Experts predict steady local housing growth

The national median price for an existing single-family home rose 14.7 percent from the third quarter of 2004 to the third quarter of 2005, according to the National Association of Realtors. But downticks in both existing home sales and new construction may signal the rapid inflation period is ending.

In Springfield, the median existing-home price jumped from $110,200 in third-quarter 2004 to $122,300 in the third quarter of this year, representing an 11 percent boost in value. In the Midwest, the median home price rose 13.1 percent.

“The appreciation will continue,” said Greater Springfield Board of Realtors President-elect Stacey Clem, “but it will be a much slower pace.”

Clem forecasts a 5 percent to 6 percent local price increase in 2006, which is in line with the national historic average of 6.4 percent annual appreciation.

Since 1992, Springfield has experienced an 81.7 percent price increase, compared to an 84.7 percent increase nationally, according to NAR.

Local demand for housing is setting records, said Clem, citing 7,187 sales from Jan. 1 to Nov. 28 through the Board of Realtors. That’s an 11 percent increase over the same period in 2004, when 6,469 home sales were recorded.

Clem predicts 4 percent fewer homes will be sold locally in the coming year, with the slowdown fueled by the same factors that will likely slow the national market: rising mortgage rates and an ever increasing supply of homes.

She expects mortgage rates to increase slowly to 7 percent by the end of 2006.

A 30-year fixed rate loan from Commerce Bank was 6.3 percent on Nov. 28. The same loan was commanding 6 percent Nov. 30, 2004, according to Commerce Bank home loan officer Debbie Bogner.

“Not a huge change,” Bogner said.

New construction also seems to be waning nationally.

The U.S. Census Bureau and the Department of Housing and Urban Development reported Nov. 17 that construction of new homes and apartments fell 5.6 percent from September to October. That’s a 2.3 percent decline in housing starts compared to October 2004.

The Census Bureau and HUD also reported that applications for new building permits fell 6.7 percent during the same period, the biggest decline in six years.

Those numbers may indicate that existing housing stock has caught up with demand, especially after NAR reported Nov. 28 that existing home sales slowed 2.7 percent from September to October.

However, the NAR report said existing home sales were still 3.7 percent above October 2004’s level, and Matt Morrow, executive officer of the Home Builders Association of Greater Springfield, said a one-month statistical sample is far too limited to draw conclusions from.

“It’s a little too early, probably, to be identifying a trend,” Morrow said. “Even if there is some sort of a trend in that regard (nationally) … it usually doesn’t necessarily mean the same thing is happening locally.”

In fact, Morrow said, there are more new Springfield-area homes being built this fall than last fall.

Morrow said that there were 107 housing starts in October in Greene County, a figure that doesn’t include housing starts from some cities such as Springfield or Republic. That’s an increase from September’s 82 housing starts and October 2004’s 77 housing starts.

He said there have been 1,052 housing starts in Greene County this year through October, which may ultimately break the record of 1,254 housing starts in 2003.

“Whether you’re building new homes or selling existing homes,” Morrow said, “business is going to be booming.”

He said Springfield’s diverse economy and relatively low home prices make it a more stable market than other areas.

One national study agrees.

The Global Insight/ National City Housing Valuation Analysis, released Oct. 13, says Springfield’s home market is 6.72 percent undervalued.

The analysis, according to the Global Insight Web site, “examines the top 299 U.S. real estate markets to determine what home prices should be, controlling for differences in population density, relative income levels, interest rates and historically observed market premiums or discounts.”

The study determined 56 metro areas, 32 percent of the nation’s total single-family housing market, were seriously overvalued (30 percent or more) and in danger of depreciation.

The study pegged Kansas City at 4.27 percent overvalued and St. Louis at 8.03 percent overvalued. Naples, Fla., was the most overvalued at 79 percent above what it should be. College Station, Texas, was the most undervalued at 20 percent under what it should be.

“The greatest part about living in southwest Missouri is that historically we have never reacted like the coasts do,” said Board of Realtors Director Wayne Fredrick. “Our highs are never as high and our lows are never as low. Springfield just kind of keeps rockin’ along.”

However, Clem and Fredrick said low-income home buyers might have been priced out of the market by the appreciation of the past few years.

“I’ve seen the lower ranges (of home prices) appreciate much more than even the higher ranges,” Clem said. “What used to be a $90,000 house is probably a $110,000 house. That does hurt the first-time home buyers and the larger range of buyers out there.”

Fredrick credits the low-end price jump to rising land costs.

“Because of raw land prices now, it’s really hard for any builder/developer in the Springfield area to go build houses now that are under $100,000,” Fredrick said. “You don’t have the new competition. You just have used houses, and there’s fewer and fewer of them all the time.”

[[In-content Ad]]