Twin Cities Real Estate Market Update October 2023

Why are Home Prices
Still Rising?

It’s halfway through October already, can you believe it? We started out this month with 90-degree temps and then BAM—suddenly there’s quite a chill in the air. We are feeling a bit of that fall chill in the Twin Cities real estate market as well. 

Looking at the market activity for September, I see some of that typical slowdown we expect after Labor Day. But this year it’s a little hard to tell what’s a seasonal effect and what’s a continuation of the impact of those high interest rates on home buyers and home sellers. Despite that decline in market activity, home prices have continue to rise in 2023, although more slowly than in previous years.

New Home Listings Shrink

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 and cover the 7-county metro.

I like to start with new home listings, they are the heart of the market. After a little bump in August, new home listings fell In September. Metro-wide, there were 5,051 new listings in August, and just 4,774 in September. Seasonally, we kind of expect to see that fall drop off. However, new listings were also down 4.7 percent compared to last year and that has been an ongoing trend.

And if we look back to 2021, new listings in September of that year were quite a bit higher—there were 6,143 new listings that year to be exact. That’s a 25 percent drop in just two years! Ouch!

Homes Staying on the Market Longer

Graphic showing the growth in the total number of homes for sale in the Twin Cities increased in September.

Even though the number of new listings fell in September, the total number of homes for sale in the Twin Cities last month did eek up from 6,691 in August to 7,040 in September.

But that tiny bump was just that. Compared to September 2022, the total number of homes for the month fell by 8.2 percent.So we have fewer homes coming to the market, and fewer homes on the market than last year at the same time.

But even with the low supply of homes for sale, homes are taking longer to sell. And that’s where we can see the impact of those interest rates.

The supply of homes for sale in September was at 2.3 months. We haven’t seen a number like that since September 2019 and at that point there were a lot more homes on the market.

Don’t get me wrong, this is still considered a strong seller’s market. As I’ve mentioned before, what is typically considered a balance market—a market with a relatively equal number of buyers and sellers—has a 4 to 6 months supply of homes for sale. We’re at 2.3 months of supply.

In real estate, we use a measure called of months of supply—that is the time it would take to sell all the homes currently on the market if no new homes were listed for sale.

Image showing the median number of days it is taking for a home to sell in the Twin Cities

Another measure of market activity is median days on market, or, the number of days from when a home is listed for sale to when it goes pending. In August, the median days on market was 14, that edged up to 16 in September. But just for some perspective, at the peak of the great recession in 2008, the median number of days on market was 144.

Moving on to interest rates. Home mortgage interest rates started this week at a 23 year high of 7.81 percent for a 30-year fixed rate mortgage. Interest on a 15-year fixed rate mortgage was at 6.60 percent. 

Home Prices Dip in September but Continue to Rise Overall

Now let’s talk prices. The median sale price dropped in September to $375,000, that’s about $10,000 lower than in August, but it’s still 2.4 percent higher than in September last year.

Across the metro, sellers are still getting about 100 percent of their original asking price. We aren’t seeing a lot of discounting going on, but we’re also not seeing those manic bidding wars either.

Moving on to interest rates. Home mortgage interest rates started this week at a 23 year high of 7.81 percent for a 30-year fixed rate mortgage. Interest on a 15-year fixed rate mortgage was at 6.60 percent.

A More Balanced Market

So what does all this mean if you’re considering buying or selling a home this fall? Home prices are holding mostly steady, and even rising slightly overall despite the uncertainty in the larger economy.

The supply of homes for sale remains low, but interest rates are keeping many buyers sidelined, so if you can afford to buy now, competition for the homes that are out there is much less than it was during the crazy pandemic years. Many homes are selling at or near the asking price.

Just remember, every 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 sellers navigate the Twin Cities housing market.

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