Twin Cities area home prices hold steady despite dwindling listings

Home prices in the Twin Cities area are holding steady as new listings fall faster than sales.

During July, the median price of all sales was $375,000, on par with last year and just shy of an all-time high, according to a new monthly report from the Minneapolis Area Realtors. Pending sales, an indication of future closings, were down 9.5%, while new listings fell a whopping 16%.

Despite the decline in sales, most houses are still selling quickly and for more than asking price. On average, houses are selling for 100.8% of list price after just 29 days on the market.

"It still surprises me how often I hear and read about a crash," said Brianne Lawrence, president of the Saint Paul Area Association of Realtors, in a statement.

Home buyers — and sellers — are facing tough decisions this summer as higher — though historically average — mortgage rates put the brakes on buying and selling.

Mortgage rates have nearly doubled in the past couple years, slowing sales and listings. On Thursday, Freddie Mac said the average 30-year fixed-rate mortgage (FRM) increased for the third week in a row to 6.96%. A year ago at this time, the 30-year FRM averaged 5.22%.

Nearly everyone with a mortgage has a rate that's below 4%, causing many would-be sellers to stay put instead of selling. At the same time, many buyers are forced to adjust their budgets.

At the end of the month, there were only 7,842 houses for sale across the metro, 16% fewer than last year. At the current sale pace, that meant there were only enough listings to last a little more than two months.

The Redfin report showed there were more buyers out shopping at the beginning of this July than there were last year at the same time. Home tours during early July rose 4% compared with a 10% decline at the same time last year, according ShowingTime, a company that tracks home tours.

Nationwide, the median home sale price was $383,750, rising 1.5% from a year earlier. That's the first year-over-year increase in nearly five months and just $2,500 shy of the record high hit in June 2022.

Locally on a year-over-year basis, home prices were down slightly in April and May but posted slight gains in June. Annual prices were down for the first time since early 2012 during April, but the typical home price is now up 7.1% from 2021 and 20% from 2020.

Higher rates rather than declining demand are the primary reason for slowing price gains. Redfin, an online real estate brokerage, said with weekly mortgage rates hovering at their highest level since November 2022, the typical home buyer's monthly payment is now at a near-record high of $2,627.

That means a home buyer with a $3,000 monthly budget can afford a $450,000 home with today's average rate, trimming $30,000 in buying purchasing power since February, when they could have bought a $480,000 home with that month's average rate of around 6%.

The decline is more extreme when compared to a year ago, when a $3,000 monthly budget would have bought a $510,000 home at a rate of about 5.3%.

Statewide, the trends are similar. The median price of all homes that sold across the state increased 1% to $342,995, according to data also released Tuesday by the Minnesota Realtors, a trade group that represents sales agents across the state.

Emily Green, president of Minnesota Realtors, said buyers had slightly more negotiating power in July, and sellers in some "move-in ready" homes were most likely to receive multiple offers.

"Supply has steadily improved month-over-month, but it remains well short of what's needed for a balanced market," she said. "We're in a tight tug-of-war right now due to high demand and lower inventory."