24 Jun Minnesota Real Estate Update June 24th

Minnesota Real Estate Update June 24th

This is our Minnesota real estate weekly update on June 24th, 2022. We are now experiencing a correction in our real estate market as the result of doubling of interest rates since the first of the year and additional homes coming on to the market. In addition, many buyers reduced affordability with the higher rates and are electing to rent for another year (even though rents went up over thirty percent the last year nationwide).

Coronavirus is still out there and continuing to affect us. The good news is that the severity of the current form of COVID is less than previous variants and hospitalizations have not increased.

We review real estate facts and future trends

The trends

We are still in a seller’s market, but this is changing quickly. So, what does that mean? That you should strongly consider working with an experienced real estate agent to give you an edge in buying or selling process that understands the market. Experience is priceless and for a buyer it costs you nothing but can save you much.

The facts

Here are facts of our current Minnesota real estate market. Our current housing affordability Index for Minnesota real estate for May was 101, and this compares to 142 this same time last year. The number of 101 is the lowest ever recorded. The higher the number means the greater home buying affordability in the Twin Cities. So, this trend is negative. Our current inventory of homes for sale is 7,429 and climbing. Of that number 38% is new construction with the majority of those yet to be built. So, the real number of available homes to buy right now is lower than 7,429. In comparison, we had 6,652 in 2021. So, the inventory of homes for sale is up 11.7% from this time last year. This is the new trend with our much higher interest rates. A point of interest, in 2009 at the time of our first real estate correction in Minnesota in 40 years, we had over 36,000 homes for sale in the seven county Minneapolis/Saint Paul metro area. The Minnesota real estate pending sales for the last week, which have sold but not yet closed, was 1,308. That compares to 1,531 pending home sales last year. That is a decrease of 14.8% from the same week last year. So, forty-six of the last fifty-one weeks that number has decreased compared to the previous year. An average real estate market would have a three-to-four-month supply of housing inventory and we have 1.4 months (May figures -1.2 in April).

More facts

Minnesota seller’s benefit financially when real estate values rise. The median sales price (May numbers) increased by 9 % since this time last year. $375,000 is now the median sales price in the Twin Cities area. A market health indicator is the comparison of our sales price to original list price. For May, the average sale to list price was 104.1 %. And that compares to 104 % in 2021. That number will adjust downward as we get June figures. For even more Minnesota real estate market information visit my website at https://www.mnrealestate.com/twin-cities-information/area-appreciation-rates/. It features a comprehensive review of our Minnesota real estate market for those that like all the data!

Our current interest rates in the Twin Cities

The low interest rates have been a real catalyst for buying power for buyers the last two years. The Federal Reserve is continually raising interest rates (did again this last week) and expect at least two more this year. Rates increased this last week by .75% and expect the Federal Reserve to raise them again in July. These interest rate increases are to reduce the rate of inflation, but they will also impact what buyers can afford. Borrower paid lender fees are 4.25% for VA, 4.199% for FHA and 4.875% for conventional. Rates for lender paid closing costs are 4.991% for VA, 4.962% for FHA and 5.9% for conventional. Just reach out to me if you need contact information of a lender with those interest rates.

My opinion of the future of Minnesota real estate

I have experienced many real estate markets in over 30 years of real estate, but hard to compare to the last couple of years. With inflation forcing the Federal Reserve to raise interest rates they could go to as high 6.5 to 7.0 % or more by late summer of this year. This is having a chilling affect on the market and what buyers can afford. Many buyers have and will decide to rent instead of buying. I predict this summer and fall that inventory will increase and we will move out of a buyer’s market into a neutral Minnesota real estate market.

This is a suitable time to discuss your housing needs for 2022!

Your house and neighborhood in our MN real estate market

We find that price ranges and neighborhoods have its own specific trends and facts. In so if you are interested in knowing the specifics for your home…just call Jeff.

Jeff Anderson

The Anderson Team

www.mnrealestate.com

RE/MAX RESULTS

612-386-8600