Real-Estate Values

PUBLISHED AUGUST 2023

At the midpoint of 2023, home ownership in the United States had taken on Dickensian dimensions: The best of times and the worst of times at the same time.

For anyone selling, opportunities remained to secure near peak-level pricing seen during the pandemic era, a nearly unprecedented surge in home valuations that was tempered—for a while—as interest rates rose throughout 2022 and early into this year before resuming their upward trajectory.

For anyone buying, some tough choices: Wait to see if interest rates will fall, or bite the bullet now before prices rise, gambling on the ability to refinance at a lower rate when the Fed eventually puts the brakes on its monetary policy.

That was the national dynamic. For buyers in Missouri, the choices were considerably less dire because the nearly unmatched value in home prices makes a compelling case for buying here.

This is why: Across the nation, average home values shook out at $416,300.  Of course, the market with the most homes and some of the most expensive—California—skewed that figure up quite a bit; the median price of a home there is now north of $813,000.

But consider the Missouri Difference: St. Louis, the largest metropolitan population center in the state, saw average values of $252,000 in the first half of this year. Kansas City, the city with the biggest population, recorded an average of $294,000. And the third-biggest market in the state, Springfield, split the difference between the two at $269,900.

Thus, Missouri’s statewide figure, $267,100, represents better than a one-third discount over the national average. And far more than that compared to other metropolitan areas around the nation.

None of that is purely the concern of the home buyer. Those statistics have considerable value for business owners and executives in the state. Because Missouri ranks so low in housing costs compared to most other states, employees here can work for less yet still acquire a bigger, better home than they can in many markets and still have more disposable income left over each month. The business implications for that are profound.

That’s on the residential side of the market. Some of the same dynamics are in play on the commercial side, as shown through market profiles compiled by Newmark Zimmer and Commercial Café.

In the office market, which has been ravaged by the impact of the work-from-home dynamic well into the post-pandemic era, asking rents for Class A space in the St. Louis market was $22.82 per square foot in the first half of 2023; in Kansas City, there were slightly more affordable at $22.12.

The national rate: $38.36 percent, is more than 72 percent higher than Missouri’s two biggest markets.

Vacancy rates, curiously, don’t seem to be weighing heavily on the national asking price any more than they do regionally. While the nation as a whole recorded a 17.0 percent office vacancy rate early this year, Kansas City stood at 16.3 percent, and St. Louis was at 15.2.

The office market has been a challenge for more than three years now, but that doesn’t mean an absence of explosive activity. The big markets in Missouri are enjoying a run that goes back more than a decade with industrial space—unprecedented construction volume, and unprecedented demand.

Kansas City, in particular, has been riding that wave. Compare the national averages of $7.29/sf asking rates and a 4.3 percent vacancy rate to the $5.30/sf rent ask in Kansas City and the 3.8 vacancy rate there. St. Louis, with the added industrial asset of Mississippi River shipping in its industrial quiver, had a 4.8 percent vacancy rate and an asking-rent average of $5.94.

The low costs of doing business, in terms of payroll and space expenses, boldly declare that Missouri is open for business. The low costs of housing? Icing on the cake.