News

In spite of all the news related to re-sales, foreclosures, and credit issues in the residential development market, today’s greatest inhibitor of home sales is the uncertainty created by the slowing of new homebuilding construction permits.  At MarketGraphics of St. Louis our reports show that the St. Louis homebuilding industry is in the process of migrating from the traditional concept of building homes and moving towards a more comprehensive strategy of creating communities.

It is important to recognize that the more stable level of closings (homes being sold) is a better indicator of the home buying market than permits (homes being built).  Our interpretation of this research data is that the St. Louis region’s new home sales are stronger than perceived, especially when compared to reported variances in permits.

Based on current data, the fluctuation of annual permits from 2003 through 2007 has a greater variance than the number of annual closings.  For example, permits range from 14,757 to 9,427, while closings range from 11,688 to 9,513.

Although the data reveals closings have been relatively stable compared to the more commonly reported permit variances, it is critical to recognize the potential psychological drag on demand.  Builders aggressively starting new homes in 2003-2005 have given homebuyers a tremendous opportunity.  Today lower interest rates and significant home values are available, an incredible combination that should be expected to motivate potential home buyers.

Our market report findings underscore a serious concern related to over-focusing on fewer permits in that it can potentially delay and reduce levels of demand (closings) for new homes.  The research indicates the aggressive building from 2003-2005 assumed an ongoing and generalized demand for the same type of homes that we sold during that time period; changing demographics were not recognized, but now they are readily apparent.

As a result, some unique opportunities in the St. Louis area exist for builders to serve more specialized markets, rather than the single-family market that has dominated for so many years.  Opportunities exist for homebuilders right now in niche markets that are currently being underserved.  We have become so entrenched in providing for the single family or growing family market, we’ve potentially overlooked the fact that it’s not the only one that exists.

Young first-time buyers and baby boomers are the two largest emerging markets now being underserved in new home construction.  These segments have a very different set of demands than traditional single family home buyers. 

In addition, we’re finding this concept of the ‘oasis’ community represents a desire for people in all three segments – first-time buyers, growing families and baby boomers – to live together in multi-generational, diverse communities.  In fact, we’re already seeing trends whereby people are looking for opportunities to live in close proximity with immediate and extended family members.

This unique approach to community planning and home building in the St. Louis metro area also takes into account the fact that the first-time buyer and baby boomer markets represent the age targets projected to increase over the course of the next five years.

Overall, buyers need to envision their future in a home.  They’re increasingly more analytical and they pay more attention to the home’s surroundings.  For this reason, discounts have become a fading trend as customers demand community amenities and incentives from builders. It’s important that developers consider this and create environments that buyers in these growing segments will want to call home five, ten and 15 years from now.

Creating communities with housing product options encompassing the needs of all life cycle stages will be the trend going forward.  These age groups that are increasing by a percentage of the population in our area are foreseen to be the new opportunities for builders to create meaningful places to live for all generations.  From our estimation, exciting planning is underway for a new wave of communities and housing needs that home buyers will begin to see in the not-too-distant future.

Local housing market shows mixed signals

By Eric Becker
Tuesday, February 19, 2008 2:59 PM CST
Well into the first quarter of 2008, the story on housing in St. Charles County remains largely one without a clear ending or even a strong hint of what the denouement might bring.

With the full results for 2007 in, St. Charles County evaded some of the more dramatic drops seen in other parts of the country in new home sales, and average sale price for existing homes remained flat.

But the number of existing home sales dropped 9.3 percent, and new home sales dropped 8.3 percent from 2006 to 2007. Nationally, those numbers were 12.8 percent and 26.4 percent, respectively.Building permit issuance tracked by the Home Builders Association of St. Louis and Eastern Missouri fell 6 percent from 2006 to 2007. During the same period, the St. Louis area as a whole saw an overall decrease in permits of 5 percent. Compared to 2005, the permits issued in St. Charles County fell 31.7 percent.

Joe Zanola, who owns Zanola Company/MarketGraphics in St. Louis, a housing market research firm, tracks new homes built and occupied. “What those numbers are indicating is a logical slowdown in permits in the last two years as we are closing and occupying a supply of homes created in ‘04 and ‘05 that was in excess,” Zanola said from a builders convention in Florida last week, adding that “we have a bit of oversupply.”

While permits can gauge homebuilder confidence in the ability to sell the homes they are building, closings on homes is a much steadier number than the ups and downs of permit numbers.

Merle Schneider, co-owner of Schneider Real Estate in St. Charles, thinks the market bottomed out near the end of November.

In a recovery market, he said, beginner buyers purchasing houses for between $130,000 and $150,000 lead the charge. Schneider said he recently sold a few properties in that range.

“I think we’ve hit the bottom of the trough in 2007,” he said.

Zanola expects median prices per square-footage to stabilize, which would stem some of the hits sellers have taken in a market that has weakened in past years. In order to ensure the health of the home market, Zanola says St. Charles County must provide better options for first-time homebuyers and the traditional retirement market, which typically seek smaller dwellings. Assuming a demand for larger lot sizes and larger homes has prohibited construction of such homes in recent years, Zanola said, laying some of the blame on lot sizes and zoning restrictions.

The entire St. Louis market ranked fifth on Forbes magazine’s list of America’s most stable housing markets. Because the area does not see great appreciation rates during periods of tremendous increases in home prices elsewhere in the country, it also does not swing hard the other way during slow periods.

Realtors in St. Charles County have undertaken a campaign to convince the public the situation is not as dire. During a news conference last week, St. Charles County Association of Realtors Chief Executive Officer Mark Stallmann tried to shift attention to the 2007 housing market’s performance in comparison to 2002, which he referred to as the “last normal market.” In the midst of public concern about the health of the housing market, the Realtors association has characterized the period of 2004 through 2006 as years of unusual growth that should not be used to gauge the present situation.

But subprime woes have touched the county market.

Missy Palitzsch, sales and marketing manager for Continental Title in St. Peters, said foreclosures in St. Charles County rose 10 to 15 percent in from 2006 to 2007. That was a greater rise than from 2005 to 2006, Palitzsch said, though she did not cite numbers.

A great part of that problem, she said, was that several people who put all their money into adjustable rate loans got into trouble when rates reset.

“By the third quarter, we’re hoping the correction has run its course,” she said.

Zanola acknowledges there are signs of weakness in the market in 2007, but argues it has stabilized.

“I feel like it’s stable and growing,” he said.

From 2006 to 2007:

Median home price: + 0.1 percent St. Charles County; - 1.4 percent Nationally

Single-family sales: - 9.3 percent St. Charles County; - 12.8 percent Nationally

New home sales: - 8.3 percent St. Charles County; - 26.4 percent Nationally

When you think of an oasis you see in your mind’s eye a fertile, lush green tract in the middle of a desert.  From a home-building perspective, one can take this vision a step further by intimating that an oasis community is a sanctuary where people can envision their lives, a place to call home.

The oasis community is built on a foundation of allure, the way in which it is presented.  First impressions are important.  Like an actual oasis, the development itself has to draw people in first and foremost.  Once these potential home buyers are drawn to an oasis community and can envision their future there, then they decide to look at the various housing products a particular builder has to offer.

As a result, there are some great opportunities in the St. Louis area for builders to serve more specialized markets, rather than the single-family market that has dominated for so many years.  Opportunities exist for homebuilders right now in niche markets that are currently being underserved.  We have become so entrenched in providing for the single family or growing family market, we’ve potentially overlooked the fact that it’s not the only one that exists.

The two largest emerging markets now being underserved in new home construction include young first-time buyers and baby boomers.  These segments have a very different set of demands than traditional single family home buyers.  Homes with two master bedrooms and smaller low maintenance homes are two of the products that fit these two growing demographics of home buyers.

In addition, this concept of the ‘oasis’ community represents a desire for people in all three segments – first-time buyers, growing families and baby boomers – to live together in multi-generational, diverse communities.  In fact, we’re already seeing trends whereby people are looking for opportunities to live in close proximity with immediate and extended family members.

This unique approach to community planning and home building in the St. Louis metro area also takes into account the fact that the first-time buyer and baby boomer markets represent the age targets projected to increase over the course of the next five years.

Overall, buyers now like to envision their future in a home.  They’re more analytical and they pay more attention to the home’s surroundings as part of a bigger community.  For this reason, discounts have become a fading trend as customers demand community amenities and incentives from builders. It’s important that developers consider this and create environments that buyers in these growing segments will want to call home for years to come.

The way a body feels after fifteen or more ten to twelve hour days in a Dodge Neon is a minimal issue compared to way the brain begins to operate.  Thoughts start oozing together, projects start mixing together, and life back at the office seems a million miles away.  When we do get back to the normalcy of life at Zanola, it takes a few days for things to function properly in our brains. Because we have been counting homes and creating columns of construction statuses in our minds, it is quite a feat to sit down at a desk and attempt to research or write without taking frequent breaks to count our pens or analyze the construction status of the two story across the street, out the window.  It seems fortunate for our physical and mental health that this drive happens only three times a year.  However, there is a secret that we will only admit to ourselves.  On the exterior we are moaning and complaining about the aches in our backs and the pain in our brain, but inside we are relishing this time.  Yes, that is the secret. We love it.  We love getting out there and seeing in the physical what the charts, graphs and reports show.  Be it our inner nerds or the innate love of our jobs, we love digging for this information and releasing it over to you.  When the report comes out it is like watching our baby go off to the first day of Kindergarten.  That may be an exaggeration, but you now know the secret: we do love this stuff.

The anxiously awaited November report will include all of the detail you have come to expect.  This will be our third report with audit detail for Lincoln, Warren, Franklin, and Monroe counties.  This means a lot more gravel roads were driven over the past year, a lot more “wild life” (horses and cows) was seen, and a lot more drive-ways were used as turn arounds.  My personal favorite experience was the chicken that had escaped from a nearby farm and was running full speed, in the middle of the road ahead at my rental car. I didn’t hit the chicken and I am sure he has found his way back to his home.  In spite of gravel roads and escaped chickens, we hope that the November Housing and Subdivision Analysis will give you a better sense of the entire market and that you find the information as informative and exciting as we do.

Katie

FOR IMMEDIATE RELEASE

Highway 40 Shutdown Creates New Opportunities for Regional Growth
Residential construction advisor says St. Louis market will find new development oases   

October 11, 2007: ST. LOUIS – The old adage reads, “Where a door closes, a window opens.” One local residential construction analyst figures the reconstruction project of highway 40, while perceived as a headache for motorists and businesses along the construction route, can actually create new opportunities for municipalities to market themselves to builders.

According to Zanola Company President Joe Zanola, cities such as Indianapolis, Kansas City and Detroit are the ones in serious trouble when it comes to the stability of their new home market.  In St. Louis he says there are some great opportunities for builders to serve more specialized markets, rather than the single-family market that has dominated for so many years.

“Opportunities exist for homebuilders right now in niche markets that are currently being underserved,” Zanola said.  “We have become so entrenched in providing for the single family market, we might have forgotten that it’s not the only one there is.”

Young first-time buyers and baby boomers are the two largest emerging markets now being underserved in new home construction.  These segments have a very different set of demands than traditional single family home buyers.  Homes with two master bedrooms and smaller low maintenance homes are two of the products that fit these two growing demographics of home buyers.

Location will also be important for builders to consider, looking into the near and distant future.  Currently, one out of every four homes built in the St. Louis market is in St. Charles County.  The Highway 40 reconstruction should give other regions, such as North St. Louis County, the opportunity to market themselves to developers as candidates for growth.

Zanola feels that the highway shutdown will take people out of their routines and encourage a more energetic and social climate.  As developers begin scanning the map for the next opportunity, Zanola sees areas such as St. Clair County in Illinois shaping up to be solid development oases for homebuilders in the years ahead.

Zanola said buyers now like to envision their future in a home.  They’re more analytical and they pay more attention to the home’s surroundings.  For this reason, he believes discounts as a fading trend as customers demand community amenities and incentives from builders. It’s important that developers consider this and create environments that these buyers will want to call home five, ten and 15 years from now.

Zanola Company specializes in conducting and analyzing research to advise the home builders of greater St. Louis wit trends based on real world data.  President and founder Joe Zanola has more than 30 years of experience in the St. Louis building industry.  For more information, the company can be reached at 314.918.7200.
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The free seminar, which is open to the public, will teach small business owners how to identify site locations and how to recognize their next emerging market.

“Before building a new office or relocating a company in southwestern Illinois, small business owners must learn about latest growth patterns and demographic trends,” said Marty Malone, Vice President of Malone Building Solutions. “Our seminar featuring Joe Zanola will teach business owners how to choose locations that will grow their companies, preventing them from making costly mistakes.”

Zanola will discuss the metro region’s demographic trends, and teach attendees how to recognize their next emerging market. Business owners will learn how to choose site locations based on information larger companies use, as well as how to remain leaders in their fields. Those interested in attending the seminar should RSVP to Marty Malone by calling 618.622.0616.