When St. Louis real estate agent Margie Kerckhoff puts an offer on a home, she usually gets excited for her buyers. But in a market that’s as tight as she’s ever seen, that feeling of hope has lately become one of angst.
Homes that have barely been on the market are receiving multiple bids above asking price. Would-be buyers are struggling to compete with others willing to pay cash, waive certain contingencies or buy sight-unseen.
In March, two of her clients, Zach and Colleen Carter, a recently married couple, went to an open house in Ballwin. By the end of the day, the listing agent had 11 offers. The Carters’ offer was one of the highest, but it still fell short. “We were exceeding our budget by at least 10 grand,” Zach Carter said. “And we lost by $3,000. It makes you uncomfortable.”
Other homes they’ve seen online were sold before they could even consider them, and many other homes in the west St. Louis County areas where they’re looking seem overpriced, he said. “It’s almost like you have to leap before you look.”
“I’ve never seen a market like this,” Kerckhoff said.
In March, the inventory of home listings in the St. Louis area hit the lowest point it’s been in years. Real estate agents typically say a market in equilibrium has a six-month inventory of homes available for sale. In many area counties, the inventory is below three months. According to data from the real estate website Trulia, the average number of homes listed each month in the St. Louis area dropped by 37.5 percent from the first quarter of 2012 to the first quarter of this year.
That mirrors a trend seen in many metro areas across the country. In the nation’s 100 largest metro areas, there are, on average, 32.5 percent fewer homes available than in 2012, falling to a point where the inventory of homes for sale nationwide is close to a 20-year low, according to Trulia data, which was distributed by The Associated Press.
Real estate agents point to a variety of factors driving pent-up demand that isn’t matched by what’s offered in the market: Interest rates remain low, lending has loosened a bit, and the financial situations of many households have improved since the recession, enticing more buyers into the market. Fewer homeowners are underwater on their mortgages, so more people can sell without having to cut a check to the bank. Far fewer new homes were built during the recession, so there’s less new home inventory available in recent years.
More properties are now owned by investors who scooped up them up cheap during the housing crisis and are content to rent them out rather than sell.
Another factor several area agents say is at play is a reluctance to list a home for sale out of fear that it would sell before the homeowner could find another home. “They’re not worried about selling their home,” said Dennis Norman of MORE Realtors. “They’re worried about being homeless.”
Inventory levels vary throughout the region but are low in nearly all counties, including in the Metro East. In St. Clair and Madison counties, the average time it took to sell a home so far this year dropped significantly from a year ago. According to the Realtor Association of Southwestern Illinois, which serves St. Clair, Randolph and Monroe counties, the area saw a record number of home sales last year.
While St. Louis’ market remains more affordable than in many other metro areas, low inventory and strong demand are putting upward pressure on prices, though several agents said appraisals have kept them from spiking. According to Multiple Listing Service data provided by Norman, the median single home sale price for the overall St. Louis region during the past 12 months was up by 4.7 percent from the prior year.
“Just because inventory is so low, that’s not a blank check,” Norman said. “The consumers that are out there today are pretty educated consumers. Everybody’s kind of learned their lesson from the Wild West days.”
Several area real estate agents said that while they expect listings to tick up in the coming year, strong demand will likely keep inventory low.
Russ Nolting, CEO of Keller Williams Realty St. Louis, said the inventory problems are partly caused by the sheer number of buyers. There were a record number of homes under contract in March on the Missouri side of the metro area, he said, and new monthly listings are relatively flat from a year ago. “We are selling a ton of homes,” he said. “It’s not that people aren’t putting their homes on the market.”
For many house hunters, navigating the market has been frustrating and stressful. In some cases, they have to be more aggressive than they had initially planned.
“You’ve got to be prepared to put in a great offer with an escalation clause and probably give up some of your contingencies,” said Kelly Hager, who runs a real estate firm in Chesterfield. An escalation clause automatically raises a bid when a rival bidder puts in a better offer.
Rose Moller-Jacobs and her fiancé, Anthony Harper, have been looking to buy a duplex in south St. Louis since December. They’ve made offers on five or six homes, she said, but have been outbid each time. “Nothing stays on the market if it’s a good deal for more than three or four days,” she said. “It’s a lot faster pace than I think we were prepared for.”
On the other side of the transaction, low inventory has been great news for sellers. “The seller is happy as a clam,” Hager said.
Paula Wagner made some renovations to her home in unincorporated St. Louis County near Creve Coeur before listing it this month. She knew that market circumstances were tipped in her favor and was expecting it to sell quickly. The three-bedroom, 2.5-bath ranch home was listed on a Friday afternoon for $209,900.
It sold Saturday morning. She received multiple offers, and the winning bid of $217,500 came with no contingencies, no inspection requirements, with the buyer providing half of the financing.
“I don’t know that I’m going to get a better deal than that,” she said.