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What you need to know about the St. Louis housing market after Fed's increase of interest rates

Experts say the Fed's action could have mixed effect on mortgages; Real estate professionals say it makes loan pre-approval even more important.

ST. LOUIS COUNTY, Mo. — Your financial landscape may be changing. Federal Reserve officials raised interest rates on March 16 in what could be the first of several such moves to combat inflation.

The Fed action could impact your mortgage interest rate and home loan.

LaTrisha Gandy and her daughters and niece are on a mission to buy a new home.

“Two bedrooms upstairs, two downstairs. Living room,” she said, on a recent tour of a prospective home in St. Louis County.

“Four bedrooms, two full bathrooms and a finished basement are my requirements,” she said.

Their house hunting comes just weeks after the Federal Reserve raised the key interest rate by a quarter of a point in an effort to battle inflation.

At the time, Federal Reserve Chair Jerome Powell said, “We're prepared to use our tools as needed to restore price stability.”

Fed officials are also talking about raising rates six more times, this year.

“So, it’s imperative,” said Gandy. “I’m trying to move as fast as I can to find a house, but I don’t want to move too fast.”

At Webster University, Mitch Ellison is an associate professor of finance in the George Herbert Walker School of Business and Technology.

“There’s kind of an offset out there,” said Ellison, “you’ll pay more on interest rates, but there should be an impact on housing prices.”

Ellison said the Fed raising the interest rate could have a negative effect on mortgages in the short term and a positive effect in the long term.

“You’ll pay more for the interest rate, initially,” he said, “but mortgages can almost always be re-financed. So, what’ll happen is - if it cools off the housing market and houses move down in price, you will just go out and refinance your mortgage at a lower interest rate.”

Experience Real Estate owner Kathy Helbig-Strick said the Fed raising the interest rate makes things like getting pre-approval all that more important for potential home-buyers.

“It really is a strategic game of chess, right now, in the real estate market. It’s not checkers, it’s chess,” she said. “Pre-approval puts you in position above someone else that hasn’t been out there getting that information done yet. When you go to make an offer, a seller in this environment is not going to look at somebody that has not been pre-approved.”

Helbig-Strick points out there’s a difference between getting pre-approved and pre-qualified. Pre-approval has gone through underwriting and the basic information has been verified.

Interest rates are figuring into Gandy’s future.

“Maybe my grandchildren,” said Gandy. “I’m envisioning my grandchildren owning this house and this land.”

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