Twin Cities Real Estate Market Update December 2023

Interest rates Dropped in November
New Listings were Up Year-Over-Year

Twin Cities Real Estate Market Update for December 2023

Interest rates started dropping in November—finally—after peaking in October and new home listings in the Twin Cities metro were actually up last month compared to the previous November. That’s the first time this year I’ve been able to say new listings were up year-over-year.

I’ll be talking more about both of those trends and what else is happening in the real estate market here in Twin Cities in this blog and taking a look at what experts are saying about the market in 2024.

Mortgage Interest Rates Begin to Fall

I typically start my report by talking about new home listings, but today, I want to talk first about mortgage interest rates. 

Image showing home mortgage interest rates in early December 2023

Mortgage interest rates are at a three month low, and as you can see in this image from Mortgage News Daily, rates in early December had dropped below 7 percent for many types of loans.

And economists are predicting that mortgage interest rates will settle into the 6 to 7 percent range by spring. That’s good news for affordability and for home buyers who have been pushed out of the market by rising interest rates.

New Home Listings Up Year-Over-Year

While the total number of new homes listed for sale dropped from October to November— which we expect at this time of year—the number of new listings actually increased in November year over year for the first time in 2023.

chart showing the number of new home listings month by month

Th image above shows the number of new homes listed for sale each month compared with the same month the previous year. April new listings down by a painful 27.6 percent; down in May by 18 percent; in June by 20 percent. Then in mid summer we start climbing out of the hole. And finally, in November, saw a 4.8 percent increase in new listing compared with last year, and in Minneapolis and St. Paul both saw almost a 10 percent increase in the number of new listings last month.

Given that supply is one of the biggest, if not the biggest challenge facing the housing market now, this is a welcome trend and one I hope we see continue next year.

Unfortunately, not all the tidings I bring this December are of full of comfort and joy. We also need to talk about the lumps of coal in this month’s numbers.

The total number of homes for sale in the Twin Cities in November dropped from 7,030 to 6,289. That’s not surprising. We have a seasonal market here in Minnesota that pretty much bottoms out in January. But the total number of homes for sale declined by 5.6 percent compared to last November. Overall, there were just fewer homes on the market for buyers to choose from.

There was a little bump in new construction, or that number would have been bigger. The total number of pre-existing homes for sale in the metro was down 8.8 percent in November. That’s not quite as low as it was in 2021, but those numbers are pretty similar to that crazy market of 2020. What’s different here is we have fewer buyers than we did when interest rates were half of what they are today.

That seasonal effect also affects the time it takes to sell a home. The median number of days from listings a home to pending was 22 in November. Up a couple of days from October, and down a couple of days from November last year. It’s just pretty typical for this time of year. Home sellers were getting, on average, 98.5 percent of their original asking price. Again, kind of a seasonal normal.

Home Prices Steady But Affordability Declined

Home prices have been holding pretty steady all year. In the metro, the median sale price was $370,000, that’s up about 1.4 percent over the year. The average sale price was rose slightly more, up 4.2 percent over the previous year.

One of the reasons for that is that is the supply of homes for sale listed under $500,000 is shrinking and the supply of homes listed above $500,000 is where we have seen the growth.

The total number of homes for sale over $800,000 grew by 17.5 percent year-over-year and the number of homes for sale under $300,000 dropped 16.2 percent. And that’s where we can really see that affordability challenge come into sharp focus.

The total number of homes for sale by price bracket

What Home Buyers and Sellers Can Expect in 2024

So what are economists predicting for the housing market in 2024? 

Lawrence Yun, the chief economist for the National Association of Realtors, shared his 2024 outlook last month. 

Next year, Yun said he expects interest rates will continue to decline, but will stay between 6 and 7 percent.

Fed up with waiting for conditions to improve, Yun also predicts that more sellers will enter the market and that we can expect to see existing home sales to increase next year by double digits. Buyers can expect home prices to continue to rise slowly.

If those predictions come to fruition, we can expect a much more active market here in the Twin Cities and across the country.

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

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