Home equity in the Twin Cities is falling at higher rates, but prices continue to rise
Despite a double-digit decline in home sales in the Twin Cities, prices posted a modest increase last month.
The median price for all closings last month was $389,900, a 2.7% year-over-year increase, according to a monthly report released Friday by Minneapolis-area brokers. Pending sales, an indicator of future closings, fell nearly 11% as buyers outstripped sellers in many parts of the metro.
“I don’t want to oversimplify, but prices are going up because we still have a fair number of buyers competing for not enough homes,” said Brian Lawrence, president of the St. Paul Area Association of Realtors.
The report showed that during August, sellers listed 2.8% fewer homes than a year ago, the smallest annual decline since May 2022. However, the imbalance between listings and sales caused the number of homes for sale to drop by nearly 12% at the end of the month.
The mismatch between listings and sales can be largely attributed to the steady increase in mortgage rates, which have moved from record lows to historic averages.
After two weeks of small declines, interest rates rose slightly this week. The average interest rate on a 30-year mortgage was 7.18%, Freddie Mac said Thursday.
This is higher than the previous week when it averaged 7.12%. A year ago at this time last year, the 30-year FRM rate averaged 6.02%, according to the weekly survey.
People who bought when prices were low are now reluctant to sacrifice that low price even if it means staying in a home that may not fit their needs, narrowing listings and stifling sales.
Although sales are down, it’s not because there are no buyers in the market, said Shelley Billett, a Twin Cities real estate agent. While hosting an open house at St. Louis Park on Thursday, she said there is still a lot of competition, but not as much as there was in the spring.
She listed the 1,557-square-foot home two weeks ago for $400,000 and has yet to get an offer. In April, she sold a slightly larger house for $480,000 and received two offers. It sold for $30,000 more than the asking price.
Of the four homes she recently sold, she got multiple offers on one of them.
“They have to be in good shape (to have complications),” she said.
Higher rates mean buyers can’t spend as much money as they did last year, Billett said. But she warns buyers not to wait for lower prices, which she said are unlikely to come anytime soon. Lower prices would attract more buyers, leading to a sharp increase in prices.
Already, housing costs are at an all-time high, according to Redfin, an online brokerage. Average monthly mortgage payments in the United States reached a peak of $2,632 during the four weeks ending September 10.
In the Twin Cities, home prices remained largely flat compared to last year. The increase in August came after slight declines in April and May and no change in July.
Although homes in the Twin City are taking longer to sell than they did last year, sellers on average received 100% of their list price after 32 days on the market. At the current sales pace, there are only enough listings for 2.2 months. A market is considered balanced when there is a supply of listings for four to six months.
The same trends are in play statewide with pending sales declining at the same rate as in the metro, though prices are up a bit more — 5.5% compared to last year, according to the Minnesota Realtors.
“There is always some level of activity in the market due to family changes, economic reasons or relocations, to name a few,” said Jerry Moskowitz, president of Minneapolis-area brokers. “But some less enthusiastic buyers without that urgency look more carefully at budgets and monthly payments.”