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Buying A Home In St. Louis - Now Really Is A Good Time
It's understandable that people who otherwise might be thinking of buying a home are nervous. Each day seems to bring more bad news about the real estate and mortgage markets. News stories about foreclosures seem to be running just about everyday in just about every form of media. All that taken into consideration though, at least in certain markets such as the St. Louis real estate market, now may very well be a good time to buy a home. Why? The answer is demographics. You might have noticed a news story about a year ago or so that announced that the US population just topped 300,000,000 people. The story went on to say that the US population is expected to top 400,000,000 people by the year 2050. The facts of the matter are that these people are going to need someplace to live! Another demographic trend that is expected to continue is that housing formations are up and expected to stay that way. What this means is that more people are going out and forming new households. This might happen when a couple divorces or when kids move out on their own. The big thing is that it's happening! Another reason that home prices are likely to start appreciating again at some point is inflation. To put it simply, if the price of nails and roofing singles goes up each year at some rate of inflation (say, 3%) then the price of the homes that these products go into are also going to go up. In the short run, this isn't always the case, but in the long run it's pretty much a certainty because if builders can't pass these increases along to the consumer, then they aren't going to build any new homes. If no new homes are built, then the supply curve will shift and the prices of existing homes will increase. But Bob...what about the real estate bubble? Well, it's true that certain markets did experience a speculative bubble, but there really aren't that many of these markets. And even then, there was a reason that these markets experienced rapid appreciation; that is because they were the markets that people wanted to live in! Most other markets, such as the St. Louis real estate market, never experienced the rapid run up in real estate values and hence, don't have as far to fall. As a matter of fact, I'll make the argument, as I did above, that in the long haul they are likely to return to appreciation! In short, one of two things is going to happen here. Either the powers that be will do something to directly "fix" the credit markets. In which case the real estate market will more than likely rebound quickly. Or the powers that be won't do anything to directly address the credit market problems, in which case the real estate markets will remain in the doldrums for some time. Even if the second scenario is what ends up playing out, the free markets will EVENTUALLY work through the excess supply and that is when the demographics trends mentioned above will play out and real estate will begin to appreciate again. In essence real estate will return to how it has been for hundreds of years here in the United States. That is it will once again be a long term hold. I'd guess a 5 - 7 year average hold before a buyer could expect to see tangible economic benefits from owning their home. As I pointed out in my blog, I'm not nervous at all yet. When I see Warren Buffet put a for sale sign in front of his home in Omaha, then I might change my mind! In the mean time, I'm confident that real estate, especially real estate in the St. Louis real estate market, will be an excellent investment. Bob Mitchell
ValueList Real Estate Services, Inc.
St. Louis, Missouri
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Contributor's Note
Yes, this intel is a blatant attempt at commercial exploitation, but who among us isn't out to earn a buck? Besides, I've got two kids in college!
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Homes Throughout The St. Louis Real Estate Market Should Start To Appreciate Again
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