In comparing first-quarter real estate activity the past two years, 25-year industry veteran Jeff Kester said he’s never seen anything like this market.
In three of the counties served by the Greater Springfield Board of Realtors, of which Kester serves as CEO, numbers paint a picture of a market that is extremely lean on active listings, buyers aggressively competing for available homes and average sales prices climbing ever higher.
Collectively, home sales prices in Christian, Greene and Webster counties are up 19%. In Greene County, they’re up 21%, and in Webster County, they’re up an eye-popping 31% in just one year.
Where will they go from here?
“I have thrown away my crystal ball,” Kester said with a chuckle. “Who could have predicted, especially during and after a global pandemic, a 17%-22% average appreciation in the housing market?”
The issue is demand outstrips supply.
“There used to be – especially before 2008 – there was always a lively new-construction market in our area,” Kester said. “Now, there’s building going on, but not nearly at the levels there used to be in the ’90s and (early) 2000s. Southwest Springfield expanded exponentially.”
Aaron Owens, co-owner of Alpha Realty MO LLC, said another issue is that homeowners aren’t motivated to sell.
“There’s a weird thought process sellers are going through,” Owens said. “Quite a few sellers don’t want to sell because they have nowhere to go. There’s so much demand, so they’re waiting for the right thing. They locked in interest rates at 2.5% or 3%. ‘Why would I go spend 6%, if I’m already locked in?’”
Meanwhile, interest rates remain relatively low, and Midwest home prices remain very desirable for those living in more expensive areas of the nation.
“There are so many people wanting to move to this area because we’re still relatively low,” Owens said. “We have a lot of transplants. They don’t mind spending on the interest rate.”
Owens said while double-digit interest rates might weigh heavily on sales, he doesn’t think they’ll go that high. “In ’09, I paid 5% and didn’t think anything about it,” he noted.
The next buyers
On the horizon, Kester and Owens independently say the concept of the family home will need to be adjusted in order to address affordable homeownership and changing demands of millennial, Generation Z and younger buyers.
“It’s not economically advantageous to any community to be a rental community,” Kester said. “I see locally a huge opportunity in the Restore SGF program because, first of all, there’s some untapped sources of inventory there. There is the ability to promote homeownership in those heritage communities in town. Different financing opportunities down the road for the areas.
“It just so happens that our biggest influx in buyers ever, (which we’re) coming into with millennials and Gen Z – they, they actually like living in the city.”
In Springfield, nearly 60% of the population rents their homes, according to a 2019 study by RentCafe.
Restore SGF is a program managed by the city of Springfield that incentivizes homeownership and restoration of properties in Springfield’s historic neighborhoods. It offers programs through community partners, such as lenders, Habitat for Humanity and Springfield Community Land Trust. The goal is to increase access to affordable housing and homeownership while preserving the city’s historic neighborhoods.
New construction also needs to be reconsidered, Owens and Kester say.
“Springfield has not traditionally, or at least for a long time, looked favorably at the term density, but I think we’re going to have to,” Kester said.
They each see a need for condos, particularly mixed-use.
“They’re apartments now, but we have an opportunity for condos in the future. It’s not a new idea. We saw that prior to the 1920s. It really is holistic,” Kester said.
Noting Springfield is ripe for big growth, Owens pointed to northwest Arkansas, Kansas City and St. Louis as examples of similar potential locally over the next few decades, depending on how the workforce develops.
“We’ve seen what Amazon has done to Republic. It has completely changed the community there,” Owens said.
But, he said, there aren’t enough existing homes to fill the demand, so developers are going to have to get creative. That may mean scaling back on the size of a single-family home, but not the quality.
“There’s a little bit of a trend of smaller homes being more desirable,” Owens said. “There are some developments where they’re building these 5,000-square-foot homes, but we’re seeing a bigger pull from downsizing. Buyers are willing to pay the same price but want something half the size with really nice finishes; 2,500 to 3,000 square foot are more popular, with open layouts, maybe a four-bedroom or bonus room.”
And Owens said he hopes as urban areas are redeveloped, more retail pockets will pop up, like that found at Cherry Street and Pickwick Avenue in the Rountree neighborhood.
Market demands creativity
In the first quarter of the year, home listings were down 4% compared with first-quarter 2021, to 1,859 in the tri-county area. Considering GSBOR has more than 2,000 member Realtors, Kester said competition has become fierce: “It’s a frantic race among Realtors.”
“We get a lot of frazzled looks,” Kester said. “It is really challenging right now for a Realtor. It used to be, you showed 10 houses and you got a contract. Now, you get 10 offers and a contract.”
Kester said he’s seen seller’s markets before, but nothing like the swarms he sees now when listings hit.
“I keep using the term that it’s like a fresh monkey falling into the piranha pool,” he said.
Owens said despite the competition, his 3-year old company has managed to double its agent count in the last year to about 85 now.
“I thought with that pressure on inventory that we would slow down. But honestly, as a brokerage, we’ve continued to grow not just agent count but volume,” he said.
Owens said low inventory has pushed his team to be more creative. One of the ideas they’ve batted around is developing a way to match sellers who are ready to move. He laughingly calls it “e-homany,” a spin on the Eharmony dating site. Take, for example, two couples. One couple is older and looking to downsize. The other is younger and looking for space for their growing family. If they each have what the other is looking for, the sale can be made. The big question is how to create a platform for making those connections.
“We’re still trying to come up with a process because there are rules and regulations,” Owens said.
Owens said he hears people toss around words like crash and recession, but he doesn’t see it.
“I’m not an expert, but I don’t see how it’s possible for us to go into a housing recession because there just aren’t enough houses on the market,” he said.
Freddie Mac appears to carry the same sentiment. In a report issued in April, the Federal Home Loan Mortgage Corp. issued a forecast that expects home purchase mortgage originations to grow from the $1.9 trillion secured in 2021 to $2.1 trillion in 2022 and $2.2 trillion in 2023. Refinancing, however, is expected to drop as interest rates on a 30-year fixed rise to an anticipated 5.1% by fourth-quarter 2023, according to the report.
Dynamic Strides Therapy to address growing demand with future expansion.