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 much cheaper to own real estate in Missouri than to rent on an annual basis. It is worth noting, however, that inventory has failed to keep up with demand throughout the pandemic. New builds have been confronted with obstacles created by COVID-19, and owners have refused to sell in fear of becoming a buyer in a seller's market. As a result, Missouri's relatively low home values have been rising for the better part of two years. In response, the Missouri real estate investing community has had to reevaluate its most viable exit strategies. 

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

Missouri Housing Market Overview


  • Median Home Value: $225,067

  • 1-Year Appreciation Rate: +16.2%

  • Active Listings: 6,361

  • Homes Sold: 7,188

  • Median Days On Market: 28

  • Median Selling Price: $238,500

  • Median Rent Price: $976

  • Price-To-Rent Ratio: 21.77

  • Unemployment Rate: 3.6% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 6,168,187 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $57,290 (latest estimate by the U.S. Census Bureau)

  • Foreclosure Rate: One in every 4,967 homes

Missouri Median Home Prices


At $225,067, 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 at around $118,000. In the time since then, several positive indicators helped local values increase. In fact, for ten consecutive years, real estate in Missouri has done nothing but appreciate. The state’s median home value has increased by approximately 82.9% since the second quarter of 2012.

The fastest rate of appreciation in the Missouri real estate market has occurred over the last two years. While prices have increased for ten years straight, the new environment created by the pandemic has elevated home values at a brisk pace. The lack of available inventory when demand is firing on all cylinders has catalyzed historic levels of competition. Supply and demand constraints brought about by COVID-19 have driven Missouri home values up by as much as 31.6% in as little as two years. In the last year alone, the median home value in Missouri has jumped 16.2%.

For some perspective, the median home value in the United States has followed a similar trajectory. Home values across the U.S. were at their lowest point in the first part of 2012. Ten years ago, 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 108.5% over the last ten years, the median home value in the United States is now about $344,141. In the two years following the onset of the pandemic, the median home value in the U.S. has increased by 39.8%. Finally, over the last year, the median home value in the United States has increased by 20.9%

Either way you look at it, regardless of the timeframe in the last decade, the Missouri real estate market has failed to keep pace with national appreciation trends. The same Achilles heel holding the market back in recent history may be a blessing in disguise. If for nothing else, home prices have grown exorbitantly expensive in most of the country. On the other hand, Missouri has the benefit of creating more demand through relatively affordable home values.

As one of the most affordable states in the country, the Missouri real estate market has benefitted from the latest work-from-home trends brought about by the pandemic. Millennials, in particular, wanted to move to Missouri over the last two years to take advantage of more affordable housing.

Moving forward, home values in Missouri should continue to increase. The jump, however, won't be due solely to demand. Several factors carrying over from the pandemic are expected to raise prices for the foreseeable future. Low interest rates, a lack of inventory, and improving unemployment should prop up the local housing market and its prices.

Missouri Median Rent Prices


Appreciation rates in the Missouri real estate market have trickled into the rental market. As local home prices rise, more people are priced out of the market and forced to rent. Even those who can afford to buy at today's prices may not be able to beat out the competition. As a result, Missouri's rental market has seen an influx in demand.

With more demand, the Missouri rental market has seen rents increase approximately 7.4% over the last year. Today, the median rent in Missouri is $976. At its current level, renters can expect to pay the following prices for accommodations:

  • 1-Bedroom: $783

  • 2-Bedroom: $966


For context, the national average rent price is about $1,326, or 35.8% more than the average renter pays in the Missouri housing market. The difference is significant and may continue to widen for the foreseeable future. Despite expensive rents everywhere, landlords will be able to justify rent increases as long as inventory is tight. If that's the case, the Missouri real estate investing community still has time to get into the long-term rental space.

Missouri Foreclosure Trends & Statistics


According to ATTOM Data Solutions’ February 2022 U.S. Foreclosure Market Report, 25,833 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions). The same report acknowledges that foreclosures are up 1.0% from the previous month and 129.0% yearly.

“February foreclosure activity looks a lot like what we can expect to see for at least the next six months – double-digit month-over-month growth and triple-digit year-over-year increases,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “This isn’t an indication of economic turmoil, or of weakness in the housing market; it’s simply the gradual return to normal levels of foreclosure activity after two years of artificially low numbers due to government and industry efforts to protect financially impacted homeowners from defaulting.”

Foreclosures are rising across the country, and Missouri won't prove to be the exception. As recently as the first quarter of this year, there were 561 foreclosures in a market consisting of 2,786,621 housing units. At that rate, one in every 4,967 homes was considered distressed in the Missouri real estate market. Investors interested in the distressed property market should pay special consideration to the Missouri counties with the most foreclosures per housing unit:

  • Barton

  • Webster

  • Shelby

  • Lincoln

  • Scott


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 the second year, 90 days on the third year

Missouri Real Estate Investing


Missouri real estate investors need to know where to find good deals and 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. 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, those profit margins are slimmer after nearly a decade’s worth of appreciation. There is less room for profits in today’s market than there was about ten years ago.

In addition to lower profit margins across the state, today's investors may take advantage of historically low interest rates. While up year to date, rates still offer some attractive opportunities. Now over five percent, rates still provide room to borrow money at a reasonable price. More importantly, lower interest rates reduce investors' monthly obligations and increase rental properties' cash flow.

Finally, demand for rental units will remain high. The state's low inventory suggests that even the people who want to buy will be forced to rent. As a result, vacancies will pose less of a threat to landlords and increase the odds of finding tenants.

Missouri Housing Market Predictions


The Missouri real estate market has followed the same trajectory as the rest of the country. For ten years, 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 align 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. 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. Fortunately, builders have been able to get back to work, and interest rates are rising, which will help, but real progress won't be made anytime soon.

  • 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.

  • Residents will move to the suburbs: The pandemic has allowed a large population of people to work from home, eliminating the need to live close to work. As a result, more people have started trading expensive apartments in the city for roomier, more affordable alternatives in the suburbs. This trend is expected to continue and could lead to an increase in suburban home values across the entire state. At the same time, the drop in demand could mean prices in large cities have reigned back in.

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 appreciated for ten consecutive years, local home values are still well below the national average. That’s not to say Missouri isn’t a scorching market, however. Missouri is currently supported by solid 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.zillow.com/mo/home-values/
https://www.zillow.com/home-values/
https://www.apartmentlist.com/research/category/data-rent-estimates
https://www.bls.gov/regions/mountain-plains/missouri.htm#eag
https://www.census.gov/quickfacts/fact/table/MO/PST045221
https://www.attomdata.com/news/market-trends/foreclosures/attom-january-2022-u-s-foreclosure-market-report/
https://www.sofi.com/learn/content/foreclosure-rates-for-50-states/#:~:text=Massachusetts,one%20in%20every%207%2C747%20homes.
https://higherlogicdownload.s3.amazonaws.com/THELANDING/b0600478-651c-4642-af71-0ca877083c44/UploadedImages/2022/April-Market-Summary.pdf

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