Foreclosure numbers loom over early positive signs for housing market
While foreclosure numbers show signs of weakness, the Home Builders Association of St. Louis & Eastern Missouri reported that the number of building permits issued rose consistently from January through April.
There were flickers of hope in building permit numbers and a rise in average home sale prices in the county for the last two months. But those changes were small when compared to the foreclosure numbers.
COUNTY FINDS DRASTIC FORECLOSURE NUMBERS
Gary Podhorsky, community planning manager for St. Charles County, said the increase of foreclosures in St. Charles County from 2004 through 2007 was drastic. Citing the county housing report, he said while there were 634 foreclosure actions in the county in 2007, 875 properties were affected.
The discrepancy in number of properties and foreclosure actions is accounted for by multiple properties owned by a single person, most often a home builder, who loses multiple properties at a time. As all properties were built under the same financing in many cases, only one foreclosure action is necessary.
Recently, there has been a significantly higher number of foreclosed properties in relation to the rise in foreclosure actions. From 2004 to 2006, the numbers of foreclosure actions and property parcels foreclosed were nearly identical. In 2007, there is a ratio of nearly 1.4 properties foreclosed for each foreclosure action filed.
The county report cited inflation, development costs, construction financing and the increasing size of homes as the culprits in rising housing costs. The report noted that the median sale price of a house in 2007 was only $356 higher than the 2005 price, attributing such steadiness to a softening of the demand for new single-family detached homes and discounting on new homes by home builders to reduce inventory levels.
NEW, EXISTING SALES DOWN
Sales, too, have taken a hit in St. Charles County. Mark Stallmann, chief executive officer of the St. Charles County Association of Realtors, said existing home sales were down in April to 405 from 485 over the same period a year ago.
Average sale price during the same period for new and existing homes, however, rose 4.4 percent. Existing home sales began the year at 293 in January, but have risen every month thereafter, giving real estate agents and home sellers alike hope that the trend continues.
From March 2007 to March of this year, a MarketGraphics report shows there were 2,770 closings on new single and multifamily homes, compared to 4,104 between July 2004 and July 2005, when the housing market was at its strongest.
St. Charles Association of Realtors President Keith McCulloh said that the inventory of existing homes for sale dropped from a year’s worth of properties to six months of inventory from the outset of 2008 through April.
Stallmann thinks this is not due only to houses being taken off the market.
"We have seen a steady increase in homes sold each month in St. Charles County," Stallmann said. "I think this accounts for a lot of the reduction in inventory."
There has been a rise in median sale price for homes from 2007 to 2008, as well, from $185,000 to $190,000.
But sales of existing homes and condos in April are down from the previous two years to 405 from 485 in 2007 and 471 in 2006, according to Stallmann.
McCulloh said that he tries to remind people that with the big rises in the housing market in years past, "once we get to the top, we need to come down a little bit."
Yet with housing sale numbers dropping significantly and foreclosures rising, it is clear that St. Charles County has not been immune to what many local real estate agents insist is largely a national problem. Though housing prices remain steady, it is unclear what effect the enormous increase in foreclosure might have upon property values.
AGENTS BOTH SOBER, OPTIMISTIC
Don Rogers, a Re/Max Discover agent in St. Charles and last year’s president of the Realtors association, is both realistic and hopeful for the housing market’s future.
He says many folks are simply looking for a deal that is too good to pass up, recalling a property he showed last week in the $60,000 range that the buyers wanted for even cheaper.
"We can always find something negative in everything we do," Rogers said of the rough appraisal the housing market has been receiving.
However, he still says the market needs more absorption.
Joe Zanola, of Zanola Company/MarketGraphics, says the stock of new housing is down to 3.6 months’ supply in March 2008 from the same month in 2007.
"Our unsold inventory in St. Charles County decreased from November, and St. Charles led the St. Louis market in terms of reducing inventory," Zanola said.
ANALYSTS MAKE SENSE OF IT ALL -- PERMITS
The most recent HBA report on permit numbers show that, among many sour grapes, 2008 may not be off to an entirely dreary start.
Permits rose steadily from January to April, with a mammoth increase in multifamily permits. Zanola says those permits are the result of expanding condominium communities, which are seeing greater interest because of their price range, from young to old buyers.
Shelly Stengel, senior staff vice president of public affairs with HBA, says that while permits are not a good indicator of the amount of houses being sold during strong periods in the housing market, permit numbers are more in lock-step with actual sales during downturns. Though the 146 single-family permits issued in April are significantly lower than the 289 permits issued in 2007, they do represent a climb from March 2008’s 136 permits and February’s 118 permit issuances. But in the last two years, the market has already seen consecutive two- or three-month increases in permits only to be broken by declines in permit issuances lasting at least as long as periods of growth.
"Most homes that permits are being pulled for have been sold because there’s not a lot of speculative building going on," Stengel said.
Zanola agreed that permits may reflect an uptick in market outlook, but cautioned against reading too much into permit numbers as a reflection of what is being sold.
"We look for permits to pick up," Zanola said of the rest of the year. "There are two things (that can be leading to this) — a larger number of buyers returning to the market, and another is taking down a sufficient amount of inventory that justifies building larger numbers of homes."
