Multiple offers in January? Oh my!

Twin Cities Housing Market Update February 2023

If you’ve been paying attention to the news the past few months, you already know that rising mortgage interest rates have caused the red-hot housing market to cool down. And as it did, we heard a lot of apocalyptic projects of another housing market crash. But really, that’s not what’s happening.

In this blog,’ I’ll explain why home prices in the Twin Cities are actually rising even as the market cools. 

Since the Federal Reserve started raising interest rates in spring of 2022, buyer activity has slowed down, and some markets across the country have seen prices fall—somewhat.

But not here in the Twin Cities. In the 7-county metro, home price actually rose 5 percent from Jan 2022 to Jan 2023.

So why are home prices still rising here? There are a few reasons.

Low Inventory + Strong Local Economy

The inventory of homes for sale in the metro remains very, very low and that’s keeping prices up. But that’s not the only reason. Here in the Twin Cities, we have a strong local economy, and during times of economic boom or bust, our local economy tends to be more stable. We just don’t see those gigantic fluctuations that some other metros experience. And while homes are taking longer to sell, homes that are priced correctly for the market are still selling quickly, and many of them are still getting multiple offers. One of my colleagues just got 14 offers on a listing in xxx.

So while we have seen a dip in home prices in some markets and in some categories, overall, home prices are continuing to rise, albeit more slowly than in the go-go housing markets of 2020 and 2021.

It's Still a Strong Seller's Market

The inventory rate in 7-county metro in January was 1.5 months. That’s how long it would take, theoretically, to sell all the homes that were on the market. That number has actually improved a little from Jan 2022 when we has less than a 1.2 month supply. But it’s still very low. If you’ve watched any of my videos before you may remember that a balanced market, a market with a balanced number of buyers and sellers has a 4-to-6 month supply of homes.

Active Listings Increased, Driven by New Construction

Map of where new homes are being built in the Twin Cities metro

The number of active listings, the actual number of homes that were for sale in January, was up, year-over-year by 14.8 percent. That’s in part because homes are taking longer to sell. But in digging into the

numbers this morning, I also noticed that most of that increase is actually do to all the new construction that’s going up.

If you take new construction home out of the equation and compare the number of existing homes for sale in January to the previous year, the number of active listings grew by just 0.2%.

That just tells you home much we need the builders to keep on building.

It also tells me that if you’re looking of a home in the core cities, or even in the first and second ring suburbs, the pickings will continue to be slim. Competition is going to be high. The bulk of new home building is happening in the third teer, in areas like Lakeville, Apple Valley, Cologne, Rodgers, Otsego, Watertown, and Cottage Grove.

So if you’re thinking of buying a new construction home, this may be your year.

Looking for more information on buying or selling a home in the Twin Cities, check out these blogs. 

In this video, I ask three questions you need to answer when deciding whether this is the right time to sell your home.

Not all new home builders are the same. Watch this video to find out which builder type might be right for you.

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

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