Saint Louis MO Real Estate Today

Just who Are Freddie Mac and Fannie Mae? And how can they help Saint Louis MO home buyers?

Fannie Mae and Freddie Mae are publicly-owned quasi-government agencies. What's very unique,  however, is both entities are overseen by the Federal Government.  Fannie and Freddie have very simple and direct mission statements: To make sure that mortgage monies are available to homeowners who are looking for cost-effective home loans.

That said, what is important for Saint Louis MO homeowners to understand is the fact that neither entity extends mortgages directly to consumers; you'll have to talk to your professional mortgage planner such as Jerry Vitale at Gorman & Gorman for that.  Instead, Fannie and Freddie's key role for a home buyer in Webster Groves MO or a condo purchaser in Clayton MO is to purchase mortgages from lending institutions; whether they are local or national - which make loans to Saint Louis home buyers.

"Fannie Mae and Freddie Mae are publicly-owned quasi-government agencies. What's very unique, however, is both entities are overseen by the Federal Government."

Federal laws restrict banks by limiting the amount of money they can lend as a percentage of their total asset base.  Therefore, if your home loan for your house in Ballwin MO is on the books of Bank of ABC, Bank of ABC is limited in the amount of new mortgages it cane make due to the fact that your loan counts towards the total ratio of home loans to asset base that Bank of ABC must maintain.

Here's where Fannie Mae or Freddie Mac play an instrumental role for Saint Louis MO home buyers as they purchase your mortgage which then converts back into cash and Bank of ABC can then lend again to somebody else.   In addition, by reselling mortgages again and again to Fannie and Freddie, a bank is able to extend mortgages to multiple homeowners in St. Louis MO using the same asset base.  Fannie and Freddie thereby ensure that "the lending system" has plenty of mortgage money available for Saint Louis MO homeowners looking for a home loan.

"The next time your hear a reference to a conforming loan - please note that this is describing a loan that meets either Freddie or Fannie criteria -- they conform to Fannie or Freddie's guidelines."

So, to some extent, for the Saint Louis MO Real Estate Market, Fannie and Freddie are a ready, willing and able source of mortgage money flowing into the local market.  One caveat, and this can be a big one given the new realities of the mortgage market - Fannie and Freddie have strict guidelines outlining the specific types of home loans they will acquire from banks and other lenders.  Freddie and Fannie will only accept loans that conform to their respective criteria - and do not deviate from these criteria.



The next time your hear a reference to a conforming loan - please note that this is describing a loan that meets either Freddie or Fannie criteria -- they conform to Fannie or Freddie's guidelines.  If not, the mortgage will fall into the categories of "Alt-A" or "sub-prime".

For a home buyer in St. Louis MO looking to buy a home in Webster Groves MO or Brentwood MO, this should shed light on why Alt-A and sub-prime mortgages are very difficult to impossible to come by lately -- unfortunately, no government agency exists that guarantees to purchase these types of loans.  Without that guarantee, or another ready source to purchase these mortgages due to the mortgage meltdown of 2007, banks and other lenders are for the most part unwilling to tie up their assets.

This is exactly what you should seek the counsel of an experienced mortgage planner.  Please call us today for a referral to a market expert!

Saint Louis MO Real Estate Market Showing Signs of Stabilization - Window of Opportunity May Close for Home Buyers!

Cottrell Report – Total Market Overview for Week Ending 10/5/07

Saint Louis MO Real Estate Market Update & Overview
			Current WK	4 Weeks Prior	Trend
Active Listings			5,929	5,983	=
Pending Ratio			11.6%	12.9%	-
Price Reductions			9.9%	7.6%	-
Days on Market*			74.6	70.7	-
List/Selling Price(%)**			97.0%	96.7%	+
			Cottrell Index (08/07)	99	=
			Cottrell Index (07/07)	86	-
			Cottrell Index (06/07)	95	-
*Weighted Average Days on Market for Listings Sold
**Average List/Sell% for all listings sold in past 6 months
Source: MARIS Data Deemed Reliable but not Guaranteed
Cottrell Index based on year over year analysis of ratio of new listings/listings sold
© Cottrell Realty Group/Keller Williams Realty 2006,2007  ALL RIGHTS RESERVED

Download TMO_10-03-07.pdf 

“Saint Louis MO real estate market is starting to show signs of supply – demand stabilization for those who know what to look for!”

Pending Ratio Declines week over week – Begins Seasonal Decline for Fall into Winter!

The pending ratio declined slightly to 11.6% down from last weeks 12.8%.  This ratio is at the lowest level of 2007 and we expect the pending ratio to decline further based on seasonal reductions of buyers in the fall and winter in Saint Louis MO. A new trend, however is developing in listing inventory entering the market which we will discuss below.

Listing Inventory – What’s really going on behind the scenes in St. Louis MO!

Over the past 30 days, available inventory has increased dramatically to a level of 8.6 months based on the six month rolling sales number average.  Things have slowed down in Saint Louis MO’s real estate market, however, sales have definitely not stopped.  We’re continuing to see more and more aggressive offers – when a property is selected by a buyer and agent for possible acquisition – well below list price.  This is a source of much consternation for Saint Louis MO home sellers.

Showings on available listings continue to be well below average and ‘choppy’ with some listings in  areas that are slower than average seeing brisk activity while others in normally strong areas remain well below normal again this week.  We believe this is a continued sign of weakness from the fallout in the mortgage marketplace. Normally strong areas such as Webster Groves,  Kirkwood MO, Clayton MO, Ladue and University City MO continue to be unseasonably low and off from where they were a few weeks ago.  Some listings continue to have no showings at all.

There however, is a new trend developing behind the scenes over the past 90 days – this trend should provide a glimmer of positive news behind the scenes.  Based on the attached file (Download Saint_Louis_MO_List_Sell_Data_10_2007.pdf ), our analysis shows that when compared with 2006, 2007 new listings for the past two months are below the number for the same month last year (both August and September new listings for each month are off by more than 7% - showing that fewer listings are entering the market when compared to the same month in the previous year.  If this trend continues, the St. Louis Mo real estate market will correct itself as sellers with unrealistic pricing expectations will either leave the market (be withdrawn) or remain unsold (expire unsold) and fewer new listings enter.  The big hit to the buyer pool – those that can no longer purchase post-mortgage meltdown, already occurred.  What remains now is to see if this trend continues and possibly accelerates over the next few months.  Readers should note that seasonally, the number of new listings entering the market drops between October 1 and December each year (generally off by up to 40%).  This is not the trend we are watching, what we are comparing is October of 2006 to October of 2007 and each successive month year over year.

Price Reductions continue at record levels

More home sellers in St. Louis MO continue to aggressively lower their price (some have decided to make major adjustments) in order to have the best chance at a significantly smaller (when compared to just 12 months ago) pool of buyers.  This week, the % of St. Louis MO home sellers who have lowered the price on their listing is 9.9%.

There are more active listings available in many submarkets in St. Louis MO, than buyers who will purchase in a reasonable timeframe. Relative pending ratios for these submarkets are well below 10%.  In these specific areas, even significant price reductions have been met with limited to no new showings.  These areas are definitely targets for sellers to consider Lease/Purchases – something we’ve developed as a successful aggressive strategy to re-position a listing to compete with a large number of available properties. Seller’s in some Saint Louis MO areas may get one and only one shot at selling their house or condo.  A seller of a condo in Clayton MO or a house in Fenton MO who receives an offer – however structured – should carefully weigh whether this is the only and best offer they will receive.  Smart sellers in Saint Louis MO are seeking the experienced counsel of a professional listing agent to market, generate and assist with the evaluation of offers.

Significant Opportunity for Saint Louis MO for homebuyers!

The shift in the real estate market in Saint Louis MO real provides a significant opportunity for home buyers.  Based on the trend towards reduced new listings entering the market, we would suggest that the current window of opportunity for home buyers based on a significant supply/demand imbalance could close between late fall and spring.  Great listings will still be available, however, seller’s may not be willing to discount as heavily as in the current market as the supply and demand come into balance. 

As we discussed previously, as a home buyer looking in St. Louis MO, you need a market expert buyer agent who can assist with the selection of homes that represent the best value and when you find the best home in Saint Louis MO, provide the critical analysis for potential purchases (is the home priced in such a manner where it represents a significant value, has it had price a price reduction(s) – when, by how much? What do the comparable sales indicate?  These are all key things that a professional buyer specialist can provide – Just make sure your agent is a market expert!

"Based on the trend towards a reduced number of new listings entering the market, we would suggest that the current window of opportunity for home buyers in Saint Louis MO…could close between late fall and spring."

Readers of this weekly report will recall that for most price ranges, the months inventory showing in the Cottrell Report for most price ranges does not reconcile with the average days on market (close to 60 to 70 days on average).  This is due to the fact that many homes on the market are overpriced and not ‘priced to sell.’  We are continuing to see many homes sell at or below the market averages for days on the market for more than 97.6% of list price.  Homes that are not within a competitive price range typically experience low to no showing activity (as noted above - some sub-markets have experienced very limited buyer activity regardless of listing price).

Weighted Average Days on Market moved dramatically upward!  Days on Market remains above 70 for 35^th week.

Weighted Average Days on Market rebounded upward to 74.6, above 70 days for the thirty-fifth consecutive week.  We believe this is a significant sign that homes were selling quicker in the early part of the year; especially as sellers reduced prices and/or new homes are coming on the market much more competitively priced to sell.. Again, this measure which applies a weighting by relative activity per price range and is the aggregate measure of six whole months sales activity had been rising steadily since late fall. 

We will continue to watch this measure carefully along with the overall list to sell ratio for pricing which has remained below 97% since mid-December 2006.  It is important to note that the list to sales ratio is considerably lower than the 97.4% seen a year ago in St. Louis.  Both indicators show activity as well as aggressive offers being accepted from the relatively smaller pool of buyers who are active in the marketplace.   

Readers should note that both the List to Sale Ratio and the Weighted Average Days on Market are lagging indicators of market condition – they contain a rolling 6 months of data – and as such will not be the first indicator of market correction.  The pending ratio (see above) is the leading indicator and as such will show the first and strongest sign of a shift in the market. Unfortunately, the local and national press focus on other indicators that are either plainly inaccurate or lag (imagine days on market declining for 30 weeks – when pending ratio reversed trend for more than 6 of those weeks) the market in terms of shifts.

Based on this fact, the press and most real estate agents and brokers normally watching the days on market would believe that the market is improving (days on market have been declining).  However, the number of buyers under contract (pending ratio) has declined significantly (by over 24%) in the past month.  We’ll be watching this carefully for any continued degradation in the pending ratio.

Note:  Complete definitions of all terms for the Cottrell Report are found here.

Kevin Cottrell /Cottrell Realty Group @ Keller Williams Realty Southwest in Saint Louis MO