The REAL Affordability Picture

Posted by Gary Hoeferkamp on January 26, 2024

Much has been said recently on housing affordability, with the rising mortgage rates and home prices the last 2 years giving buyers a double whammy. The problem has worsened the last few years. However, one of the most misleading stats given by headlines is the salary needed to buy a home. Some seem to say you need to make over $100,000/yr to buy a home. What the headlines do not spell out is they are listing the average or median priced home, and many times is a national figure. And sometimes based only on the top 20 metros in the country, which are among the highest priced. Who says you need to buy a house in the middle price range? That means there are 50% of the homes LESS than that.

Let’s pare this down and look at some St Louis metro stats so that you, as a buyer, are not hesitating to purchase a home due to a misleading headline. I find that $78,000 is listed as the median for our metro household income by the Census Bureau for 2022. Doing some quick math, and taking 28% to 36% of that as a typical house payment allowed by lender guidelines to include principal, interest, property tax and insurance, is $1820/mo to $2340/mo on a 30 year fixed mortgage at 7%. Using a mortgage calculator, with 5% down and decent credit, including PMI (private mortgage insurance) puts the purchase price cap between $220,000 and $285,000. With 10% down, the range goes up to $233k to 304k. This price range is flexible depending on adding down payment (brings loan down and pushes price up), how much each month you are comfortable with, how the lender scores various parts of your income, credit, debt, job history, etc and is strictly used for illustration.

Let’s split the range, and say $252,000 is your allowable price, and you are comfortable with that. I feel that is pretty reasonable. What if you make $50,000? To do some quick math, that could put you in the $160,000 range as computed above. Some of these are condos, and there will be a monthly fee to consider, and may push your price down a bit. If your expectation is a mansion at these prices, you will be disappointed. But if you are realistic, you may be pleasantly surprised. And you may need to start smaller or in a different area than you imagined. I had to start small AND in a different area 30 years ago, and traded up after 9 years to a very comfortable home in a nicer area. Now let’s look at what $240k to 250k will get you around St Louis, click on the various links:

17 in St Louis City: OneHome™ | Browse Properties

16 in North County: OneHome™ | Browse Properties

3 in West County: OneHome™ | Browse Properties

4 in the Central Corridor: OneHome™ | Browse Properties

5 in South County: OneHome™ | Browse Properties

5 in St Charles County: OneHome™ | Browse Properties

And what $150k-160k will get:

16 in St Louis City: OneHome™ | Browse Properties

26 in North County: OneHome™ | Browse Properties

3 in West County: OneHome™ | Browse Properties

3 in the Central Corridor: OneHome™ | Browse Properties

3 in South County: OneHome™ | Browse Properties

3 in St Charles County: OneHome™ | Browse Properties

While these are real homes and condos On The Market or Coming Soon right now, they may be sold soon, and others are always coming on line. Please check with me for current info!

Here is an update on local, existing home sales activity as of today (Jan 24th):

• Manchester had 3 homes available and 16 under contract
• Ballwin had 9 homes available and 27 under contract
• Kirkwood had 22 homes available and 26 under contract
• St Peters had 21 homes available and 52 under contract
• Arnold had 17 homes available and 12 under contract
• Florissant had 85 homes available and 74 under contract

The ratios range from .7 to 5.3 pending sales for every 1 available. Adding the total of these 6 areas is 1.3 pendings to every 1 available. My last comparison of these areas in December was 1.4 to 1 (and 2.8 to 1 in June 2022) with the available home supply DOWN 12% from Dec. That shows a typical January with lower inventory and slower sales rates. RIGHT NOW (or the last 3 months) is looking like the best time for buyers to avoid high levels of buyer competition. Manchester takes honors this month again of best seller's market at a 5.3 to 1 ratio of pendings to available, and Florissant (again) and Arnold the best buyer's markets, both with slightly more on the market than under contract.

In the next few days to a week, I will send out my annual St Louis metro price appreciation guide, with whole market figures, and the 7 submarkets broken out, showing average prices, days-on-market, and how much sellers were negotiating in 2023.