Home sales across Minnesota are starting to take a hit as mortgage rates have doubled over the past year.
Mortgage rates climbed above 6% this week for the first time in 14 years. That’s as lenders continue to leap ahead of the expected hike to key interest rates set by the Federal Reserve.
On Friday, a new report from Minneapolis Area Realtors showed the lowest August monthly sales in eight years and the lowest August listings in at least a decade.
“Given current interest rates, we see a less competitive environment as the market slows down,” said Dennis Mazon, a Twin Cities real estate agent and president of Minneapolis Area Realtors. , the silver lining is that the easing of market frenzy could lead to more inventories and opportunities for continued buyers.”
Similar stories are unfolding statewide. St. Cloud saw the steepest decline in housing closures of all regions, with him down 26% year-over-year.
Home prices are still rising, sales are going fast, and sellers are still close to asking prices. need to do it.
Chris Galler, CEO of Minnesota Realtors, said a rise in mortgage rates to 6% from 3% a year ago had a big impact on his monthly payments.
“Most people think, ‘Oh, it’s only 3%,'” Galler said. “No, we really need to see the impact, which is 100% interest.”
So the current monthly payment for the $270,000 house is the same as the $310,000 house purchased a year ago. “That’s about $40,000 they lost in terms of purchasing power,” Galler said.
Buyers signed 4,981 purchase agreements in the Twin Cities last month, according to Minneapolis Area Realtors. That was a 24% drop from last year and his lowest August figure since 2014. Closings were down about the same amount, reflecting deals signed two to three months ago.
The median of those sales rose 5.6% to $369,750, the smallest annual increase since summer 2020.
There were also far fewer home sellers last month. In Twin Cities, he had only 6,186 new listings, down nearly 20% from last year, and for August he was the fewest in a decade.
The trend was similar across the state, according to Minnesota Realtors. The closing price fell 17%, and the median selling price he rose 4.4% to $330,000, according to the group. New listings decreased by 19%. St. Cloud saw a 32% reduction in listings.
A slowdown in the market isn’t all bad news for potential buyers. In this market, sellers are likely to spend more time and money making sure their homes are in good condition, Galler said. For less, the buyer can request an inspection of the home. It’s a practice some buyers skipped during last year’s homebuying craze as a way to improve their offers.
“It’s still not a buyer’s market,” said Twin Cities distributor Shawn Hartmann. “But we are heading towards a balanced market.”
Most of Hartmann’s clients have purchased homes priced under $500,000, making them the buyers most affected by price increases.
Sales of upper brackets are still strong. Closures of homes valued under $500,000 are down from last year, while closures of homes valued over $500,000 are up by nearly double digits compared to last year.
This is partly because entry-level buyers have fewer options, but also because they are the ones most affected by rising mortgage rates. Redfin said on Friday that cash purchases were above pre-pandemic levels, with a quarter of all homes in the Twin Cities purchased with cash during the month of July.
Hartmann said competitively priced properties in top condition and in good locations remain in high demand. He recently received a dozen offers for a mid-century modern home near Como Park in St. Paul for well above his asking price.
It sold for $120,000 more than its $535,000 asking price late last month.
According to Hartmann, the deal was an anomaly. Demand for housing typically slows in the fall, but the decline has been more pronounced this year. He said that as mortgage rates rise, more people are becoming sellers than buyers.
“More selling than buying suggests that the market may be changing a bit.” “And now more people are interested in selling.”