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St Louis Housing Market Report For 2013

The St Louis Housing Market is dramatically changing in 2013. As the rest of the country is seeing an upward movement in the real estate market, with a decreasing inventory of properties and an increasing in buyers’ demand, St Louis current housing market is also benefiting from this trend and it is actually becoming a seller’s market.

St Louis Housing Market In 2013:

According to Zillow, the St Louis current housing inventory is down 13 percent over the past year in the metro area. Lower supply and higher demand mean rising home prices. Although the rate of increase varies widely by neighborhood,  much of north St. Louis County, is still seeing declines. North St Louis County has seen a higher number of foreclosures than most of the other neighborhoods in St Louis County, producing a higher volume of distressed properties in shadow inventory. Shadow inventory being defined as inventory of properties that have been foreclosed and our now being held by the lender in their REO (Real Estate Owned) department waiting to be put back in the market.

As the first quarter of 2013 has come to an end, RealtyTrac is reporting that St Louis foreclosures have come down 11.96 percent from a year ago. and 9.88 percent from the 4th quarter of 2012.

New home construction has raised 53 percent from a year ago, according to the Home Builders Association of St Louis, based on the number of new home construction permits being issued for the St Louis current housing market.

You have to keep in mind that throughout history, the United States real estate market has been following predictable patterns. After 10 to 12 years of an upward curve and stabilization, there is a recession. From the late ‘90s and for about 10 years after that, house prices nationally rose by 70% more than inflation. Consequently, an estimated $8 Trillion in “bubble wealth” was created.

This brings to a critical caveat for real estate investors:

Housing markets tend to adjust very gradually, and price declines have historically averaged 18 quarters in duration.

The St Louis current housing situation is in line with these patterns. Even if the overall average home prices have declined 7 percent between 2011 and 2013, according to the St Louis County Assessor Jake Zimmerman, St Louis as most of the Midwest has not seen the dramatic decrease in values as other parts of the Country, like Florida or Arizona.

Think Like a Real Estate Investor

To paraphrase from a quiz that uberinvestor Warren Buffett presented to Berkshire-Hathaway shareholders at their annual meeting in 1998,

“When you are buying hamburgers, would you prefer that the price of hamburgers is going up or going down? Likewise, if you expect to be a net saver during the next five years, should you hope for a higher or lower [real estate] market during that period?”
“Many investors get this one wrong. Even though they are going to be net buyers of [real estate] for many years to come, they are elated when [real estate] prices rise and depressed when they fall. ”
“In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying? This reaction makes no sense. Only those who will be sellers [of properties] in the near future should be happy at seeing [real estate prices] rise. Prospective purchasers should much prefer sinking prices.”

These present times, as painful as they are, will prove to be an epochal time of wealth building, if we position ourselves correctly.

Creative real estate investors need a new way of looking at the marketplace.

This will require the ability to ignore the hyperbole of the marketplace generated by builders, real estate agents, mortgage lenders, and unscrupulous appraisers and maintaining an intense focus on the economic factors specific to that community.

There are plenty of opportunities in  St Louis to take advantage of this unique situation in the St Louis current housing market. Since supply and demand are shifting, even the less desirable neighborhoods will see a higher demand from investors, because of their affordability compared to more sought after areas. As an investor looking to buy and hold or wholesale, you will find less competition and better value in these neighborhoods, which include areas like North County and South City.

Toss out the concept of “fair market value” for the most part, and focus on “economic value” based on “affordability.” The approach of “Buying low and sell high” should be changed to “Buying low and sell low.”

If you would like to network with other investor and keep current on the St Louis Current Housing Market, please join Laura Al-Amery at the St Louis Real Estate Club: Networking and Education Group.