Twin Cities 16-County Region
Interest rates are still on the rise and buyer demand is cooling... so what the heck does this mean for the Twin Cities real estate market??
This blog covers interest rates, buyer demand, days on market, median purchase prices as well as predictions on where the market is headed, supported by local data. I will also answer one of the biggest questions floating around right now Is now a good time to buy a home?
The data listed is from the NorthstarMLS and focuses on the Twin Cities 16-county region. If you are interested in a more in-depth analysis of your area or neighborhood, please feel free to reach out. I'll be happy to provide your local data.
The median sales price for homes hit $357,000, a $5,000 drop from last month which was expected as we head into the slow season here in Minnesota.
However prices grew another 5% compared to October of 2021. We will continue to see the median sales price drop into January, but should still expect to see year-over-year increases ranging 3-5%.
We have now hit 3 months in a row where the final offers were at 100% of the original list price on homes. This means sellers are more accurately listing their homes, anticipating less bidding and buyer activity. For now, buyers can expect to pay closer to the list price versus mentally tacking on an additional $30,000 to account for multiple offers.
So wHY are we seeing offers closer to asking price??
The quick answer to that is just buyer demand... Here is the evidence that demand is softening:
Days on market have increased, both in anticipation of the slow season as well as lower demand. We are now up to 21 days on market, a 50.0% increase compared to October 2021.
BUT this length of time is equivalent to the Spring Market of 2019. This is a signifier that we are returning to a normal market, NOT a crash.
The number of showings on active listings has also decreased since last year, showing signs of a market correction. We are seeing about 4.7 showings per home, down about 27.7% from October of last year.
So where did the demand go??
A large number of buyers decided to pause their home search in hopes that the market would calm down and prices would drop to more affordable levels. But what ended up happening is the Fed increased interest rates to FORCE a slow down in spending to combat inflation.
We are currently hovering right around a 7.1% interest rate, which makes a significant impact on buying power.
But I have slightly bad news Interest rates are projected to remain high, near the 7+% range until Spring 2023. Now there are a few mortgage professionals that believe we may hit closer to 5% this winter or possibly early Q1 of 2023, but I wouldnt hold my breath. Inflation is a huge driver of mortgage rates and there are still correction measures being taken by the fed to cool spending.
so what does all of this mean for the market?
We will continue seeing:
- softened buyer demand
- longer days on market
- offers closer to original asking prices.
BUT because we are still down in total inventory the ball is still in a sellers market. SO homes may take longer to sell, but they wont be selling for pennies on a dollar like during the housing market crash.
New listing are down 20.8% from October 2021, which is why we are still in a Seller's Market even with higher interest rates.
all this being said, is now a good time to buy a house?
YES! Here's why:
- Higher interest rates have reduced overall competition, so you arent paying thousands of dollars above market value
- But more importantly you have more flexibility to negotiate with a seller! You get to have an inspection, you get to request repairs, ask for seller paid closing costs, among other things that were practically unheard of for buyers over the last 2 years.
- Also- interest rates are constantly changing how much you owe the bank for your home doesnt. Say you buy at 7% interest rates right now, and then they drop down to 5%. You can refinance your loan, paying the lower interest rate AND a more inexpensive home that you purchased not in multiple offers. But also say that interest rates go up. Then you are at least building your financial equity in property that you own.
OK! there is your quick recap for the month of october...
Now that you know what is happening in the market supported by local data, you may be interested in starting your home search. Feel free to start a No-Obligation Search here.
Or download my FREE homebuyers guide to help you get a jump start on ownership.