2009 Market Report Update - New Construction Housing Starts in St. Louis (City), Missouri

10 YEAR STATISTICS - ST. LOUIS CITY HOUSING STARTS 2000 TO 2009:

EXPLANATION OF STATISTICAL REPORTS:

The City of St. Louis issues two types of permits for new construction. The "new construction" permits are for new buildings constructed from the ground up. The "rehab" permits are for the complete or gut rehabilitation of existing structures, including such housing starts as condo conversion projects, conversion of multi-family flats to single family, etc. For the purposes of the data, single family includes attached townhomes and multi-family includes condominiums and multi-family projects like apartments.

Commentary:

The graphs tell a remarkable story. The City of St. Louis has experienced a renaissance that has saved some of its great historic buildings by converting local landmarks from industrial, commercial or other institutional uses into residential apartments and condominiums. Here are some of the many problems with drawing broad conclusions based on these statistics:

• No Data on End Use: It is difficult to easily track the end use for any permit. For example, a multi-family permit may relate to a for sale condominium or a for rent apartment or even a unit originally intended as for sale and now rented.
• No Breakdowns Based on Neighborhood: Housing values vary by neighborhood. The permits are not grouped by neighborhood or zip code. As a result, overbuilding in certain sub-markets could depress sales prices and rental rates in that submarket and have limited or no impact on other submarkets.
• No Breakdown on Delivery Dates: The housing permits reflect the dates that the permits were issued and not the dates when the permits were closed out. As a result, the units in large multi-family projects are grouped in a single year even though construction of the units occurred over an 12-24 month period, and the sale of the units occured over multiple years.

However, notwithstanding the limitations in the data, it is pretty clear that some neighborhoods were overbuilt. The overbuilding of certain neighborhoods often had a 4-stage impact on the submarket:

• Reduction in sales transactions.
• Downward pressure on sales prices as developers reduced prices.
• Conversion of projects from for sale projects to projects including rentals.
• Downward pressure on rental rates as residential rental inventory increased.

Again, I would caution from drawing any broad conclusions as this phenomen varied greatly based on the strength of the neighborhoods and submarkets. For example, Lafayette Square saw a decrease in volume, but did not experience any decrease in median or average sales prices and, in fact, saw increases in median and average sales prices in 2008.

If you are a developer, lender, resale owner, or purchaser interested in the purchase, sale or rental of a newly constructed single family home, townhome, condominium or loft in the City of St. Louis and desire experienced representation, contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381.

Data Sources: Home Builders Association of St. Louis and Eastern Missouri and the City of St. Louis Building Division.