Missouri Real Estate Market Trends & Analysis


The Missouri real estate market has developed a reputation as one of the most affordable markets in the country.  With a median home value well below the national average, it is actually a lot cheaper to own real estate in Missouri than to rent on an annual basis.  In response to the latest demand for housing, active listings have increased steadily since the first quarter of 2019. While inventory remains tight, recent trends suggest easement is on the horizon, which will help balance the market and make it easier for everyone to participate. 

It is worth noting, however, that Missouri’s relative affordability has awarded real estate investors more opportunities across the state. At this point in the year, it’s entirely possible to find and acquire affordable properties that are expected to appreciate, at least for the foreseeable future.

The Top Missouri Real Estate Markets


While the best real estate market in Missouri is up for debate, here’s a list of the cities investors may want to pay special considerations to:

Missouri Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Title Companies, Lenders, Real Estate Agents, Attorneys
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Non-Judicial
Process Period: 2 - 3 months
Notice of Sale: Trustee
Redemption Period: Up to 12 Months

Taxes

Income Tax: 1.5% - 6%
Corporate Tax: 6.25%
Sales Tax: 4.23%
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 0.91%
Property Taxes by County: http://www.tax-rates.org/missouri/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,387.00
Transfer Fee: No Fees
Origination Fee: $1,749.00

Overview


  • Median Home Value: $162,980

  • 1-Year Appreciation Rate: +4.1%

  • Median Home Value (1-Year Forecast): +2.7%

  • Median Rent Price: $1,042

  • Price-To-Rent Ratio: 13.03

  • Average Days On Market: 60

  • Unemployment Rate: 3.1% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 6,126,452 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $51,542 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 12.56%

  • Foreclosure Rate: 1 in every 2,722 (3.6%)

Median Home Prices In Missouri


At $162,980, the median home value in Missouri is well below the national average. However, that’s not to say the local housing market hasn’t had an impressive run. As recently as the first quarter of 2012 (during the depths of The Great Recession), Missouri’s median home value bottomed out around $118,000. In the time since then, several positive indicators helped local values increase for the better part of a decade. For eight consecutive years, in fact, real estate in Missouri has appreciated. The state’s median home value has increased approximately 38.1% since prices were at their lowest point of 2012 (the first quarter).

In that time, the median home value in the United States followed a similar trajectory. Home values across the U.S. were at their lowest point in the first quarter of 2012. In January of that year, the median home value across the entire country was around $160,000. Of course, the recovery took hold soon after, and home values increased year-over-year for the better part of a decade. After appreciating somewhere in the neighborhood of 52.5% over the last eight years, the median home value in the United States is now about $244,054. Over the last decade, in fact (2010 to 2019), the rise in home values saw the combined value of every residential home in the United States increase 51.0% from the start of the decade.

While real estate in Missouri has been outpaced by national trends, it’s worth pointing out that the “Show-Me” state exhibited a higher appreciation rate in recent history. While the median home value in the United States managed to increase by as much as 3.7% in the last year (November 2018 to December 2019), the average price in Missouri jumped 4.1%. The difference is less of an indictment on the national market, however, and more suggestive of Missouri’s relative affordability. If for nothing else, prices across the country don’t have as much room for growth as Missouri.

Moving forward, it’s safe to assume appreciation rates in Missouri will mirror their national counterparts, even closer than in recent history. The Zillow Home Value Index is expecting the national average to slightly outpace appreciation rates in Missouri—2.8% and 2.7%, respectively. As a result, local real estate will remain relatively affordable, at least when being compared to national figures.

Median Rent Prices In Missouri


Rental rates, for the most part, tend to share a direct correlation with home prices; when one goes up, the other does, too. Rising home prices may prevent many buyers from participating in the market, relegating them to tenants instead of homeowners. The more people that are priced out of buying, the more competition there will be for rental housing, which would explain the price correlation. That said, the Missouri real estate market has seen rental prices increase in the wake of historic appreciation for the better part of a decade.

While home values in Missouri have increased 38.1% since the first part of 2012, rental listing prices have jumped 10.8% over the same period of time. As a result, the median rent in Missouri is now $1,042. While rental increases in excess of 10.0% over an eight year period are encouraging to landlords, the rise in Missouri rental rates hasn’t kept pace with national trends. To put things into perspective, the median rent price in the United States has increased 25.9% since the first quarter of 2012. Today, the median rent in the United States is $1,650.

With a price-to-rent ratio of 13.03, it is still cheaper to own a home in the Missouri real estate market. However, at that point, Missouri’s price-to-rent ratio is relatively high for “affordable” markets. Consequently, more people may be inclined to rent, despite housing affordability.

Missouri Foreclosure Trends & Statistics


Missouri has a relatively average foreclosure rate, compared to the rest of the country. According to the most recent numbers presented by RealtyTrac—one of the country’s most trusted sources for distressed property information—approximately one in every 2,722 homes in Missouri is in some stage of distress (pre-foreclosure, bank-owned or auction); that translates to 3.6% foreclosure rate. To put things into perspective, the foreclosure rate for the entire country is somewhere in the neighborhood of 3.9%.

It is worth noting, however, that while Missouri appears to have an average distribution of distressed homes, the number of properties that have received a foreclosure filing in Missouri has increased dramatically in recent history. As recently as December, in fact, “the number of properties that received a foreclosure filing in MO was 81% higher than the previous month and 40% higher than the same time last year,” according to RealtyTrac.

In the wake of recent increases to the state’s foreclosure rate, some cities have found themselves with higher distributions of distressed homes than others. Five counties, in particular, now have higher distributions of distressed homes than anywhere else in Missouri:

  • Sullivan (1 in every 1,114)

  • Jasper (1 in every 1,405)

  • Saint Louis (1 in every 1,427)

  • Buchanan (1 in every 1,842)

  • Mississippi (1 in every 1,906)


Tax Lien Investing


  • Tax Lien or Deed: Tax Lien State with weird right to bid on property purchase

  • Interest Rate: Tax Lien State with weird right to bid on property purchase

  • Redemption Period:2 years on 1st year, 1 year on second year, 90 days on third year

Real Estate Investing In Missouri


Missouri real estate investors have made a habit out of dealing in distressed properties. If for nothing else, it is a market’s distressed assets that simultaneously combine attractive profit margins with relatively low acquisition costs. Whether the result of the seller’s motivation or the property itself, attractive profit margins are directly correlated to investor success. As a result, distressed assets have become a commodity across the country.

Real estate investors in Missouri, in particular, have begun paying special considerations to local auctions. The most recent data presented by RealtyTrac suggests the majority of Missouri’s distressed inventory is made up of auction homes. Of the homes identified as distressed, 53.3% are either up for auction, or will be at some point in the near future. Therefore, investors looking to stack the deck in their favor and secure a deal with good profit margins should visit the place where distressed assets are the most abundant: local auctions. Once there, investors will have the opportunity to bid on homes and potentially walk away from the process with a new asset purchased under market value.

Bank-owned homes make up the remaining distressed inventory in Missouri. Constituting 47.0% of Missouri’s distressed market, bank-owned homes aren’t as abundant as their auction counterparts, but are nonetheless a viable source of deals with attractive profit margins.

As their names suggest, bank-owned homes are real estate assets in the possession of banks (or other financial institutions). In the event a home doesn’t sell at auction, it will remain on the books of the loan originator. Typically a bank or traditional financial institution, most loan originators would rather sell the distressed property instead of holding onto it. Non-performing assets (homes that aren’t generating revenue in the form of a mortgage) actually cost their owners money, which means many banks may be willing to part ways with the home, if the price is right.

Of course, knowing where to find deals with attractive profit margins is one thing; knowing what to do with them once they are acquired is an entirely different thing. Missouri real estate investors need to not only know where to find good deals, but they also need to know which exit strategies to execute, which begs the question: What should real estate investors in Missouri do with the homes once they are acquired? Should they rehab and flip them? Should they look into wholesaling? Should they build a long-term, passive income portfolio?

Fortunately, there’s a viable investment strategy for any market, and Missouri is no exception. Thanks, largely in part, to the state’s relative affordability, investors have the option of looking into today’s three most popular investment strategies: rehabbing, wholesaling and rental properties. That said, one strategy currently looks more attractive than all of the others: long-term rental property investing. That’s not to say there are no profits to be made rehabbing and flipping houses, but instead that profit margins are slimmer after nearly a decade’s worth of appreciation. There is simply less room for profits in today’s market than there were about 10 years ago.

Rental property investors, on the other hand, may offset today’s higher acquisition costs with years of cash flow. Let’s say, for example, buyers were to us a 30-year fixed-rate conventional mortgage with a 3.835% interest rate (the average rate for a 30-year fixed-rate loan in Missouri) to buy a home for $162,980 (the median home value in Missouri). In the event they are able to put down $33,000 (about 20%), monthly mortgage payments would come out to be somewhere around $945. Subsequently, the median rent price in Missouri is $1,042. While the difference is marginal at best, it’s fair to assume most properties in Missouri are cash flowing, which means investors have the potential to pay down their mortgages with other people’s money. The best rental markets in Missouri, however, have the potential to return even more.

Missouri Housing Market Predictions


The Missouri real estate market has followed the same trajectory as the rest of the country. For the better part of a decade, in fact, real estate in Missouri has exhibited many of the same characteristics as its national counterpart. Price increases, confidence in the market and several other indicators are in line with national trends, but what does that mean moving forward? What can Missouri real estate investors, homeowners and prospective buyers expect for the foreseeable future?

  • Inventory constraints will persist: Nearly every state across the country has been held back from realizing its true potential because of a distinct lack of inventory. Very few places have enough inventory to satiate demand, and Missouri is no exception. In fact, it looks like Missouri’s inventory shortage will continue, at least for the foreseeable future. As a result, prices should continue to rise in the face of competition. And while help is on the way, it appears as if it’s going to take some time before enough homes are brought to the market. In the meantime, completion and the cost of houses in Missouri will keep rising, albeit at a slightly tempered pace than recent history.

  • Affordability could attract more buyers: With a median home value well below the national average, real estate in Missouri holds significant appeal for those in search of more affordable housing. Consequently, more people may migrate to Missouri in search of a home they can afford. It may become commonplace for homeowners to relocate from expensive states to Missouri. The average home size in Missouri, for example, could attract buyers looking to upgrade their living situation.

  • Millennials will make up the majority of purchases: As a relatively affordable market, Missouri has drawn the attention of Millennial buyers from across the country. In 2020, more Millennials may turn their attention to Missouri as they look to escape the higher prices of more expensive cities. The influx of Millennial buyers could be significant for Missouri, as “younger” generations are expected to make up the majority of buyers across the country.

Missouri Real Estate Market Summary


The Missouri real estate market has managed to follow a similar trajectory as the national market, but on a smaller scale. While real estate in Missouri has, in fact, appreciated for eight consecutive years, local home values are still well below the national average. That’s not to say Missouri isn’t an incredibly hot market, however. All things considered, Missouri is currently supported by strong fundamentals and increasing demand. In the near term, it’s safe to assume the state will see an uptick in activity, which should do nothing less than support everyone involved in the market: buyers, sellers and—especially—investors.

Sources:



https://www.census.gov/quickfacts/fact/table/MO/PST045218
https://www.bls.gov/regions/mountain-plains/missouri.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/mo/
https://www.realtytrac.com/statsandtrends/mo/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/mo/home-values/
https://www.zillow.com/home-values/
https://higherlogicdownload.s3.amazonaws.com/THELANDING/b0600478-651c-4642-af71-0ca877083c44/UploadedImages/2020-forms/December_2019_Year-End_Market_Summary.pdf
https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment/missouri

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