ST. LOUIS — As home interest rates are rising, combined with a competitive market with fewer houses available, buyers in the St. Louis area may have trouble getting a home.

That’s the case for a south St. Louis County woman and her family. Last summer, they looked at a dozen homes, but none seemed worthy enough to make an offer.

In January, she said they made an aggressive offer on a house, presenting $20,000 over the asking price. She said she knew houses were going for over asking, but “It was not at all what we expected it to be.”

She says the home ended up with 35 offers and 14 of them were more aggressive than the Engelkemeyer’s offer. It ended up selling for $80,000 over asking. The family has not made an offer since.

“We’re kind of defeated at this point. If we can find what we want, which the inventory is so low, we’re not sure if we can really compete with the kinds of offers that people are giving,” she said. 

For the second month in a row, real estate agent Brandon Balk said St. Louis’ absorption rate is at 0.9 percent, meaning if no other houses were listed, there is less than a month’s worth of homes available on the market. 

A couple of years ago, the absorption rate was at 6 percent, which is about a six-month supply of homes available on the market. 

Between 2019 and 2020 was when Balk started to see the housing inventory decline. 

“When interest rates started going lower, more people wanted to buy,” he said. “It got to a point where there’s so many people who wanted to take advantage of such low interest rates, but there’s not enough houses to meet that demand, and that’s where the offset came.”

The family is looking for a home with four bedrooms and between 2.5 and three baths in preferred school districts, including Mehlville, Rockwood, Kirkwood, Ladue, Parkway, and Webster. 

Balk said he is noticing that sellers are listing homes on Fridays and accepting offers on Sundays and Mondays, rather than putting the home on the market and hoping for the best offer.

“I think some of that is because there’s just so little inventory available right now that agents are trying to give everybody the best opportunities they can to see the home, while also giving sellers as much time as they can,” he said.

The family has outgrown their current home and, “just feeling stuck,” she said. They are deciding whether to invest in their current home or not since they do not know how much longer they will live there. 

Balk said there are three factors that make a house sell: location, condition and price.

“If you have a good location, the price is right and it’s in good condition, you’re probably going to have multiple people trying to compete because there’s not too many options to choose from right now,” explained Balk.

Interest rates recently rose again this month and are expected to continue to rise for the rest of the year, according to Balk. He predicts rates reaching into the five percent range or higher.

“I still think the market is going to stay hot and strong in St. Louis until the inventory offsets that. So, until there’s less buyers and more houses, I think there’s always going to be competition,” Balk said.

Currently, someone with a really good credit and low-debt income ratio, for a conventional loan, is looking at a 3.0 to 4.5 percent interest rate. That same scenario would have been between 2.675 and 2.875 over a year ago, according to Balk.

The higher the interest rate, the less buying power someone has, he said. When interest rates were in the low two percent range about two years ago, buyers had more power. 

“They can buy a lot of houses for less money because of the lower interest,” Balk said. 

Interest rates are controlled by the federal government and there are several factors that can cause rates to rise.

“A way to control the inflation was to raise the interest rates to even out the market a little bit more, so that there wasn’t such a huge buying market anymore,” real estate agent Heather Mellor said.

Other factors include gas prices, and international affairs such as the Ukraine invasion.  

With many roadblocks standing in the way for buyers, Balk offered some advice. 

“If you’re looking to buy, don’t get emotionally attached. Just know your number, do your best, there’s always another house,” Balk said. “If you really want to find a good deal, you want to focus on homes that have been on the market for a little bit of time.”

And as for sellers, “Don’t be greedy. Sometimes the highest offer is not the best. Sometimes it looks better on paper than what it turns out to be,” he said.