As mortgage rates continue to inch higher, St. Louis housing market remains competitive

Published: Jan. 2, 2023 at 6:22 PM CST
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ST. LOUIS, Mo. (KMOV) - One year after historically low mortgage rates helped to create a housing market boom, rates have nearly doubled, leaving buyers able to afford less.

In December 2021, 30-year fixed mortgage rates hovered between 3.5% and 4%. As a result, the monthly payment on a $250,000 house cost roughly $1,265. Within 12 months, interest rates nearly doubled to 6.75%, increasing the monthly payment to $1,621.

Lending industry experts said the rate hikes in such a short amount of time are unprecedented.

Marc Desaulniers and his wife have lived in their Franklin County home for 18 years. The 9-acre property is also home to horse stables, but the couple is now looking to relocate to be closer to family.

“We thought it was time to downsize--maybe have a little simpler lifestyle,” said Desaulniers.

The couple listed their home in late 2022 after six months of decision making and renovations.

“Obviously the market is slower this time of year, and you know, it helped on the buy side,” he said. “It’s probably hurting on the sell side but helping on the buy side, so we’re figuring it evens itself out.”

Cathy Shaw Connely is the Desaulniers’ realtor. In the industry for more than four decades, she’s relieved to see the market stabilizing after a chaotic couple of years.

“There’s still the homes, that are ranch homes between $200,000 to $500,000 there’s still getting some multiple offers on them, but not like they were,” she said. “Inspections and contingencies are also making their way back into contracts.”

While winter is a slow time of year, Shaw Connely said inventory remains fairly low, despite rising interest rates.

“Yes, it’s going to affect the amount of house they can buy but prices have dropped as well,” she said.

Some industry experts anticipate rates beginning to drop by the third quarter of 2023, but not before they continue to rise as the Fed tries to combat historic inflation.

Waiting until rates drop, Shaw Connely said, can be a dangerous game for buyers.

“You might get back into the situation where you’re paying way over asking price or sellers will say you’re in competition with someone that will buy it without allowing inspections or appraisals maybe,” she said.

Those who entered into bidding wars over the last few years, many offering tens of thousands of dollars over the asking price, may not see their return soon, if ever, she said.

“Those buyers, I can’t see where they’re getting out of it what they put into it, at least right now.”