Despite a double-digit decline in home sales in the Twin Cities, prices posted a modest gain last month.
The median price of all closings last month was $389,900, a 2.7 % annual increase, according to a monthly report released Friday by the Minneapolis Area Realtors. Pending sales, an indication of future closings, were down nearly 11% as buyers outpaced sellers in many parts of the metro.
“Not to oversimplify, but prices are rising because we still have a decent number of buyers competing for an insufficient number of homes,” said Brianne Lawrence, president of the St. Paul Area Association of Realtors.
The report showed that during August, sellers listed 2.8% fewer homes than last year, the smallest annual decline since May 2022. Still, the imbalance between listing and sales caused a nearly 12% decline in the number of houses for sale at the end of the month.
The mismatch between listings and sales is being caused in large part by a steady increase in mortgage rates, which have gone from record lows to historical averages.
After two weeks of slight declines, rates rose a tiny bit this week. On Thursday, Freddie Mac said the 30-year fixed-rate mortgage rate averaged averaged 7.18%.
That’s up from the previous week when it averaged 7.12%; a year ago at this time, the 30-year FRM averaged 6.02%, according to the weekly survey.
People who bought when rates were lowest are now reluctant to sacrifice that low rate even if it means staying in a house that might not suit their needs, constricting listings and stifling sales.
Shelly Billiet, a Twin Cities Realtor, said that while sales are down, it’s not because buyers aren’t in the market. While hosting an open house in St. Louis Park on Thursday, she said there’s still plenty of competition, but not as much as in the spring.
She listed the 1,557-square-foot house two weeks ago for $400,000 and has yet to get an offer. In April, she sold a slightly larger house across the street for $480,000 and got two offers. It sold for $30,000 more than the asking price.
Of the four houses she’s sold recently, she got multiple offers on one of them.
“They’ve got to be in great shape [to get multiples],” she said.
Higher rates mean buyers can’t afford to spend as much as they did last year, Billet said. But she warns buyers against waiting for lower rates, which she said aren’t likely to come anytime soon. A decline in rates would bring out even more buyers, causing an even steeper increase in prices.
Already, housing costs are now at an all time high, according to Redfin, an online brokerage. The median U.S. monthly mortgage payment hit an all-time high of $2,632 during the four weeks ending Sept. 10.
In the Twin Cities, home prices have largely remained flat compared with last year. The August increase came after slight declines in April and May and no change in July.
Though houses in the Twin Cities are taking longer to sell than they did last year, on average sellers received 100% of their list price after 32 days on the market. At the current sales pace, there are only enough listings to last 2.2 months. The market is considered balanced when there’s a four to six month supply of listings.
The same trends are playing out statewide with pending sales falling at the same rate as in the metro, though prices were up slightly more — 5.5% compared with last year, according to the Minnesota Realtors.
“There’s always a certain level of activity in the market because of family changes, economic reasons or relocations to name a few,” said Jerry Moscowitz, president of Minneapolis Area Realtors. “But some less motivated buyers without that urgency are looking more cautiously at budgets and monthly payments.”