PARAMOUNT MORTGAGE - LENDER'S BLOG

St. Louis Real Estate Market in 2009

What kind of market will St. Louis Realtors face as they ramp up for the spring and summer home buying season? In our part two of Elizabeth Weintraub’s 2009 market predictions article for About.com, we continue looking ahead through 2009.

Sellers will shun loan modification programs in favor of short sales – Upside-down home sellers may try to modify their existing loans but those efforts will be met with roadblocks as lenders exhaust other options. The loan modification process will be cumbersome and riddled with conflicting demands within the same banks. Many sellers will turn to a short sale or walk away rather than try to deal directly with banks. Real estate agents who specialize in short sales will see an uptick of business.

Banks will pursue foreclosure options over loan modifications – Banks will find it is easier and less expensive to foreclose than to attempt loan modifications. It is probable that banks will decide it is more profitable for them to foreclose than to rewrite a loan. In that event, banks will prefer to make loans to new borrowers who meet rigid standards. As a result, the number of foreclosures will continue to rise. Many 5/1 ARMs will begin to adjust during 2009 and 2010, causing more foreclosures. But consumers won't see many of those foreclosed homes show up in MLS, (Multiple Listing Service) which will artificially reduce inventory.

Rental rates will increase as demand increases – Surging numbers of home owners will lose their homes in 2009, which will turn former home owners into tenants. Some home owners will walk away from their residences, deciding that home ownership is not worth the aggravation, and return to living in rentals. Because new construction will be at a standstill, existing inventory will serve as shelter. There will be fewer rental homes available than the demand will dictate which will put upward pressure on rental rates. Sellers who are unwilling to take a hit on their sales prices will put their homes on the market as rentals, but that won't provide enough inventory to fulfill demand.

Bank will rent out REOs – In an effort to drive up housing prices, banks will slowly release their REO inventory to the market and price those homes at 5% to 20% under comparable sales. Banks will be under great pressure to cut losses and increase revenue. Although state charters prohibit banks from renting out bank-owned homes, banks will find a way to work around this prohibition. By transferring title from bank-owned homes into holding companies, banks may find a loophole that will allow them to rent out homes instead of putting them on the market. This maneuver will let banks receive income while waiting for the market to turn around.

Link: 2009 Predictions