Regional Values Hold Their Own, Defy National Trend
BY BILL BEGGS JR.
The few contrary, celebrity market watchers who say it’s not a good time to buy a new home have a national perspective. Chances are they haven’t compared the extraordinary buys available right here, right now. St. Louis and environs offer so much more value and price stability than the topsy-turvy new-housing markets on the coasts and other high-profile troubled markets in between, many local and national mainstream
expert observers say.
“People are still having babies, being transferred here,” says Dan Barnard, president of the Home Builders Association of St. Louis & Eastern Missouri (HBA). Kids are growing up and having families of their own.
Barnard is president of Greater Missouri Builders, based in St. Charles and close to much of the homebuilding action region-wide. Admittedly, that action has slowed considerably.
“You could see the slowdown beginning in late 2005,” says Barnard. “But it has all the makings of turning around soon.”
Trend-watchers point out that anyone in the market for a new home, but hesitant to take a chance, should consider three important factors that may not be in play when the market does begin to recover: Home prices are coming down. Interest rates are at about their lowest level ever. At the same time, housing choices are at an all-time high.
Our grandparents, who lived through the toughest of economic times, would say to
jittery consumers that “it’s always darkest before the dawn.” No one can say when the economy as a whole will stabilize. However, an article in The Wall Street Journal noted that the housing marketing is “bottoming out right now.” And the business cycle continues: What goes down, must come up.
Our region has defied the national housing downturn already. While values and sales plummeted in California, Florida, Las Vegas, Phoenix and a few other over-heated
markets, St. Louis remained far more stable. In St. Charles County, prices actually rose.
According to the St. Charles County Assessor, average new-home selling prices in St. Charles County rose 3.6 percent from 2006 to 2007. This may not be nearly enough for a speculator, but for the person building a new home and intending to use it the old-fashioned way — live and raise a family there—it’s nothing to sneeze at.
The impact that homebuilding has on the economy is significant, and a bellwether of better times to come. With each hammered nail, a homebuilder increases the nation’s wealth. The demand for goods and services created by the construction of new homes ripples through the economy. By generating wages and tax revenues, the housing construction industry boosts local economies nationwide and accounts for about 14 percent of the country’s overall GDP.
Using surveys from the U.S. Bureau of Labor Statistics, the National Association of Home Builders estimates that the construction of 1,000 single family homes generates 2,448 full-time jobs in construction and related industries. This translates into $79.4 million in wages and $42.5 million in combined federal, state and local revenues and fees.
The excitement of owning a new home also entices owners to spend money on furnishings and other decorative items. In the first 12 months after a new home purchase, owners spend an average of $8,905 to furnish and decorate it. That also creates jobs and stimulates economic development.
Meanwhile, newly enacted federal legislation has made available a tax
credit of as much as $7,500 for first-time homebuyers. Time is of the essence: only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible.
“Things Aren’t Tough All Over,” announces a recent article in BusinessWeek, which points out how national news can be misleading in certain areas of the country. St. Louis is one of the brightest spots out there right now.
St. Louis is among the dozens of places that never experienced the highs of boomtowns such as Miami and Las Vegas, and therefore, aren’t suffering the lows. Observers say that real estate is a lot like the weather: there’s a local temperature, and that’s what you go by.
With the median home price down 14 percent nationwide in the past year, it’s easy to forget that real estate is highly localized. And some cities are proving surprisingly resilient even as huge swaths of the country are slumping. According to research firm Fiserv (FISV), home prices rose over the past 12 months in roughly 40 percent of the 100 largest metropolitan areas. Fiserv expects prices to keep climbing in 23 of those cities through 2010.
The “weather” here’s a lot more pleasant, so to speak, according to an influx of new St. Louisans from other markets. And many, transferred here by Wachovia Securities, physicians groups or other corporations, are deciding that a new home’s the way to go.
Let’s take Charlotte, who hunted for homes in and around St. Louis for months in advance of her transfer here. In general, she found desirable homes closer to her new office were too expensive. But she wasn’t very excited about the housing stock farther out, either. Charlotte admits she’s particular. So she found all the particulars she wanted with a builder in High Ridge. In a few months, she’ll be ready to move from her apartment into the home she had built.
Charlotte found her part in the American dream. She was able to personalize her home with tile, flooring and appliances she chose herself. In a new home, the consumer can select virtually everything down to the knobs on their kitchen cabinets.
It helps to have a strong association of builders who watch the market and adjust accordingly—unlike overheated coastal markets and a few other super-accelerated growth markets which flourished during
the boom by cranking up production to
crazy levels.
Those days have screeched to a halt, and couldn’t have maintained any more than the dot.com bubble in 2000… or any other period where goods or services are artificially inflated. Observers say that was certainly the case for the irresponsible lending and borrowing that comprised the subprime mess responsible for our present travails.
Shaun Hayes, CEO of Sun Security Bank, has weathered tumultuous times aplenty, first with Allegiant Bank and then National City.
He thinks the government, by and large, has taken the right moves to stabilize financial markets.
“The Fed and the U.S. Treasury have done a wonderful job of providing a floor,” Hayes says. “Is it directionally right? Yes. Is it perfect? No.
“We are a home-buying culture. But greed and fear are amazing things—we went from one to the other almost overnight.”
Few expect 2009 to be a banner year for new home sales, but many think it will be an improvement over this year.
“2010 will be better than 2009,” Hayes asserts, “and 2011 will be better than 2010.”
Barnard, of the St. Louis HBA, agrees. Admittedly, he’s both a cheerleader for and custodian of the industry, the local chapter of which is comprised of some 1,200 members, both builders and ancillary businesses such as roofers and other subcontractors.
“A good, stable market is the builder’s friend,” he says.
Strength in numbers means that decisions can be made region-wide to benefit the consumer. However, the homebuyer ultimately deems whether it was a sound investment, and Barnard says each buyer has to keep that “investment” in perspective.
Barnard emphasizes: “Our home is probably one of the biggest things we take for granted.”
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