Recovery’s Less Dramatic, But Missouri Housing Market’s On The Mend

Housing-Prices-graphic-1Housing-Prices-graphic-2Missouri’s housing market has recovered unevenly since 2012 as the U.S. housing market has shown strong momentum.

Recovery in the national housing market bodes well for improvements of Missouri’s market. Analysis of historical databases suggests Missouri’s housing market followed the same general trends as the U.S. market but avoided the sharp gains and losses in the past decade; markets of the state’s eight metropolitan statistical areas picked up at different paces due to economic factors.

Missouri sees smaller rebound than U.S.

Sales of existing U.S. homes rose 9 percent in April, from 4.02 million units last year to 4.38 million this year. That was the fastest pace since November 2009, according to a National Association of Realtors (NAR) news release. The median existing single-family home price stood at $193,300 in April, 11 percent higher than a year ago.

Walter Molony, economic issues media manager at the National Association of Realtors, said he has observed a strong positive trend since the beginning of 2012. Molony said the housing market has been recovering solidly, which means the increase was based on household formation, job creation and “favorable housing affordability conditions with historically low mortgage interest rates.”

Missouri’s housing market bounced back moderately compared to the national market. The all-transactions house price index (HPI), which measures the average change of single-family house prices in repeat sales or refinancings, appreciated in the first quarter in six of Missouri’s eight metro areas. Meanwhile, the state’s all-transactions HPI dropped 0.37 percent, according to an analysis of the Federal Housing Finance Agency’s databases.

Prity Vanmali, a realtor at Century 21 Advantage, specializes in housing markets of Jefferson City, Columbia and Ashland. She explained the slower pace of recovery in Missouri is consistent with the state’s smaller downturn.

“Although Missouri’s housing market was affected by the nationwide economic downturn, we were fortunate not to have experienced the extreme highs and lows that other states have had to endure,” Vanmali said.

The year-over-year growth of the median existing single-family home prices in the St. Louis, Kansas City, Springfield and Columbia metro areas also lagged behind the national increase in the first quarter, according to an analysis of the NAR’s data sets.

Donna Zerega, President of the St. Louis Association of Realtors, said the percentage growth those areas saw was not as dramatic because they “did not take as deep a dive as some areas of the country.”

“When home values fall 60 percent, any dollar increase is reflected as a large percentage increase,” Zerega said.

Columbia, Jefferson City stay steady

Columbia’s existing single-family home price surpassed St. Louis’ median price in 2007 and has stayed flat since then.

“Not only is Columbia conveniently located between the metropolitan areas of St. Louis and Kansas City,” Vanmali said, “but it also offers a culture of higher education, which keeps the demand for housing and the resulting home values high.”

Columbia resident Victor Acton bought his current home in 2010. Acton, the owner of a general home maintenance company, said the market helped his purchase.

“I was able to purchase the home and keep it under the appraised value,” Acton said. “I have already done many upgrades and look forward to a better return when I sell my home.”

But Acton said he is concerned about the quality of local construction. He estimates as a business owner that at least one home per week needs repairs for structural problems such as cracks in drywall, concrete slab or basements. He said improving construction quality might raise housing cost and slow down the growth in the local housing market.

Jefferson City stood out as the only Missouri metro area where HPI rose in the first quarter compared to 2008. The five-year HPI decreases in the other seven metro areas can mostly be attributed to the subprime mortgage crisis, Zerega said.

Jefferson City’s housing market was not hit as severely because of its “relatively steady supply and demand that is inherent to a capital city’s market,” Vanmali said.

Vanmali remains optimistic about the local and regional housing markets. She said Missouri is likely to continue to recover steadily.

“Between the State Capitol and the University of Missouri, the local Mid-Missouri market continues to attract buyers, which is a positive for seller,” Vanmali said, “and reasonable housing prices, historically low mortgage interest rates, and regional educational and cultural opportunities, make this a great time for buyers in and interested in the Columbia-Jefferson City markets.”

St. Louis endures harder hit

The median price of existing single-family homes in St. Louis has dropped 14.8 percent since 2007. By comparison, that figure for the Midwest as a whole has decreased 10.8 percent. St. Louis also saw all-transactions HPI decrease 0.56 percent in the first quarter as most other metro areas in Missouri experienced all-transactions HPI growth.

St. Louis is not an expanding metro area in terms of job formation and population growth; it is also a more diverse area economically, Zerega explained. But she has a positive perspective about St. Louis’ HPI record and the future of its housing market.

“We started the year slowly, but the market is roaring now,” Zerega said, “I think Q2 will reflect a rise as properties put under contract in Q1 close and the information becomes available. We have bidding wars in certain areas and price ranges, especially $300,000-$400,000, and the top end of the market is selling again.”

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