The St. Louis housing market is hot, but there are some potential risks on the horizon.

Here are some of the factors to keep in mind:

Some of these factors are real and likely, while others are quite far-fetched.

• Overbuilding and a flood of supply: If there is a sudden increase in the number of homes for sale in St. Louis, it could lead to a drop in real estate prices. This is because there will be more houses and condos on the market than there are buyers. This could happen if Missouri builders construct too many homes, or if homeowners decide to sell their homes at the same time.
• Airbnb and Short-Term Rentals saturation (especially in vacation markets): If too many local St. Louis homes are being rented out on Airbnb or other short-term rental platforms, it could take away from the pool of homes available for long-term home buyers. This is because these homes are not available for purchase, and they can also drive up the prices of other homes in the St. Louis area.
• Increase in overextended homeowners (high debt ratios, HELOCs, etc.): If St. Louis homeowners have high debt-to-income ratios or have taken out home equity loans, they may be more likely to default on their home mortgages if interest rates rise or the housing market declines. This is because they will have less money available to make their mortgage payments.
• Student loans turned back on (coupled with high outstanding debt): If student loan payments are turned back on after the pandemic pause, it could put a strain on St. Louis household budgets and make it more difficult for some people to afford a home. This is because people will have to start making monthly payments on their student loans again, which could take away from their disposable income.
• Buy now, pay later (lot of kicking the can down the road): Buy now, pay later schemes that proliferate all over the US (and in St. Louis) allow people to make small payments on purchases over time. This can be helpful for people who need to spread out the cost of a big purchase, but it can also lead to debt problems if people are not careful. This is because people may end up spending more money than they can afford because they are not thinking about the long-term cost of the purchase.
• Climate-related issues: Climate change could lead to more extreme weather events, such as hurricanes, floods, and wildfires. St. Louis area might become even more prone to tornadoes. These future extreme events could damage homes and make it more difficult for people to afford them.
• Spike in mortgage rates: Mortgage rates have been rising in recent months, and they are expected to continue to rise, at least for the foreseeable future. This could make it more expensive for people in St. Louis to buy homes, which could dampen our market’s momentum.
• Crypto bust (bitcoin, NFTs, etc.): The cryptocurrency market has been volatile in recent months, and there have been some high-profile collapses. This could lead to financial losses for some investors, which could make it more difficult for them to afford homes. This is not as applicable in St. Louis, but could still be a slight risk.
• Forbearance ending (COVID-related job losses): The federal government’s forbearance program, which allowed homeowners to defer their mortgage payments, is ending. This could lead to some local St. Louis homeowners defaulting on their mortgages, which could dampen the market’s momentum.
• Mass unemployment (recession): A recession could lead to job losses and financial hardship for many people all over the US, including our local St. Louis job market. This could make it more difficult for people to afford homes, which could dampen the market’s momentum.
• Contentious presidential election: A contentious presidential election could lead to uncertainty and volatility in the housing market. This is because people may be less likely to make major financial decisions, such as buying a home, during a time of political uncertainty.
• Mom-and-pop landlords in over heads: Many mom-and-pop landlords here in St. Louis are struggling to make ends meet due to rising costs and low occupancy rates. This could lead to some landlords selling their properties, which could increase the supply of homes on the market and dampen prices.

If you are considering buying a home in St. Louis, it is important to be aware of these potential risks. You should also talk to a mortgage broker to get pre-approved for a loan and to get the best interest rate possible.

Posted by: Carlson Mortgage – a top-rated St. Louis mortgage broker providing home loans in the state of Missouri. We are routinely ranked as a #1 mortgage broker in Missouri on Yelp, Google and Zillow. We can be reached at (314) 329-7314 seven days a week.

Our loan application can be found here or you can call us at 314-329-7314 to speak with one of our mortgage loan officers. Also, here is our pre-approval page, if you are looking to buy a home or need a referral to a top real estate agent.

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