Southeast Missouri's real estate market sees ups and downs

Thursday, August 23, 2007
Dennis Craft with A-1 Crane Service hoisted a roof truss at a new home construction site in Cape Girardeau. (Fred Lynch)

The Southeast Missouri real estate market is echoing, but not mirroring, the national slump in real estate, experts say.

The difference may be subtle but it is real, they say. Some indicators are strong, with investors willing to gamble on particular niches in the market, such as the Coalter and Felty Investment Group's purchase of 90 properties in south Cape Girardeau, many near Southeast Missouri State University's River Campus.

Jackson is another market where some indicators are good, with 61 permits for new single-family homes issued so far this year, about 25 percent more than were issued in all of 2006.

Other indicators show a weakness, including a decline in the number of new subdivisions being recorded at the Cape Girardeau County Recorder of Deeds' office. The pace of straight property transfers -- the sale of a full parcel with all improvements to another owner -- is also down from the strong pace of 2005.

Overall, said Sheila King, president of the Cape Girardeau Board of Realtors, this year's market is off from 2005 and 2006.

"It is a lot slower than it was last year," King said. "But the media blows it out of proportion here. What happens in California isn't what is going on here, but it is a buyer's market."

One of the differences between today's market and two years ago, said Tom Meyer of Exit Realty in Cape Girardeau, is that certain locations remain hot, while two years ago there was demand across the region.

"There seems to be a real drive for finding housing downtown" in Cape Girardeau "that is compatible with pricing out on the west end. When I have had something downtown on a residential property, it has sold within 30 days."

The biggest squeeze, developer Mike Annis said, is in new residences. Builders are being caught between rising costs for materials and a market that won't accept higher prices. As a result, he said, he's cut back the number of homes he's building by about one-third from the number he would normally build.

"The house prices themselves are not inflated but the cost of building them is," he said. "That in and of itself is a problem. There are a lot more homes, a lot more builders and that is having an effect on the local market."

In Cape Girardeau in 2005, the city issued 128 building permits for new homes and 30 permits for new commercial buildings. The average value of a new home was $159,094 and the average value of the new commercial buildings was just under $700,000.

In 2006, the number of new homes fell to 101, but the average value rose to $208,647. The city issued 25 commercial building permits for new construction, with an average value of just under $800,000.

This year, the city issued 53 permits for new homes in the first six months of the year, and the value of each home rose again, hitting $235,000. The city has issued eight permits for new commercial construction, with an average value of about $600,000.

In Jackson, 2006 was the worst year in this decade for new home construction, with just 48 permits issued, compared to an average of 75 in each of the past five years. The 61 permits issued so far this year put Jackson on a pace to return to that preslump average.

The number of new subdivisions, along with the number of property transfers, recorded at the Cape Girardeau County Recorder of Deeds' office is another good indicator of whether the real estate market is continuing to slump or if it is recovering. Based on those numbers, the market remains sluggish.

Only 19 new subdivisions were recorded in the first six months of the year, one-third the number for all of 2006 or 2005. And the number of new lots in those subdivisions is down even more. The total lots recorded so far is about one-fifth of the number from 2006 and one-sixth the number from 2005.

While new construction is a big factor in gauging how fast the region is growing, the willingness of investors to purchase and rehabilitate existing buildings is a good measure of confidence in the sustainability of the economy.

The Coalter and Felty purchases, which began with single properties, expanded to encompass entire portfolios of landlords who had neglected their properties, said Jason Coalter. He and his partners, his father Ted and Roy Felty, buy residences and remodel them.

"The good thing about the River Campus is that it gives us a cornerstone to draw other investors and property owners to the area," Coalter said.

The group has invested about $2.5 million into the south Cape Girardeau area, and while they have experienced some losses, they see profits in the long-term. "People said I or no one would change downtown. But if you don't change, it will never happen. And if you don't believe in change, it can't happen."

Overall, King said, the weaker sales makes Southeast Missouri a buyer's market. But she cautions purchasers, whether they are looking for a home or making an investment, from thinking that prices are being driven down as dramatically as they are in major cities such as Detroit, Los Angeles or St. Louis.

Prices have fallen about 2 percent over all in the past year in this area, she said.

"If it is priced right it is going to sell," King added.

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