April 2023 Twin Cities Housing Market Report

The Spring Market Begins to Bloom

The number of new home listings that came to market in March was more than double what we saw in December, a season increase after a long Minnesota winter. But the promise of the  spring market is tempered by a shortage of homes for sale and higher interest rates,

Good News Bad News

When it comes to new home listings, there is a good news bad news story here. New listings of home for sale have more than doubled since December as we move toward spring, but that good news is relative as new listings are actually down 24 percents compared to March 2022. That story repeats and actually gets more extreme when you take new construction out of the mix.

New listings of previously-owned homes almost tripled from what they were in December, a seasonal swing that we expect to see. But compared with March 2022, the number of new listings of previously-owned homes dropped by 30 percent.

I like to add a little historical perspective to this, so people understand just how tight this market really is. That is the lowest number of new listings to come to market in March in the past 10 years.

March 2013 we saw 5,254 new homes hit the market in the seven-county metro. That is almost 1,200 more new listings than last we saw last month when we saw just 4,129 new homes listed for sale.

Graph showing new listing in the 7 county metro, March 2013=March 2023

They say a picture is worth a thousand words, so this is what that looks like graphically. You can see in this image that the number of new listing started to fall about this time last year, and it just kept dropping.

More Homes for Sale

When we look at the total number of homes for sale in the metro, the picture changes a little bit. There were fewer homes for sale in March this year than last year, but the drop was much less significant, just about 2 percent. That is mostly due to the number of new construction homes and condos being built, however. The total number of new construction homes on the market in March was up 48 percent compared to last year. If we take new construction out of the mix, the total number of homes for sale in March this year was down 15 percent compared to March of last year.

So that new building that’s going on, especially in the third tier suburbs for single family homes and throughout the metro for condos, is helping to ease the housing shortage a bit. That’s great news, but it’s going to take a while until we see that start to impact the housing shortage we have here in the metro.

Homes are Staying on the Market a Bit Longer

Homes are staying on the market a little longer than last summer. We can see that in a measure we call months’ supply. That’s the number of months it would take to sell all the homes currently on the market. In a market with a balanced number of buyers and sellers, we expect that number to be between 4 and 6 months supply. Less than 4 months is considered a seller’s market. Right now in the metro, we have about 1.3 months supply, and that has been pretty constant over the past few months. It is a little higher than March of last year when it was aa flat 1 percent. That  indicates that homes are staying on the market a little longer, but this is still an extreme sellers market.

And it will likely get even tighter as we move fully into spring. Now that buyers have had almost a year to get used to the change in mortgage interest rates, we can see buyer interest ticking up, both statistically and anecdotally.

Showings are up. Multiple offers are again becoming commonplace, the number of days homes are staying on the market is falling. After a brief dip, we are also seeing prices rise again. The median sale price in the seven-county metro had dropped from $382,000 in June of last year down to $341,700 in January of this year. That is both a seasonal dip and an indication of buyers dropping out of the market due to the rise in interest rates, which seem to have peaked last year in October.

Prices are Rising Slowly

With the spring market and the shortage of homes for sale, the median sale price has started climbing again and was $360,000 in March. Seller in March were also getting 100 percent of their asking price, up from 97 percent in January.

Graph showing the median sale price of homes in the Twin Cities over the past three years

So just to quickly recap, the shortage of homes for sale continues to be a problem for buyers and the market as a whole. There were 24 percent fewer new listings in March than the previous year. And the number of new listings coming on the market in March was the lowest for the month of March in the past 10 years.

The total number of homes for sale was also down, but by much less. It seems like buyers are still playing a bit of wait and see with interest rates—and we’ve had a very long winter, which may also be keeping some buyers at home.

The market is showing signs of spring, though. Houses are selling more quickly than in January. Many sellers are getting 100 percent of their asking price, and home prices are slowly rising as buyer activity ticks up.

J Trout Lowen is a Minneapolis REALTOR and an expert at helping homebuyers and sellers navigate the Twin Cities housing market.

The Minneapolis housing stock here is aging and there are some important mistakes you want to avoid when shopping for a home here.

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