ST. LOUIS – For months, Americans have struggled with record inflation. On Wednesday, the Federal Reserve once again raised interest rates, this time by 75 basis points. Contact 2 explored the effect rising interest rates are having on the St. Louis real estate market.
The latest data from MARIS and St. Louis Realtors shows closed sales are down 15% from June of last year. The median sales price is up 12%, but the number of homes for sale is down 14%.
Wednesday’s rate hike is the fourth so far this year, making it more expensive to get a loan or take out a mortgage. It also signals more change is on the horizon for the local real estate market.
For Berkshire Hathaway HomeServices Select Properties President & CEO Maryann Vitale Alles, analyzing mortgage rates requires perspective.
“When I got into the real estate business, it was 16%. We never thought we would see single digits and here we are,” she said.
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In a year’s time, mortgage rates on a 30-year fixed loan have risen from record lows in the 2s and 3s to current numbers in the 5s and 6s. Wednesday, the Federal Reserve hiked interest rates for a second time in a row by three-quarters of a percentage point.
“We needed to normalize this market and I think the interest rates did exactly that,” Vitale Alles said.
She thinks interest rates may have sent some first-time homebuyers back to sidelines for now, but others haven’t been discouraged.
“The luxury market, those people have money. Those are still getting multiple offers and appraisal gaps, removing the inspections. The ones that are lower are now having inspections and appraisals. That’s protection for the buyers,” Vitale Alles said.
She’s witnessing buyers’ pandemic preferences change.
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“At first, they thought they wanted office space. Now, I think they’re more looking for the recreational space in the outdoors,” she said. “Swimming pools. If they have swimming pools, you’re going to get multiple offers. That’s a very sought-after feature.”
With fears of a recession and the potential for another rate hike next month, Vitale Alles remains bullish on buying.
“Gas prices are what they are. Interest rate is what it is. It’s still a great time to buy.” Vitale Alles said.