Home Prices are rising again, and inventory is falling

Twin Cities Real Estate Market Update July 2023

 

New listings are down. Home prices are rising. And interest rates have climbed back above 7 percent. In my real estate market update for July, I look at how these trends are impacting homebuyers and home sellers in the Twin Cities.

It’s July already, and we’re more than halfway through 2023 but the real estate market seems so 2022. With a low inventory of homes or sale, relatively high interest rates, and the Federal Reserve showing no signs of cutting interest rates, the Twin Cities real estate market seems stuck in neutral.

Before I dive into the numbers for this month, I want to note that the statistics I present here are drawn from the North Star Multiple Listing Service data for the seven-county metropolitan area, which includes Hennepin, Ramsey, Dakota, Anoka, Washington, Scott, and Carver counties.

New Home Listings Fall in June

I like to start each month looking at new listings, they are the heart of the housing market. In June we had 5,417 new listings come market in the seven-county metro. That is 191 fewer new listings than we saw in May. That’s not entirely unusual. May is often the strongest month of the year.

I like to start each month looking at new listings, they are the heart of the housing market. In June we had 5,417 new listings come market in the seven-county metro. That is 191 fewer new listings than we saw in May. That’s not entirely unusual. May is often the strongest month of the year.

A list in new home listings in the Twin Cities seven-county metro for the month of June from 2015 to 2019 and 2023

The bigger news here is that new listings continue to lag well behind last year, and are significantly lower than pre-pandemic levels. New listings in the seven-county metro were down 18.7 percent compared to June 2022. 

If you look back at the market before the pandemic, from 2015 and 2019, you can see that drop is even greater. Looking at the data from 2016 and 2017, sort of the peak of the housing market recovery, you can see we had more than 7,400 new listings in June, and those years were still strong seller’s markets.

Inventory Shortage is Greatest for Lower-priced Homes

That inventory shortage hits hardest at the bottom of the price range, homes priced below $300,000. In that price range, new listings fell by 28.3 percent compared to June of last year. 

A graphic showing new home listing for June 2023 in the Twin Cities real estate market

The only area of growth in new home listings was again in the above $800,000 price range. Although new listings there were only up by 1.2 percent year-over-year.

The total number of homes for sale increased ever so slightly in June, but that number is still nearly 17 percent below last year. That is an indication that buyer activity remains strong, despite some drop off in buyer activity due to interest rates and other factors.

The only area of growth in new home listings was again in the above $800,000 price range. Although new listings there were only up by 1.2 percent year-over-year.

Total Number of Homes for Sale Edges Up as Buyer Demand Slows

We are still in a tight sellers market. Months supply, a measure that indicates how long the current inventory of homes would last given the current sales rate if no additional new houses came on the market is creeping up as buyer activity slows. 

The supply of homes edged up from 1.6 months in May to 1.8 months in June. That’s for all home types. But if you take new construction homes out of the equation, supply drops to 1.4 months. Just a reminder, a market with a balanced number of buyers and sellers would have four to six months of supply.

A graphic showing the months of supply of homes for sale in the seven-county Twin Cities metropolitan area.

Just a reminder, a market with a balanced number of buyers and sellers would have four to six months of supply.

Median days on market, that is the median number of days between when a house is listed for sale and when it goes to pending status and is considered off the market, dropped from 16 days in April to 12 days in May and to 11 in June. Homes are still selling at a brisk pace.

Home prices are rising again after a couple of months of holding steady. The median sale price of a home in the seven-county metro rose to $387,000 in June. That is $15,000 growth from last month and up 1.2 percent from last year.

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 is, well the average sale price of all homes sold in June. The average tends to be higher.

The average sale price in the metro was $456,184. That difference may be due, in part, to the shortage of homes for sale at the lower end of the market.

Home sellers are typically getting about 100 percent of their original asking price.

Mortgage Interest Rates Fairly Steady

Lastly, let’s take a look at interest rates. Home mortgage interest rates for a 30-year conventional mortgage have been above 7 percent for the past week, and in the high mid sixes for a 15-year fixed rate mortgage.

What Does This Mean for Homebuyers and Sellers?

So what does this all mean for you? If you’re considering selling your home this summer, you can expect strong buyer demand. But with the low inventory of homes for sale, finding your next home could take some time. For those who can afford to do so, buying your next home before selling your current home is going to make for a less stressful home-buying journey.

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, you can 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 real estate market. 

In this tight real estate market, buying for you sell is a great option, if you’re financially able to do so. Check out this video to learn more.

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