Local real estate market shows slowing

Nationally, existing-home sales were down 1.3 percent in June compared to the previous month, according to the latest data from the National Association of Realtors.

Uncertainty about the movement of the economy, combined with recent interest rate increases, an overabundance of new homes on the market and several other factors, has led to a slight decrease in home sales in the Springfield market.

Numbers from the Greene County Recorder of Deeds office show the local downturn.

The office recorded 5,894 warranty deeds in the first six months of 2006 – a 9.7 percent drop from the first half of 2005. Deeds of trust – 10,382 through June – are down 3.4 percent from the same period in 2005.

Greene County Recorder Linda Montgomery says the main culprit for the lower numbers is probably interest rates. The federal funds rate, the interest rate at which banks lend money to each other, climbed two points between June 2005 and June 2006, and the June 29, 2006, rate of 5.25 percent was more than four points higher than the historic low of 1 percent in June 2003.

Lois Kreider, president of Mid-Missouri Mortgage Co., said that while home loan rates aren’t directly tied to the prime rate, they are affected directly by the bond market, which is affected directly by the federal funds rate.

Regardless of the correlation, Kreider said the success of the local housing sales market is tied most directly to potential home buyers’ feelings about the economy. The effect, she added, is intensified this year because of upcoming elections.

“Whenever you have an election, people are more focused on what’s going to happen,” she said. “In an election year, they’re listening to everything (politicians) are saying.”

Other economic factors also are affecting the market, according to Greater Springfield Board of Realtors President Stacey Clem. Most notable is the increased cost of gas.

“People, especially on the lower end of the income scale, are having to pay so much more in gas that they’re struggling with making payments, and they’re having to buy a lesser house than a year ago,” she said.

Kreider said the local housing market is nearing capacity, as evidenced by the abundance of moderately priced available homes in the area.

The recorder’s numbers back up that statement; in 2005, the county set new single-year records for both subdivision plats filed and lots in those subdivisions.

GSBOR’s Clem said the organization has recorded 5,525 home sales for new and existing homes this year as of Aug. 15; last year at this time, the number was 5,506.

Kreider has noticed a movement toward purchasing older homes, a fact she says indicates that interest rates and the general state of the economy are making people more cautious about their purchases.

“When you’re in an up market, everybody’s buying new houses,” she said. “When times get crunched, they look at the investment of their money, how far it will go, and go toward older houses.”

Clem says that Springfield, however, remains insulated from major fluctuation, as does most of the Midwest.

“We saw a steady market with slow but steady appreciation,” she said.

Warranty Deeds vs. Deeds of Trust

A warranty deed is the deed that guarantees the title of a property from the buyer to the seller. When Joe sells a home to Sue, he gives her the warranty deed.

A deed of trust, on the other hand, is a document used in lieu of a mortgage. If Joe sells a home to Sue, and she takes out a mortgage to pay for it, she would get a deed of trust.

Deeds of trust are always more numerous than warranty deeds, because deeds of trust also include refinancing of property, so one property could have multiple deeds of trust simultaneously.