July brought another month of Calm Stability for home Prices and Interest Rates

Is the Rollercoaster Ride Over for the Twin Cities Housing Market?

It’s August and you know what that means. It’s almost time for the Great Minnesota Get Together, the State Fair. Food on a stick, rides, music, and the best people watching you’ll get all year.

If you’re looking for some excitement to end your summer, the State Fair may be your best option because you won’t find much here in the housing market this month. Much like June, the real estate market seems to be set on slow simmer.

That might seem kind of dull after the rollercoaster markets of 2020 and 2021, but in reality, a steady and predictable market is good for both buyers and sellers.

Before I dive into the numbers for this month, I want to note, as I do each month, that the statistics I present here are drawn from the North Star Multiple Listing Service data. Although this is my August housing market update, the stats in this report are for the month of July and cover the seven-county metro area, which includes Hennepin, Ramsey, Dakota, Anoka, Washington, Scott, and Carver counties.

New Home Listings Lagging

New home listing in the Twin Cities fell in July for the second month

I like to start each month looking at new homes listed for sale. New listings are one of the best indicators of what’s happening in the market. 

In July, we saw the number of new homes for sale drop for the second month in a row. Metro-wide, 4,802 new listings hit the market in July, down from 5,568 in June, and down 17.5 percent from July last year.

The number of new home listings continues to lag well behind pre-pandemic levels, and those years were still strong markets for home sales. One of the big culprits here is, of course, the rapid rise in interest rates last year coupled with historically low mortgage interest rates in 2020 and 2021.

As many homeowners refinanced  or purchased at those historically low interest rates and now that mortgage interest rates have more than doubled, many homeowners are feeling married to their rate. I’ve seen estimates as high as 80 percent of all homeowners now have a mortgage with an interest rate below 5 percent.

Slide showing the number of new homes listed for sale in the Twin Cities in July 2023 as compared to the same month in 2015 to 2019, before the pandemic.

Mortgage Interest Rate Increases Cool Homebuyer Interest

Interest rates are also having an impact on buyers. We can see that impact in the total number of homes for sale each month. The total number of homes for sale increased ever so slightly in June and remained largely unchanged in July, but that number is still nearly 17 percent below last year. With fewer homes to choose from and higher interest rates eroding their buying power, many buyers have chosen to sit on the sidelines until market conditions improve.

Even with less buyer activity, however, we are still in a tight sellers’ market. We can see that in the months’ supply of homes for sale. That is a metric that measures how long the current inventory of homes for sale would last at the current sales rate if no new homes came on the market.

Overall Supply of Homes for Sale Increases Slightly

Graphic showing months supply of homes for sale in the Twin Cities metro in July 2023

Month’s supply is inching up, from 1.6 months in May to 1.9 months in July. But just a reminder here, that what the real estate industry considers a balanced market as a market with 4 to 6 months of supply. So this is still a strong seller’s market.

Another measure of market activity is median days on market, or, days to sale. That is median number of days between when a house is listed for sale and when it goes pending and is considered off the market. July the median days to sale was 11, That has remained pretty constant for the past three months, and it actually the same as it was in July 2022.

 

Home Prices Dipped in July

Graphic showing the median home sale price in Minneapolis and St. Paul in July 2023

Home prices dipped a bit in July, after a slow rise in the spring. The median sale price of a home in the seven-county metro was $380,000 in July. That is down about $6,500 from last month, but still an increase of 1.3 percent from last year.

The median sales price in the core cities tends to be a little lower than the metro average. That is due in part to the age of the housing stock and the small number of new construction homes for sale. In Minneapolis the median sale price was $330,000 in July, the same as last year. In St. Paul, it was $285,000, down just slightly from the previous year. Homes are holding their value, even as buyer activity slows.Just a quick note here, on median versus average sale price. The median sale price means that half the homes sold were about that price and half below. The average sale price in the metro was just under $460,000. The difference between median and average may be due, in part, to the shortage of lower-priced homes for sale.

Across the metro, sellers are still getting about 100 percent or even a little more than their original asking price.

Interest Rates Steady Around 7 Percent

Lastly, I want to take a quick look at interest rates. Home mortgage interest rates for a 30-year conventional mortgage have been hovering around 7 percent or a little above for the past month. The interest on a 15-year fixed rate mortgage has dropped down to about 6.4 percent.

What This Means for Home Buyers and Sellers

What does this all mean for you? If you’re considering buying or selling your home this summer, you can know what to expect. Because the of low inventory of homes for sale remains well below last year, and down significantly from before the pandemic, homes are still selling quickly and sellers are typically getting their full asking price—as long as the home is priced correctly.

For buyers, the lack of inventory can be frustrating, but buyers can take comfort in the fact that home prices are holding steady, and that they won’t be facing such tough competition when they go to submit an offer.

Just remember, every individual’s situation is different. If you want to know how these market trends might affect your plans to buy or sell a home, or if you want a more specific look at the market trends in a particular city or neighborhood, call, text, or email me. I’m here to help.

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

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