The future of the real estate market is one of continued price appreciation and high demand.
That’s according to Sandy Hancock, president of the St. Louis Association of REALTORS and broker/owner of RE/MAX Results with five offices, including Brentwood and South City.
While demand is high, inventory is not.
The months of inventory is the measure REALTORS use to project future price trends, Hancock said. The inventory is the number of months it would take to sell all the homes listed at the current sales rate. A four- to five-month inventory is “normal.” Anything less than four months will push prices up.
Clayton is showing only two months of inventory, Hancock said, projecting a continued increase in prices and the unavailability of enough homes on the market.
The Central West End and University City areas are more balanced with four and five months of inventory, she continued, adding that the Central West End market is a little more seasonal with new faculty and students purchasing homes in late spring and summer.
“Also, the Central West End has seen an influx of new luxury apartments that provide upscale amenities and compete directly with the condo market,” Hancock said. “We are seeing many people who would have bought a condo, but are now considering a rental.
“University City is a solid market with a continuous demand for homes in good condition with the best floor plans (three bedrooms, two full baths and a finished lower level),” Hancock said.
While home prices are on the rise, the market could support even higher prices, although “the increases will be limited by our ability to get the properties to appraise at that new price,” Hancock said. “Appraisers must use comparable sales from the last six months because homes with loans will be limited by the comparable sales.
“Because home prices cannot accelerate as fast as demand, this is causing a continuous competition for homes,” Hancock said. She said this is resulting in multiple contract offers on many of their listings with many of those offers over the list price.
The list price is limited by the knowledge that a home priced too high cannot be supported by comparable sales and may not be able to be appraised according to the appraisers’ rules, Hancock said.
“Sometimes, we are seeing the appraisal contingencies being negotiated out of the contract so that the buyer is taking the risk,” she explained. “In this case, if a home sells for $300,000 but only appraises for $290,000, the buyer is increasing their down payment on the loan to cover the difference.”
In addition to inventory, low interest rates make up two of the overarching factors driving the real estate market. She called rates “incredibly low” at 4 percent for 30-year fixed loans and 3.1 percent for 15-year loans.
As far as the condition of house, Hancock said many buyers are looking for homes in pristine condition.
“Any time you improve the quality of a property, you increase the number of buyers who will consider that home and that allows sellers to get full price,” Hancock said.
To make the most of today’s complicated market, hiring a REALTOR is the way to go.
“Creating more interested buyers is the primary job of a REALTOR,” said Hancock. “With today’s focus on Internet marketing, professional photos and staging is so important.
“But also, the REALTOR will help the homeowner to analyze the condition (of the home) and find resources for the owner to improve the home,” she said. “Yes, condition does matter!”