YOUR BUSINESS AUTHORITY
Springfield, MO
YOUR BUSINESS AUTHORITY
Springfield, MO
While historically low interest rates might be the leading incentive to buy a home right now, renters have quietly taken majority status in Springfield over the past decade.
According to an analysis of U.S. Census Bureau data by internet listing service RentCafe, Springfield’s renter growth rate 2010-19 was second in the nation, behind Waterbury, Connecticut, and it was the only Missouri city to shift to more renters than buyers in that span.
Springfield’s renter rate was 59% in 2019, representing an increase of nearly 11 percentage points and some 21,000 renters from 2010. The report covers 23 cities, with at least 100,000 residents, where renter rates overcame ownership figures during the time period.
It’s a sign of growth, said Matt Morrow, president of the Springfield Area Chamber of Commerce.
He attributed the increase to the student population. With three universities in the city – Missouri State, Evangel and Drury – Morrow said there has been an opportunity for more housing rentals in downtown Springfield as well as around the campuses.
“That has been a positive thing,” Morrow said. “Among those students, we have tried to make a case that this is a good place to stay, that you could build a career here.”
He said the city’s growing population might be skewing younger, which can have a promising long-term effect.
According to Springfield Business Journal’s review of the U.S. Census Bureau’s American Community Survey data, the city’s largest population segment has been 20-24 year-olds. Between 2010 and 2019, the census survey shows the city held at 14% of residents in that age range. The next closest ages are 15-19 years old, at 8.7%, and 25-29 years old, at 7.8%, last year.
Morrow said there is an opportunity for Springfield to become a homebuyer’s market again in the next 10 years, if students decide to stay and work after graduation.
“If we want young people to be here in college, right out of college, to start building a life here where they will ultimately own a home, it’s important that they have good options available to them at the various stages of their life,” Morrow said.
But Morrow said he does recognize that younger generations are not purchasing homes as rapidly as previous generations. According to the National Association of Realtors, the median age for a first-time homebuyer is 33 years old.
Bryan Magers, CEO of rental property management firm Bryan Properties, has been leasing to students around Missouri State University for nearly 30 years and near Drury University for 40 years.
“We lease to about 20% of the students that go to Drury on two apartment projects,” Magers said. “Without the college students in this market – gosh that would probably be 10,000-15,000 less units in Springfield.”
But Magers and Morrow agree they’d like to see a balance of rental and homebuyer options.
“Homeownership is a really good thing. The more people can come to a place where they are buying and owning their own homes is the No. 1 way most build wealth,” Morrow said.
Housing shortage
Brendan Griesemer, Springfield assistant director of planning and development for the city, said in order for there to be a balance of rental and homebuyer options, an identified need for affordable housing must be addressed.
“I think where our issue plays bigger is that we are having a difficulty with quality, affordable housing,” he said. “The quality of our housing in general needs to be improved.”
Griesemer said he and the team behind the Forward SGF comprehensive plan currently are exploring strategies for future development growth. Chicago consulting firm Houseal Lavigne Associates was hired to study housing in the Springfield market, and Griesemer anticipates results will be ready by fall 2021. The target areas in the comprehensive plan, he said, are population trends, current available housing and long-term projected housing needs.
According to a 2019 Community Focus Report by the Community Foundation of the Ozarks Inc., the availability of safe, sanitary and affordable housing is a concern due to rising utility costs and low household income. The report also states that high levels of construction costs were a factor.
“The number of cost-burdened households, where more than 30% of household income is used for housing costs, has trended upward for renters and homeowners,” the report states.
But Jeanna Callahan, a real estate broker with Century 21 Integrity Group, said there is a lack of inventory for home sales in general. In 2010, she said there was 8,500 active listings, according to the Southern Missouri Regional MLS. During that time, she said the market had an absorption rate of 12 months, meaning Realtors had 12 months of inventory to sell at any given time. Now, she said the market has an absorption rate of two months.
“I can’t remember the last time I wrote an offer for a buyer that wasn’t multiple offers,” Callahan said. “It’s not an exaggeration to say – literally houses sell in hours now. It’s a super competitive market from a sales standpoint.”
Hopeful future
Derek Chaney, a residential lender with Mid-Missouri Bank, said he was a little surprised by the RentCafe report, but he perceives the data as people not knowing the options associated with purchasing a home. Going forward, Chaney said he is hopeful that with mortgage interest rates at record lows, it will spur more construction along with catching homebuyers’ attention.
Mortgage rates dropped to a record low for the 13th time this year, according to past SBJ reporting. Freddie Mac reported the average for a 30-year, fixed loan decreased to 2.72% the week of Nov. 9, where it remained as of press time.
One action that could swing the numbers back toward homeowners, according to Morrow, is annexation of residential developments into the city.
He said there are housing developments right on the edge of the boundary line.
“We think of a lot of the areas where single-family housing has been developed in the last 20 years, we think of that as Springfield,” Morrow said. “But technically, it’s not showing up in these kinds of studies because we haven’t annexed residential development in a very long time.” But he said he does know that idea can generate differing opinions.
“The reality is that you would have to provide service for houses when you bring them in, so there are costs associated with that, too,” Morrow said. “But I am not talking about going out way in the county; I am talking about those right along the city limits.”
