Filings not

REO

• STL Foreclosures down 44% in 2009 vs 2008

• 2,226 REO – 0.51% of households – 21% of Filings

• Including Short Sales (Pre-Foreclosure)

(Pre – 10-12% of
STL Sales
 What Happened with St Louis
Housing Prices?
• Median price decreased from $156.5 in 2005 to
$135.1 in 2009

• According to OFHEO Data – STL Prices Declined by -

-2.35% in Q3 2009

• PMI Market Index – Moved from <1 in 2007 to 38.7 in

2010 (% risk of price declines – poor trend)

• PMI Pricing Index (-1.6%

1.6% Q3 2009)
What’s Really Happening and How
to I apply this w/Buyers & Sellers?
• Overall list to sale in St Louis County – 94.9% for all
sales in past six months (includes REO/Short Sales)

• Number of price reductions in same period close to

2.5 for every listing – (300--600 every 7 Days)

• List to Sale gets worse – both as price range

increases AND as property is on market longer

• Pricing of Property Up Front (Not Marketing and

Condition) the primary driver of whether it sells

• More than 50% of listings expire vs sell

Case Shiller Doesn’t Cover STL –
Now What?
Case Shiller Doesn’t Cover STL –
Now What?
Case Shiller Doesn’t Cover STL –
Now What?
Case Shiller Doesn’t Cover STL –
Now What?
Yeah…But All Real Estate is Local
Right? Chesterfield vs. Ballwin
 Yeah…But All Real Estate
is Local Right? Ballwin (con’t)
(
 Yeah…But All Real Estate
is Local Right? Fenton vs. Florissant
 Yeah…But All Real Estate
is Local Right? Fenton Con’t
So, Have Prices Fallen Everywhere?
Valley Park vs. Glendale
St. Louis - An Optimistic Look
at the Recovery:
Median Sales Price - 1970 to 2020 - at 6.4%
Appreciation
 A More Conservative Look at
Recovery:
Median Sales Price 1980 to 2020 at 4.3% Appreciation
 What Next?

• Market will not strengthen until job growth occurs and

business cycle recovers

• Now more than ever important to tell the truth to

sellers – regardless of outcome

• Strong counsel to Buyers – set expectations and

strongly qualify – media can ruin them

• Know your #s – Saint Louis Housing Market Stats are

available for Free @ www.stlouisrealestatetoday.com