The Impact of Interest Rates on the St. Louis Housing Market

The Impact of Interest Rates on the St. Louis Housing Market

As we look ahead to 2025, the dynamics of the housing market are set to be significantly influenced by interest rates. Redfin economists predict that as mortgage rates decrease, more homeowners will list their properties for sale, particularly move-up buyers looking to take advantage of these lower rates. However, this influx in listings is expected to be met with even higher demand, causing homes to sell more quickly and often above their listed prices.

How Lower Interest Rates Influence the Market

Lower mortgage rates have a profound effect on the housing market:

1. Increased Affordability: As interest rates drop, monthly mortgage payments become more affordable, allowing buyers to consider higher-priced homes. This increased buying power can lead to more competitive bidding and higher overall home prices.

2. More Listings: Homeowners who were previously hesitant to sell may be more inclined to list their homes, knowing that lower rates could make it easier to afford a new, more expensive property.

3. Demand Exceeding Supply: Despite the expected increase in listings, the demand for homes is likely to outpace supply. This imbalance can result in homes selling faster and for prices above their initial listing.

Visualizing the Impact

The chart below illustrates how varying mortgage rates affect the maximum home price buyers can afford based on different monthly payments:

For example, at a 3% mortgage rate, a $3,000 monthly payment supports a home price of around $600,000. However, at a 6% rate, the same payment only supports a home price of about $450,000. This demonstrates how crucial it is for buyers to secure the lowest possible rates to maximize their purchasing power.

Current Market Conditions

Even though mortgage rates have decreased from their recent peaks, they remain significantly higher than the lows experienced during the pandemic. The current economic volatility suggests that rates might experience temporary increases. U.S. Treasury yields, which are an indicator of where mortgage rates are headed, recently showed fluctuations, underscoring the importance for buyers to act quickly.

Recommendations for Buyers

Given the current market conditions, here are some strategies for prospective homebuyers:

• Act Quickly: With the likelihood of demand outstripping supply, buyers should move fast to take advantage of improving affordability and existing inventory.

• Shop Around: Ensure you’re getting the best mortgage rate by comparing offers from different lenders.

• Stay Informed: Keep in touch with your lender to secure the best available rate as market conditions change.

Conclusion

Lower interest rates significantly enhance home affordability, driving demand and influencing the overall housing market. As we approach 2025, understanding and leveraging these dynamics can help buyers navigate the market more effectively. Locking in lower rates now could provide substantial financial benefits and increase your buying power.

Stay proactive and informed to make the most of the current and future housing market opportunities.

Source: https://www.redfin.com/news/home-affordability-improves-mortgage-rates-drop

Why Today’s Housing Market Isn’t Headed for a Crash

Why Today’s Housing Market Isn’t Headed for a Crash

67% of Americans say a housing market crash is imminent in the next three years. With all the talk in the media lately about shifts in the housing market, it makes sense why so many people feel this way. But there’s good news. Current data shows today’s market is nothing like it was before the housing crash in 2008.

Back Then, Mortgage Standards Were Less Strict

During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. Banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance an existing one.

As a result, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. Today, things are different, and purchasers face much higher standards from mortgage companies.

The graph below uses data from the Mortgage Bankers Association (MBA) to help tell this story. In this index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is.

This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards have helped prevent a situation that could lead to a wave of foreclosures like the last time.

Foreclosure Volume Has Declined a Lot Since the Crash

Another difference is the number of homeowners that were facing foreclosure when the housing bubble burst. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM to show the difference between last time and now:

So even as foreclosures tick up, the total number is still very low. And on top of that, most experts don’t expect foreclosures to go up drastically like they did following the crash in 2008. Bill McBride, Founder of Calculated Risk, explains the impact a large increase in foreclosures had on home prices back then – and how that’s unlikely this time.

“The bottom line is there will be an increase in foreclosures over the next year (from record level lows), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”

The Supply of Homes for Sale Today Is More Limited

For historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Supply has increased since the start of this year, but there’s still a shortage of inventory available overall, primarily due to years of underbuilding homes.

The graph below uses data from the National Association of Realtors (NAR) to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just 2.7-months’ supply at the current sales pace, which is significantly lower than the last time. There just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience slight declines.

Bottom Line

If recent headlines have you worried we’re headed for another housing crash, the data above should help ease those fears. Expert insights and the most current data clearly show that today’s market is nothing like it was last time.

Chesterfield, MO Homes Market Update

Number of homes for sale vs homes sold in Chesterfield, MO

The number of homes sold so far in 2016 is the highest we have seen in the past 10 years.  While inventory of homes for sale is hovering just over the 300 homes, it is still one of the lowest inventories we have had in nearly 10 years.   The blue line on the graph shows the number of homes for sale in Chesterfield, while the Green line shows the number of homes sold.

Chesterfield Homes sold by year YTD (1/1 to 10/23)

2016 = 823

2015= 784

2014= 801

2013= 789

2012= 692

2011= 557

2010= 595

2009= 555

2008= 622

2007= 729

2006= 729

List to Price Ratio and Average Days On Market for Chesterfield, MO

List to price ratio is the percentage of list price buyers end up paying for homes after negotiations.  The list to price ratio for YTD in 2016 is around 98% with the median being 97.7% and the Average being 97.3%.   The number of days it takes a home to sell is called the Days on Market.  The Median days on market is 26 while the average Chesterfield home sells in 65.3 days.

Luxury homes in Chesterfield.

So far in 2016 only 15 homes sold over $1,000,000 in Chesterfield so far in 2016.   This same period in 2015 saw 23 homes and 19 in the same period 2014.   The high price winner goes to a beauty in Pacland Estates for 2.3 million and change.  To see what you could have bought for $1m in Chesterfield check out http://bit.ly/2e4lhV9

Homes are still selling in chesterfield and despite the time of year now is a good time to list a home because of continuing demand and lower inventories.    Some higher price points may see demand soften and prices may ease in 2017.    

If you would like to know what your Chesterfield home is worth visit the link below for a free and instant home value report:  bit.ly/chesterfield1016