Nationwide real-estate slump trickling down to Southeast Missouri, many say

Bruce Domazlicky has studied real estate trends since 1997 and has noticed a problem in the market unseen since the 1980s.

But the current situation at the national and local level does not come at a surprise to the Southeast Missouri State University economics professor.

"Together Cape Girardeau and Jackson are in a slowdown," said Domazlicky, economics professor and director of the Center for Economic and Business Research at Southeast. "For several years nationally we've been building homes faster than we should have, particularly in the past five years. Eventually, it had to catch up."

He said the nationwide real-estate slowdown is having a trickle-down effect on home sales in Southeast Missouri.

"While the nationwide picture shows a troubled market, it hasn't gotten out of hand here," Domazlicky said. "The market has yet to get overheated in this area."

The National Association of Realtors reported that existing nationwide sales, including single-family homes, increased 2 percent to a seasonally adjusted annual rate of 4.99 million units in May, but 15.9 percent below the 5.93 million-unit pace in May 2007.

Figures from Cape Girardeau and Jackson indicate a significant slowdown in new home construction.

In Cape Girardeau, the city has issued 24 building permits for single-family homes since Jan. 1. That compares to 53 for the first six months in 2007.

In Jackson, 19 single-family home building permits have been issued so far in 2008. That's a decline from 49 issued during the first half of 2007.

Tim Morgan, director of the Cape Girardeau Inspections and Permits office, also saw the downturn in the market.

"Even though we've heard some of the Realtors make comments about how the national market trends haven't affected them, the truth is that is has," Morgan said. "There has been a spillover here and most other places. But if a person compares us to other markets, he or she would notice that we are faring better."

Morgan said the economy is not the sole reason fewer building permits have been issued for single-family homes in 2008. He pointed to the ice storm and excessive rainfall as reasons for fewer construction projects in the area.

High-priced homes

Vicki Stroud of ERA Cape Realty, president of the Cape Girardeau Board of Realtors, said homes that are faring best in the area are priced at less than $250,000. Stroud said homes listed at more than $350,000 are not selling as well because people who could afford those house payments are not moving into the area. "But that could change as more physicians move into the area to work in our expanding health-care industry," she said.

Gary Turner, a broker with 360 Land Development, said too many homes have been overpriced, leading to the current housing crisis.

"Not too many years ago, it seemed like everyone was buying and selling a home," Turner said. "But the pie is only so big no matter how many pieces you cut [it] into. Now, people are more cautious about what they can afford."

360 Land Development combines 16 subdivisions and hundreds of home lots in the area. The partnership between Mathes Land Development, Midwest Construction and Holloway Carpet One has a goal of building 135 to 140 homes in 2008.

Turner said he expects developments to fare well because he believes the prognosis is better than reported in the media.

"I don't subscribe to all the doom and gloom that's advertised in the papers and on television," Turner said. "Our prognosis is better than what people have experienced in other parts of the country."

Another land development that will invest millions of dollars in construction is Walden Park, a project that will include 1,500- and 2,220-square-foot homes. The home-building phase has just begun.

Managing partner Gerry Jones said that even though the market may be slow, he believes homes in the $50 million development will sell because of the clientele expected to live there. Homes range from $125,000 to $500,000.

"What will happen two to five years from now is impossible to guess, but I believe that we will continue to have a very steady long-term market," Jones said. "We will build according to market demand during that time."

Increase in foreclosures

Through June, 343,159 Americans lost their homes to foreclosures, an increase of 136 percent compared to the same period in 2007, according to a July 10 report from RealtyTrac, an online marketer of foreclosed properties. Missouri ranked 16th for the rate of foreclosure activity nationally.

According to RealtyTrac, 24 foreclosed properties in Cape Girardeau County have been listed for sale since June 26. Home prices range from $15,000 to $409,900. Ten of the homes in the county are priced at more than $100,000.

At Crown Title and Escrow Co. in Jackson, closing agent Lonna Haimes said that everything is the same as usual for her business.

But at Southeast Missouri Title Co., the number of foreclosure transactions has increased by 5 percent each year since 2006.

"As far as the housing market in general, our revenue from residential transactions was down in 2007, but we are seeing an increase in the first half of 2008," said manager Tracey Sutton.

Syndicated radio talk show host and financial expert Dave Ramsey -- whose workshops are taught nationwide, including in Cape Girardeau -- agreed.

Ramsey said a problem is that Americans have developed a short-term mentality when it comes to purchasing items.

"People aren't willing to wait until they can afford to buy things," he said. "This crossed over into the housing market. I love real estate and I want people to own a home, but they need to be ready to buy first."

Market repercussions

The Washington, D.C.-based Center for Economic and Policy Research released a study Wednesday that projects the downturn in the housing sector could, by 2009, eliminate the majority of all wealth that American families have accumulated since the early 1990s.

The study concluded that "decisions homeowners have made about saving and consumption, which were based on perceptions of their own wealth, will not be easily reversed now that this wealth is diminished."

The most significant effect, the study found, will be felt by homeowners in their 50s and 60s as they approach retirement age without more assets than their home.

"For many, if not most, Americans, their main source of wealth consists of their homes," Southeast's Domazlicky said. "So a substantial decline in the value of their homes is a reduction in their wealth."

He said the effect on homeowners is another matter. He said losses in wealth tend to cause individuals to reduce their spending by 2 to 4 percent.

"The flip side, of course, is that people buying homes now will pay less and so they will benefit from the lower prices, so it is a two-way street in that sense," he said. "So the numbers do paint a bleak picture for people's wealth, but for most Americans they are just paper losses. As long as they don't have to sell their homes, the effects at present will probably be minimal."

bblackwell@semissourian.com

335-6611, extension 137

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