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Take Five: New head of local Realtors says housing market is taking baby steps toward recovery

This article first appeared in the St. Louis Beacon, Feb. 28, 2013 - The new president of the St. Louis Association of Realtorsbelieves the local housing market will be taking ''baby steps” forward in 2013, as sales and prices continue their slow climb from the bottom.

"We’re just in the new normal,’’ said Donna Zerega, who leads the 8,000-member association. "I think that it’s getting better. We’re moving ahead little by little, and I think 2013 should be better, but don’t expect that it’s going to be roaring. It’s going to be little baby steps, so to speak.’’

Zerega, who is with Prudential Alliance and has been selling real estate for 30 years, said January’s numbers showed small increases in sales and median sales prices over the same period in 2012 for most of the St. Louis side of the metropolitan area, which her organization represents.

A 2010-2012 comparison on the SLAR website also indicated improvement last year:

  • In 2012, 15,224 homes were sold, compared to 13,311 in 2011 and 13,690 in 2010.
  • The average median sales price was $124,000 in 2012. Though that was still below the median of $130,450 in 2010, it was an improvement over the $119,000 median in 2011.

Zerega also noted a recent national survey by Prudential Real Estate that found that 63 percent of Americans have a favorable or somewhat favorable perception of the U.S. residential real estate market. Moreover, younger respondents were more likely to hold a favorable opinion when compared to older respondents. A positive attitude toward home buying is important to a market that needs young buyers.

"I do feel there’s been a shift and that people are at last willing to get out there again,’’ Zerega said.

On a personal level, she said she is seeing movement from clients who have been "contemplators” -- buyers or sellers who have considered but have not bought or sold a property.

"One couple is retired and thinking about downsizing. They had me look at their home numerous times over the last six years to tell them what to do to get ready. For six years, they’ve been considering it, but within the next month I think they’re going to put the house on the market. They’re finally ready,’’ she said. “And another couple -- years have gone by and now they’re actively looking at homes. I feel like that has been a big change.’’

Zerega said projections she has heard from local analysts suggest that improvements in sales and prices will remain modest in 2013 because real estate is so linked to the overall sluggish national economy. She advises clients not to expect a return anytime soon to the market that existed before the housing bubble burst in 2006-2007.

"It’s all tied together,’’ she said. "Don’t expect that we’re going to be back at the old normal.”

Here are more excerpts from the Beacon’s interview with Zerega:

You must get this question all of the time: Where do you think the St. Louis housing market stands in its recovery?

Zerega: Yes, that’s always the question.

This has been the longest period of a downturn, and that makes it very difficult. But we are starting to see a small increase in prices. We’re seeing an upturn in the number of homes being sold, and so the recovery is under way. I think it’s still very fragile. I think it could be affected by things happening -- some downturn in jobs or something happening in the larger picture -- but I think that for now this is the best advance in the market since 2006.

We sold more homes in 2012 over 2011. The increase was about 16 percent, depending on which areas you’re looking at. That’s good.

I think we’ll see more sellers jump on the bandwagon. They’ve been holding off a bit because prices had been declining, and if you didn’t need to move and you didn’t have to sell, then why do it? I think we’ll see more people putting their homes on the market now.

I do think that volume will increase, and I think that people who have been sitting on the sidelines -- both buyers and sellers -- seem to be coming into the marketplace and there is more confidence right now in what is going to happen in the market. I think the words are "cautiously optimistic.”

Right now, we’re low on inventory. Our inventory is down, and the number of listings is down across the board, too.

As sales increase, that should bring prices up a little, and that’s what I think we can expect to see: a rise -- but a very gentle rise -- in prices. Maybe like 2 percent to 4 percent, or something like that.

Recent research at the St. Louis Federal Reserve has shown that the recession hit young families the hardest. Is this a particular concern, since the real estate market depends heavily on young and first-time homebuyers?

Zerega: I think the whole thing is very driven by employment and what’s going on in the greater picture. As the Prudential survey indicates, they still value homeownership. Some people questioned whether or not the young generation would think it was a benefit at all, so I’m really pleased to see that the majority of people still feel like owning a home is definitely a benefit. That’s a good indication that they’re going to try and buy a home. But I think a lot of it is going to depend upon employment.

I also list and sell homes. So I’m thinking back to last week. I had a young couple jump into the market. They looked at five homes and bought one. They were first-time homebuyers. At the end of last year, the last transaction I had, were first-time homebuyers. I think they’re seeing this as being a good time to get into the market if they’re able to. Interest rates are low, as everyone knows, and they’re expected to go a bit higher as the year goes on.  I think they’re trying to take advantage of the low interest rates, the low home prices and get into the market now that they feel comfortable that homes are not going to decrease in value. They’re thinking the market has stabilized enough.

Some analysts are warning that massive student loan debt could have a far-reaching impact on the U.S. economy -- that heavy debt loads could limit the ability of young Americans to buy houses, even if they want to.

Zerega: I do think student loans would be one of the reasons why young people might not have that much money in the bank. It is kind of a catch-22 because people are going to school for more education, and that’s a good thing. To get jobs now you have to have a certain education and skill level. And I think more and more people are going on to graduate school. I don’t know how that’s going to play out, but I think that as far as Realtors are concerned, we can’t affect student loan debt per se, so we’re trying to keep it rational in terms of the lending part of it.

As an association, we’ve looked at mortgage regulation, and we think that it would be really difficult to insist upon every buyer having 20 percent down.

We support programs/efforts that lead to sustainable ownership of homes, and we would never advocate for a measure that puts people in a situation that causes more problems than solutions. So less than 20 percent down might not be a good solution for some borrowers, if it puts them into an unsustainable situation.

We’ve really been working on the mortgage interest deduction and trying to keep that in place. It certainly helps from a tax perspective, and it also encourages people to invest in the housing market. We have had discussions about the mortgage interest deduction for second homes, and it seems like from one perspective, why don’t we just give that up. After all, it’s a second home. But from another perspective, there are whole communities of these types of homes where if people lost that ability to deduct the interest, they might not be so inclined to buy a second home. And what’s going to happen to those communities? It’s very complicated.

To learn more:

Watch video presentations from the economic forecast breakfast held by the St. Louis Association of Realtors in January:

* St. Louis Federal Reserve economist Bill Emmons offers historical perspective on the housing bust and recent trends

* Joe Reagan, president of the St. Louis Regional Chamber (formerly the RCGA), talks about the region’s economic future

Foreclosures have been slowing, but they have had a long-term impact on housing prices and the market. The pendulum regarding lending requirements has swung away from easy paperwork, including the now notorious “no-doc” loans to a much more conservative approach. How will that affect recovery?

Zerega: Foreclosures affect neighborhoods and the whole marketplace. You know, I don’t think anyone I represented ever got a mortgage just by signing the documents. I really felt like the people who got the mortgages were qualified, and as far as I know, none I have dealt with have gone into foreclosure. But there are many of them out there.

I’ve been a Realtor since 1984. One thing I remember was a lender coming out with a rate sheet. It said, "Wow. Look at our great new rates: 14.5 percent with only 5 points.’’ And you know, we functioned in that market. Were there a lot of people who were excluded? I guess so. I also remember the day: "Oh, my gosh. Look at this. Interest rates are below 10 percent. Oh, my gosh. Look at this. Interest rates are below 8 percent.’’ So, historically, we’ve slugged through all of that.

I will say that the housing affordability index is at an all-time high: 198, with 100 being the point where the average family can buy a median-priced home. On paper, we should be doing pretty well. The interest rates have a lot to do with that. But then there are these people out there who don’t have a job and they’re not going to be able to buy anything, no matter what.

What do you tell people who are considering buying a house now?

Zerega: It’s still going to be a good investment over time. It’s a benefit to own a home. You would have been paying rent. You have no control over rent increases. You have no control over how the property is maintained or taken care of. Or, what your landlord wants to do. You have no freedom to do what you want; you can’t change it or make it more appealing.

Hopefully, this is the beginning of a better time period. And I think that we all have to keep in mind that for a while people were thinking that homes were a great place to put money and get rich -- investing in homes was up there with the stock market.

To me the hardest time period during this whole thing was at the beginning of the downturn when sellers just didn’t get it. They just didn’t understand what was going on. Of course, in the very beginning no one understood what was going on. But then it took a while for sellers to understand that they were not going to be able to just wish it -- they could not just wish they could get what they paid for a property or for an increase in value, the way it used to be.

Mary Delach Leonard is a veteran journalist who joined the St. Louis Beacon staff in April 2008 after a 17-year career at the St. Louis Post-Dispatch, where she was a reporter and an editor in the features section. Her work has been cited for awards by the Missouri Associated Press Managing Editors, the Missouri Press Association and the Illinois Press Association. In 2010, the Bar Association of Metropolitan St. Louis honored her with a Spirit of Justice Award in recognition of her work on the housing crisis. Leonard began her newspaper career at the Belleville News-Democrat after earning a degree in mass communications from Southern Illinois University-Edwardsville, where she now serves as an adjunct faculty member. She is partial to pomeranians and Cardinals.