There is ongoing national chatter about home prices and how to keep them from rising so fast. Congress has been discussing legislation to accomplish this, while balancing various property rights and other issues. The main idea is to limit investors to a certain number of single family homes - between 100 and 350 is what I am seeing - which is a very small number for a large investor. A key factor is if they are allowed to keep their current inventory, or be forced to sell them. Another idea is to incentivize builders to build more homes and rehab vacant ones, and sell to homeowners vs renting them. A third idea pushed by the White House is to continue deporting immigrants to free up housing (which has gone very wrong). I will address all 3:

I am OK with limiting investors to a relatively small number of single family homes, even though I am a free market kind of guy. I believe this will have little to no effect on home prices, but I understand the popular feeling that it will, and I see the hurt when so many home buyers are constantly beat out by cash offers. It is not the price that wins these bidding wars, it is the firmness of it, as their offers have less or no escape clauses, depending how they handle inspections. Watch for my upcoming emails on two examples on homes I just sold to investor clients (1 buyer, 1 seller) that will outline this in detail.

The stats from recent articles (below) say 10% of homes are owned by investors, and 80% of those 10% by individuals with under 10 homes each. That leaves 2% of the total market that own 10 homes or more. My own analysis in STL 1-2 years ago indicated about 2% of homes here were owned by large investors. However, (1) the big guys are now selling more than buying in many markets around the country, and (2) their target markets tend to be concentrated not only in certain metros (it states Dallas at 9%), but also in certain parts of the metro, like where the price-to-rent ratios are the best, and/or the price fits their desired range. The problem is that these areas are not typically where the most buyer demand is, it would not lower competition where it is most needed, and if made to sell alot of them, that could flood one part of town with too much supply and drive neighborhood prices down too much. That may be why some of the large investors are already selling, to get ahead of this potential flood. Or they see a long term trend and are proactively selling - that is the free market at work. Another idea I read is to place an extra tax on these properties - all rentals, or only large investors, like a hotel tax. That raises funds to incentivize builders, but will likely get passed on to the tenants in higher rent, harming the objective. To summarize, I feel the numbers are too small, and the change too gradual, to make a significant difference in prices by stopping large investor purchases, and could cause harm in neighborhoods with high rental ratios if forced to sell; and taxing will have the wrong effect. Just like the Realtor lawsuit 2 years ago was supposed to lower home prices by lowering Realtor fees. It did not do either.

As for incentivizing builders and rehabbers, that has more teeth. But is costs money, as companies will sell profitably as much as they can, and if prices are keeping buyers out, they are limited in their sales, plus labor (see comment on deportation above) and supply chain issues, no matter how many incentives they get. At least buyers are not losing to competing bids on new homes, but prices are higher for the same size, and the location tends to be further out. How about making those empty office buildings into residences? That helps some, but it takes money (the downtown AT&T tower is requiring public assistance to make that happen, otherwise it's too expensive), and there are only so many people that want to live in a downtown highrise. I believe the biggest potential lies in the areas of town that have higher supply and lower demand. Those prices are more affordable, why won't more buyers look there? Schools, crime, infrastructure decay, perceptions, etc. If a concerted effort can be made by many parties (government, police, corporate partners, homeowners) to upgrade these areas and/or make them safer, that can drive more demand into those areas. But not too fast that it spikes the prices up or displaces current residents. I like the process of rehabbing vacant rundown homes and bringing in new owners, especially in distressed areas, win-win. My friends at Dream Builders 4 Equity are doing a nice job at this in North City: Dream Builders 4 Equity as are others.

On immigration, I believe a major effort by political parties and immigrant organizations need to hammer out a coherent and fair policy that (1) protects our country and citizenry physically and financially, (2) allows a healthy number of people in that can be reasonably absorbed, and (3) are vetted quickly and correctly so they can become full citizens, have a job lined up, pay taxes, and contribute to our wonderful country. If done properly, this can make housing more affordable by creating rules that for the first 3 years, new immigrants (1) pay a surcharge tax that go toward above mentioned costs, (2) can only own one home max and have a minimum occupancy level of 2, (3) volunteer 96 hours a year (8 per month ave) toward building or rehabbing homes, (4) no public assistance without working and paying taxes. There can be short exceptions for emergency refugees or healthcare, or certain family situations. Just throwing out ideas to create a type of capitalistic immigration policy. Since we have way more demand than we can comfortably take in, we can make requirements which will slim down the number coming in, and provide benefits for all of us. Controlled properly, we continue growing our population at the right pace, which we need long term, while benefitting everyone.

Back to the free market thought. Back in 2008-2011, prices became much more affordable, with drops of 15-25% across the nation (about 17% in STL). They then rose back above normal the next 15 years. Eventually they will settle down again. Our country is predicted to drop in population in a decade or two. Too long to wait, yes, but at some point we may have too many homes and we are battling too much supply and not enough demand with prices spiraling down. Then what? Other free market forces nudge high price area dwellers to lower price areas, think West Coast to Midwest, or large metro to small town, or high demand part of metro to low demand part. Or more family members combine in one home. Or friends live together. Buying an outdated home or smaller home vs larger/ updated one. Most of these are being done now to accomodate higher prices.

Not sure I addressed housing affordability as fully as it needs to be, but it is a complex problem, and I believe that too much government intervention can be a bad thing in the long run.

Here are links to 2 recent articles on this issue: March 4 Washington Post Senate moves to boost housing affordability - The Washington Post and March 4 CNBC Big investors exiting for-sale housing market, even before Trump ban

As we head into spring (clock change this weekend!) the current housing inventory dropped 4% from January in the 6 submarkets I track. Here is an update on local, existing home sales activity as of March 4th:

• Manchester had 9 homes available and 23 under contract
• Ballwin had 27 homes available and 48 under contract
• Kirkwood had 34 homes available and 35 under contract
• St Peters had 45 homes available and 68 under contract
• Arnold had 7 homes available and 21 under contract
• Florissant had 98 homes available and 84 under contract

The ratios range from .86 to 3 pending sales for every 1 available, averaging 1.3 pending to every 1 available. My last comparison of these areas in January averaged 1.1 to 1 (and 2.8 to 1 in June 2022) with the available home supply DOWN 23% from December. That shows a continuing drop in inventory and stronger buyer demand, typical for early spring, and hastened by the dropping interest rates (now around 6%), and building spring fever. We are back to a normal seller's market from a slight seller's market in January. Florissant is still a balanced market. Arnold and Manchester firmed up the most to strong seller's markets. Kirkwood is the only market that softened, partly due to an influx of older, smaller condos, and is only a slight seller's market. Kirkwood buyers, now is your time to buy!

Mortgage rates have dropped to 6.0%, adding fuel to the spring market. If they drop further, that is good news for buyers with loans, as their payment drops, but bad news for prices as they will be pushed higher with more competition.

Enjoy your spring!