O'Fallon tackles foreclosure issues

Officials hope lower-end projects pull city out of rut

By Eric Becker
Tuesday, May 12, 2009 12:31 PM CDT

In the last five years, O'Fallon, the largest city in St. Charles County, has also led the area in number of foreclosures.

The rate of foreclosures in the quckly growing city is on par with -- even lower than -- that of other cities in the area. But the number of foreclosures -- 726 in the last five years -- has forced builders and city leaders to focus on keeping that rate from growing.

Now, nearly three years after home sales in the city began to taper, some say signs of stabilization and recovery are taking hold.

Joe Zanola of the national housing market research firm Zanola Company/MarketGraphics in St. Louis, said such a recovery could indicate wider stabilization across the St. Louis region.

"We look at the O'Fallon area as the epicenter of the St. Louis housing market," Zanola said. "It is an indicator of the rest of the market."

According to the St. Charles County Association of Realtors, new home sales in O'Fallon jumped from fewer than 1,300 in 2000 to nearly 1,900 in 2005.

O'Fallon has outperformed St. Charles and St. Peters in home sales in the last four years as well, said real estate agent Cort Schneider of St. Charles-based Schneider Real Estate. Schneider said 50 percent of his sales are made in the O'Fallon area.

O'Fallon also has led St. Charles County in number of foreclosures. The city has reported 726 foreclosures about 2.5 percent of its total land parcels. St. Peters and Wentzville, which have fewer properties, have slightly higher percentages of foreclosures during that same period. Both had foreclosure rates around 3 percent.

Until 2004, O'Fallon didn't have enough homes to keep up with buyers' demands. As demand for new homes began to slide, inventory in O'Fallon became bloated, peaking in November 2007.

Many builders have changed their building strategies since the housing downturn began.

"Two years ago, builders finally realized people were not buying the expensive homes, so they started to concentrate on lower, entry-level homes," said Jack Strick, O'Fallon's director of community development, citing projects by home builders like McBride & Son Homes and The Jones Company.

Strick said he hopes that trend, coupled with a recent ranking in Money Magazine's 100 best small cities in which to live, helps sell more homes in O'Fallon.

Building entry-level homes could be key to recovery, said Karen Vennard, 2009 President of the St. Charles County Association of Realtors. Vennard said as buyer interest has picked up in recent months, homes priced at or below $180,000 have sold quickly.

Zanola said the O'Fallon area has the best balance of home supply and demand in the metro area.

Zanola said three things need to happen for O'Fallon to grow again: the area's economic growth must rely on factors other than population growth, housing supply must grow at entry-level prices to attract the 21- to 24-year old market and new home supply should not exceed 20 percent of the annual demand.