You don't have to look far these days to find reasons to
worry about the economy. Not when everyone is riveted to a housing crisis —
born out of loose credit and speculative shopping — that's threatening to
push the country into recession.
Stories of unfathomable surges in home prices in Florida and California have
been replaced by tales of woe as homeowners in those far-flung locales
grapple with plunging
demand and wobbly prices.
Simply put, this isn't a good time to be
selling a house. But if you are,
St. Louis is
among the better places to do it.
Consider Holly O'Bert and her husband.
Tired of the noise and congestion
around
their home near Lafayette Square, the couple listed their house in
May in hopes of moving somewhere quieter.
"From watching the news, we were pretty scared," said
O'Bert, 27. "We didn't think we'd sell it for a year."
As it turned out, all it took was three months and a couple of price cuts —
from $190,000 down to $179,500. "We were getting calls all the time. It was
nonstop," said O'Bert, who quickly picked out a replacement home in Webster
Groves.
Does their success mean St. Louis has nothing to fear from a national
housing crisis? Of course not. But it's a reminder that things here aren't
so bad as they are in some parts of the country. And that's not likely to
change.
In the eyes of many financial gurus, this is a region geared — through its
diverse industry base — toward weathering such calamities.
Think of the St. Louis economy as a landscape. Where some parts of the
country have soaring mountain peaks and deep valleys, we have a lot of
gently rolling hills.
In the best of times, we get to watch with envy as people in other parts of
the country bask in the glow of fast money and lightning growth. But in the
worst of times, we usually get to watch those same people struggle and groan
as their economies fall to pieces.
"We'll certainly feel it," said Bob Lewis, president
of Development Strategies, a St. Louis economic development consulting firm.
"But we just didn't get that high. If things slow down, we're probably not
going to slow down as much as others."
For now, the housing sector represents the single biggest threat to the
economy. But even there, we see differences between what's happening here
and the country as a whole.
Nationwide, existing home sales during the first six months of the year were
down 10 percent, according to the National Association of Realtors. During
that same time frame, sales were off 6 percent on the Missouri side of the
metro area, pushing them back to 2003 levels, said Dennis Norman, president
of the St. Louis Association of Realtors.
With more homes hitting the market, that's creating a bit of a glut and a
buyer's market to go with it.
"I don't mean that in the sense that there are fire sales," Norman said.
"But there are some great values."
That's allowing buyers to be pickier than they were even a year ago, said
Tyler Olsen, a real estate agent with Coldwell Banker Gundaker, who has been
working in the city of St. Louis for a dozen years.
His team has sold around $13 million in homes so far this year, putting it
behind last year's pace.
"It's been more choppy than anything. You see good months, then it levels
off again," Olsen said. "We're a little off, but it's not earth-shattering."
It's the same story on the Illinois side of the Mississippi, where
foreclosures are on the rise and residential building activity has slowed.
As in Missouri, industry officials say they aren't too worried.
"We're just in one of those housing cycles, down at the bottom of the
trough, waiting for something to kick us back up," said Al Suguitan,
president of the Greater Gateway Association of Realtors.
That, however, isn't likely to happen anytime soon. At least not if you ask
Larry Swedroe, a principal and director of research at Buckingham Asset
Management Inc. in Clayton.
"This is not a one-year problem," said Swedroe, who sees potential for
long-lasting problems — there are plenty of reasons for the pool of
available homes to grow larger, but few incentives for people to buy. It's a
lethal combination.
"You've got supply increasing and demand collapsing at the same time," he
said. "It doesn't take a genius to figure out that house prices are going
down. The only question is how far."
There also is the question of whether the crisis and all the foreclosures
that come with it will be enough to nudge the country into recession.
If so, it would be an unusual route to take. Recessions typically are caused
by things like rising interest rates or higher energy prices and are
followed by rising foreclosure rates, said Jack Strauss, an economist at St.
Louis University.
"In this case, it might be just the opposite," Strauss said. "That's why
this is worrisome. It's like a double whammy."
Still, Strauss and others say St. Louis won't suffer so much as many other
parts of the country — particularly along the east and west coasts, where a
recession would likely start.
Thus far, however, there is little evidence to suggest a recession is
imminent.
The latest Federal Reserve "beige book" — so named for the color of its
cover — showed that economic activity has continued to expand nationwide,
with both St. Louis and Kansas City characterized as having moderate growth.
Residential construction was soft, but commercial construction remained
strong. Consumer spending was mixed, with a majority of retailers reporting
sales increases. Furniture stores and car dealerships suffered, with new
auto sales during July and half of last month dropping 6 percent.
That's not surprising to Dave Sinclair, who owns five dealerships in the St.
Louis area.
His own lots managed to maintain an even sales pace last month, but he's
heard of some competitors dealing with 25 percent declines.
Still, Sinclair, 79, prefers not to spend a lot of time predicting what each
month is going to bring.
"I'm just hoping to keep an even keel," Sinclair said. "If they come in,
I'll try to sell them a car. If they don't, I'll try to figure out how in
the hell to get them in here."
tbarker@post-dispatch.com | 314-340-8350