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Welcome to the Deerwood Realty Show. I'm John Schink, founder and managing broker of Deerwood Realty in St. Louis, Missouri. You know, I've put up with high house prices for a long time now. It's been years, and I'm just to the point where it's driving me nuts. I'm so sick of it, and I'm going to give you three examples today of what I'm seeing in the market right now that just make me sick to my stomach. It's not enjoyable.

Now, look, if you're somebody that owns property and you bought a house in, say, 2015 and then refinanced at 2.3%, this discussion isn't really for you. This is more for people that are buying houses right now in the market. I just want to say, at least one person gets the situation. I feel very bad for what's going on, so I'm going to go over these examples of what I'm seeing in the marketplace and what I've personally dealt with with my own buyers, just to get a sense of how stupid this really is.

The first example I have is a house in Maplewood, Missouri. Maplewood is a nice suburb of St. Louis, with houses typically built in the 1920s. There are some really nice parts of Maplewood, and some parts that aren't that great. I showed a house to one of my buyers that was listed for $440,000. That's not bad for Maplewood, if it's a decent house. But it was severely dated. When we went to see it, we were just disgusted. The house had been updated in the mid-90s, and the kitchen and everything were all dated. You go to the back room, and there's this weird transition to a new addition. They didn't think to add a door to the backyard, so if you have a pet, you have to go around the front to get to the backyard. The garage is on the side of the house but not attached, so you have to walk around to get in. The basement is less than 5 feet high, and my buyers are 6 feet tall, so they'd hit their heads on everything. The washer and dryer are in the basement. It was just awful. The hardwood floors hadn't been redone, and there was a large rug that had been there for years, creating a lighter area on the floor. There was a closet with a radiator for heat, and you had to leave the closet open for the radiator to work. They wanted $440,000 for this house. As we left, I told my buyers that I thought it would go for over asking, and they were sick. It actually did go for $115,000 over the asking price. This is at a 7.2% 30-year fixed rate mortgage. Five years ago, this house would have struggled to sell for $300,000.

Example two: a house in University City. University City is a cool place, close to Washington University and the Delmar Divide, which has a fascinating history. Houses go for a good amount of money there. One of my buyers saw the pictures online and had to go. When we got there, the kitchen was about 8 by 8 feet. The basement had water leaking in, and there were no updates since the house was built. There was no bathroom off the master suite, and it was a small house. This house would have sold for $350,000 about four years ago, which would have been high. It was listed at $550,000, and someone paid $50,000 over asking last week. This is July, not the height of the flu season that caused prices to go crazy, and not at 2.5% 30-year fixed mortgage rates. This is right now.

Finally, this is the one that really caused me to be just sick: a house in Webster Groves. Webster Groves is a nice part of town with no issues in general. The people selling this house had bought it in 2021 for $375,000. It's about 1,000 square feet. They had outbid others, with the original asking price being $325,000 in 2021. House prices have gone up in St. Louis every year since 2015. This house was listed for half a million dollars. The sellers did a $6,000 basement tile drain system upgrade and expected a $125,000 return. They posted an update sheet online, listing updates that had been done by the previous owners. They did nothing except ask for a stupid amount of money. The agents listed updates like the HVAC and roof, which were done before they bought it. It was just gross.

I know that in some places like Florida and Austin, Texas, the market has changed and gone down. I wanted to go over a chart from Lance Lambert, co-founder of Residential Club, using Zillow home price data for America's 50 largest metro housing markets. It's good to see that St. Louis is still on the list. Since March 2020, prices have gone up 40.45%, which is ridiculous. I have buyers right now that literally cannot buy anything because their budget is not higher than $200,000, and you can't find anything decent in St. Louis for less than $200,000. It's gross.

In some places like San Francisco and Phoenix, you're seeing a decrease from the peak, but at least in Phoenix, house appreciation is still 50%. This is just gross. I just wanted to share that with you. I'm at my wit's end. I had some questions I wanted to go over with you, just to get my opinion on this stuff.

First question: What factors do you think are most responsible for the high house prices in St. Louis? Many people say it's a question of supply; we don't have enough homes. I don't agree with that. Experts say Wall Street doesn't own 35% of the total housing stock, but if you add small-time investors with five to ten homes, it's not unreasonable to think that 40% of the single-family housing market is owned by investors. I think that's a problem and causes high home prices. Building more houses isn't the solution if up to 40% are bought by investors.

How have rising home prices affected your decision to buy or sell a property? People get married, get new jobs, and have reasons to buy a home. If you're going to stay in a home for five to ten years, maybe you'll be okay. Agents were saying "date the rate," but prices are going up regardless of the rate. A 2.5% mortgage on a $200,000 house is fine, but when the same house goes to $400,000 and the rate is 6%, it's still a problem. Refinancing down the road is key.

Do you believe the current housing market is sustainable, or do you expect prices to drop soon? I'm not a doomer. I don't want anyone to be hurt by the housing market, especially single-family homes. I think the government will step in to slow down any crash because it's too horrible for them to handle.

What strategies can potential home buyers use to navigate this challenging market? Are buyer's agents doing a disservice to their buyers when they advise them to pay up at times? I am not the busiest real estate agent, but when I work with buyers, we look at at least ten houses before making an offer. You have to get a sense of what you're getting for your money. It's a disservice when agents don't compare houses and advise buyers to pay over.

For both buyers and sellers: If you're going to sell your home, your agent should take you around to see other houses in your area. The same is true for buyers. Don't just look at price; consider what you're getting for your money.

How do you think government policies impact housing affordability? They botched it. Even last night, Trump said they'd lower interest rates and tamp down inflation. The reason we have high interest rates is because inflation is out of control. The idea that lowering rates will make inflation go away is ridiculous. Inflation affects everything, not just housing. The Fed should have raised rates sooner.

If you're a seller right now, the market is locked up. I don't have contempt for people selling their homes after 25 years, but I do for those buying at stupid prices. Prices will go down if you only buy when it makes sense. It's frustrating as a buyer's agent to watch this happen. There should be reform in single-family homes, tax breaks, and elimination of benefits for investors. Stop incentivizing investors to take housing stock from regular people who just want to buy a home.

With that, I'm going to head out. I'm a little fired up. Hope you enjoyed the video. If you have questions or comments, put them down below. Good to be back, and I hope to see you again soon. Bye.

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