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. While the pandemic has certainly impeded the desired number of homes from entering the market, recent trends suggest easement is on the horizon. Not unlike everywhere else, once the Missouri real estate market can add to its available inventory, everyone participating in the market should benefit. 

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: $173,541

  • 1-Year Appreciation Rate: +6.9%

  • Median Home Value (1-Year Forecast): +7.9%

  • Median Rent Price: $1,042

  • Price-To-Rent Ratio: 13.87

  • Average Days On Market: 60

  • Unemployment Rate: 4.6% (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 12,447 (0.8%)

Missouri Median Home Prices


At $173,541, 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 by approximately 47.0% 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 64.1% over the last eight years, the median home value in the United States is now about $262,604.

While real estate in Missouri has been outpaced by national trends over the last decade, 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 6.6% in the last year (September 2019 to October 2020), the average price in Missouri jumped 6.9%. 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.

Prices in Missouri benefited greatly from demand. As one of the most affordable states in the country, more people moved to Missouri in an attempt to seek a lower cost of living. Millennials, in particular, were more inclined to want to move to Missouri so that they may afford to buy a home. The resulting competition may account for the modest appreciation advantage Missouri had over the national average.

Moving forward, home values in Missouri may increase as much as 7.9% over the next 12 months (on par with the rest of the country). The increase, however, won't be due solely to demand. Several factors carrying over from the pandemic are expected to increase prices for the foreseeable future. Low interest rates, a lack of inventory, and improving unemployment should all prop up the local housing market, and its prices.

Missouri Median Rent Prices


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 by 47.0% 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 over 10.0% over an eight-year period are encouraging to landlords, the rise in Missouri rental rates haven’t kept pace with national trends. To put things into perspective, the median rent price in the United States has increased by 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 13.87, 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. Not only that, but the lack of available inventory will actually force people to rent for the foreseeable future.

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 12,447 homes in Missouri is in some stage of distress (pre-foreclosure, bank-owned, or auction); that translates to 0.8% foreclosure rate. To put things into perspective, the foreclosure rate for the entire country is also somewhere in the neighborhood of 0.8%.

Despite a low statewide level, 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:

  • Barton (1 in every 2,801)

  • Perry (1 in every 2,898)

  • Dent (1 in every 3,659)

  • Cape Girardeau (1 in every 4,168)

  • Scott (1 in every 4,291)


While the Missouri real estate market boasts an average foreclosure rate, it's safe to assume filings will increase soon. The financial stress placed on the shoulders of homeowners in the wake of the pandemic will almost certainly lead to more foreclosures. While the extent of new foreclosures is unknown, there will most likely be more on the market within the next year. Therefore, investors who position themselves well now could simultaneously help distressed homeowners avoid filing for bankruptcy and find their next deal.

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 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, 82.9% are either up for auction, or will be at some point shortly. 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.

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.

In addition to lower profit margins across the state, today's investors may take advantage of historically low interest rates. Since the pandemic took hold, in fact, the Fed has dropped interest rates to their lowest point ever. At less than 3.0%, it's never been cheaper to borrow institutional money. More importantly, lower interest rates reduce monthly obligations for investors and increase cash flow from rental properties.

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 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. Fortunately, builders have been able to get back to work, which will help, but real progress won't be made until at least a year down the road.

  • 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 actually 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, 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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