State of the Market: January 2010

It’s been far too long since I have relayed my thoughts on the state of the investment real estate market, so in the spirit of the season, here is a quick rundown of my current investment market impressions in South St. Louis, Missouri:

  • Single-Families – There is no doubt that the $8000 homebuyer credit had a positive impact on house sales in the fall. September and October were especially productive. With the deadline for the credit originally set for November 30th, buyers were in a frenzy to find and close on properties prior to that deadline. Of course, when the program was extended until April 30th, 2010, the sense of urgency wore off. Couple that with the typical slowdown during the winter holidays and the market for these properties has been particularity slow for the past month or so. The good news is that with the holidays now over and the new homebuyer credit deadline  approaching in a little over three months, the market should see a nice resurgence soon. After April 30th though, its anybodies guess what is going to happen. So if you are in the middle of am rehab or thinking of selling a house, I would hurry up.
  • Condos – Not much to say here other than to avoid them. There have been some pretty good deals out there as of late, but the big issue is that buyers can’t get condo financing right now. Unless you can make sense of renting a condo or seller-financing it, I would stay away from them until something changes financing-wise.
  • Multi-Families – Where last year seem to offer a steady mix of 2-family and 4-family foreclosures, the last few months have been very heavy on the duplexes. Since the fall, however, things have been very heavy on the duplexes. Some of the single bedroom properties don’t present the greatest deals, but there heavy been a  fair amount of 2+ bedroom properties that heavy been pretty solid. It seems that a great many of the 4-families out there have already been foreclosed and sold, so it is possible that this might be somewhat of a permanent trend.
  • Apartment Rentals – November and early December were great for renting mid-level apartments. We moved a lot of inventory during that time. The properties that seemed to be getting less activity were the cheap units ($450 for single) and expensive ones ($650 for single). There hasn’t been much of a resurgence following the holidays as seems to happen some years. Lots of window-shoppers out there requesting showings, but not many pulling the trigger. Average would probably be the best way to describe the current amount of rental activity.
  • Neighborhoods – When looking for investment properties, location and price are always big factors. But the one thing it is hard to control is where all the good inventory is coming from at any given time. Much of last year produced a glut of quality foreclosures and short sales in neighborhoods like Tower Grove South, Shaw and Tower Grove East. But since the fall, things seem to have shifted increasingly eastward, with the best deals coming up in Tower Grove East, Fox Park, McKinley Heights, and Benton Park. Areas further south such as Benton Park West, Gravois Park, Dutchtown and Bevo continue to have a solid flow of inventory coming through as well, obviously rentability and resale remain a concern.
  • Best Investment Bets – So what’s the moral to this story? Obviously you should be on the lookout for all types of property in any quality area, but if I had to point you in one direction it would be Tower Grove East. Despite the sluggish economy of the past few years, or maybe even because of it, this neighborhood is really changing fast. There has always been a nice housing base, but the vast amount of foreclosures on derelict and substandard properties recently in the neighborhood has created a huge influx of development in the vicinity. Pricing hasn’t really caught up yet so there remain some pretty good deals. Look out for properties of all types there. Also pay attention to the increasing number of singles and duplexes in Benton Park and McKinley Heights. Benton Park West and Gravois Park within one block north or south of Cherokee is also a place to watch.

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