What is Happening in the St. Louis Real Estate Market?

The question I am asked the most lately is how is the real estate market? In my opinion the housing market is beginning to calm down a bit. Nationally, home sales dropped in July and August from a year ago, breaking month after month of increases. As most of you know the real estate market has been surging over the past year, which for many buyers and real estate agents has been very frustrating. After almost twenty-five years in the real estate industry, I must say I have never seen anything like what we have experienced over the last year. In most cases every property was receiving multiple offers along with homes selling well over list price and in my opinion, many times more than they were even worth. Not to mention all the contingencies removed, often including inspections and appraisals. It has not only been difficult for the buyers, but very overwhelming for real estate agents, especially experienced ones like me who know what the outcome will be later. Our oldest son purchased his first home this year, as his mom and real estate agent I encouraged him to realize when he was ready to move up to a larger home in five years, not only may there not be any equity in the home, but there was a very good chance he could be taking money to closing. Unfortunately, I lost that battle, it is understandable because at the same time what is the option? Go pay a ridiculous amount to rent; something that you do not like and in many cases does not even have a yard. While I have been very happy for my sellers to benefit during this time, I am also glad that it is starting to stabilize and even adjust as we have all expected it would do at some point. Although interest rates have remained incredibly low, which is also a benefit to buyers, but when there is little to no inventory it hurts all parties. The low inventory has been the driving force behind the price increases and the pent-up demand among buyers that have been more than ready for a change after what we have all been through with the mandates during the pandemic. I know our clients were completely ready for a lifestyle change and in many cases their lives had completely changed to a working from home environment. Now that things are currently easing up, but who knows what tomorrow brings with the Biden administration, it seems as if housing is settling down. Is it that or is it the fact that buyers just got tired of battling and being disappointed with the outcome? The bottom line is we need more inventory and that has been a factor for several years now. I personally think that a lot of sellers have been riding the wave to see just how high the market would go before deciding to jump in. As I have told all our past clients, you better jump now because you may not see a surge like this in home values again for some time. Not to mention interest rates are still exceptional and new favorable loan programs are coming out all the time that make it easier for a buyer to qualify. An article from the NAR stated that sales of existing homes, which include single-family homes, townhomes, condominiums, and co-ops, fell 2% in August from July, and were down 1.5% from a year ago, according to the report. But sales are still above the pre- pandemic rate, said Yun. Sales for 2021 year-to-date are 16% higher than in 2020 and up 12% from 2019. Although home prices continue to rise, the amount of the increase is not as high as the prior year within the last couple of months. It will be interesting to see how the numbers come out this fall and winter, those numbers will give us a better indication of what to expect in the spring. As reported by NAR, “the median home price in August was $356,700, up 14.9% from a year ago, marking 114 straight months of year-over-year gains in home prices. Just to be clear: a 14.9% annual price increase is not normal, Yun said. Around 3% to 5% is a more typical annual bump in price. But compared to the 20%-plus price growth that NAR reported in past months, this lower price jump shows some narrowing of that gap”. “Sales slipped a bit in August as prices rose nationwide,” said Yun. “Potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory.” There is not a shortage of buyers, The Rick and Tracy Ellis Team has a huge list of buyers just waiting for a home to come on that meets their criteria so they can pounce, but as always, the inventory is continuing to remain low, this is continuing to push sales down. Once we start having more sellers decide they better take advantage of the high prices before they start to decline, I think our supply of homes on the market will start to slowly increase; this will obviously help the real estate market normalize. The NAR also reported that “the inventory of unsold

homes at the end of August was 1.29 million, down 1.5% from July and down 13.4% from last year, according to NAR. Unsold inventory is at a 2.6-month supply at the current sales pace. A balanced market has roughly a six-month supply”. Clients ask all the time, what do we think 2022 will look like in the real estate market? After reviewing several economists reports and based on what we are experiencing locally, I do think home sales will remain strong going into next year, but I think we will slowly start to see inventory levels continue to trend toward a more normal level. When it comes to home values, I think we will see the numbers trending down 1-2% every quarter. We are even coming into a time when, in some cases sellers are open to contingencies on a sale again and happy that it also allows them time to find out where they are going as well. As for me, speaking from the perspective of a real estate professional, I am looking forward to a balanced market. The things I have witnessed in contracts over this year have absolutely amazed me, in many cases I felt sorry for the other client with the risk they were taking just to get the house. It is hard when you have done this for as long as we have and seen so much. Many have significantly overpaid for homes, waived inspections or even appraisals. I just have to wonder after they get settled into that home, they fought so hard to get the winning bid on, will they have regrets? To waive inspections and appraisals on a home, likely your largest investment is just a huge risk that frankly I witnessed too many taking this year. At the end of the day, it is the client’s choice; all we can do is give them our professional advice. If you are considering doing something like that, I would strongly suggest taking a building inspector with you during your tour of the property for them to look over at least the big-ticket items. It is so important for you to know exactly what you are buying. It is sad to me that so many first-time home buyers felt like they just could not compete and because of that, first-time home buyers purchasing a home fell to 29% in August, which is the lowest rate since January 2019. It certainly is not for lack of trying and their need for a home likely remains. Many were forced into temporary housing or shortterm leases. I think that we will see a busy spring of first-time home buyer purchases; they are one of my favorite clients to assist. To see the look of pride and accomplishment on a first-time home buyer’s face when you hand them their keys is one of the many reasons we do what we do every single day for almost twenty-five years. If you are thinking of buying or selling a home, please call The Rick and Tracy Ellis Team and let us put our many years of experience to work representing your best interest.