Home price gains in the Twin Cities are slowing, and the region is on track for a softer landing should interest rate spikes quell demand.
During August, metro-wide house prices rose 7.64% from last year, compared with a 13.1% rise for the 20 Metro Composite, according to t.S&P CoreLogic Case-Shiller US National Home Price Index.
A watchful index shows home prices are slowing steadily across the country as rising mortgage rates erode affordability.
Craig Lazzara, managing director of S&P Dow Jones Indices, said price gains slowed in all 20 cities tracked by the group in August.
“Home price growth peaked in spring 2022 and has been declining ever since,” he said in a statement. “Given the continued outlook for a challenging macroeconomic environment, house prices may continue to slow.”
The index tracks repeat sales of the same home each month, so it’s a reliable indicator of what’s happening in the housing market. There is a bit more lag between Case-Shiller’s latest report (which includes his June, July and August data) and local sales reports. Such as from a realtor in the Minneapolis area.
Case-Shiller reports track the value of individual single-family homes, while local reports track the median and average price of homes closed in a given month.
Moderate price gains are one reason the Twin Cities have seen less price declines than cities where house prices have skyrocketed, market watchers said. This was also the case during his 2006-2007 housing meltdown that led to the 2008 recession.
“Historically, our peaks and valleys have tended to be less prominent than other cities,” said Andrew Babra, director of the real estate program at the University of St. Thomas and the Schenehong Real Estate Center. Even so, we won’t see a significant drop in Minneapolis.”
For most of the past two years, the index has also grown by double digits in the Twin Cities, roughly mirroring the national average. For example, the price in January rose 0.5% from the previous month, while year-on-year it rose 11.8%. During that time, nationally, the index rose 19.2%.
Demand for homes in the Twin Cities remains strong, but rising mortgage rates are making it difficult for many to buy a home, Babra said. Still, there are a lot of people who need to buy it, but for some reason I decided to put the decision on hold.
“What we are seeing is sort of a market reset, but market uncertainty is also driving it,” he said. “People back off and wait and see what happens.”