Whether you have been fantasizing about a bigger kitchen or a backyard perfect for your dog, it can feel near impossible to make any real decisions unless you have a clear picture of what is actually going on in the housing market.
This blog is for you if you’re looking for a quick market recap for the Twin Cities that doesn’t try to blow smoke up your butt or scare you using bad fear tactics.
Here are the key highlights from the month of August 2023 in the Twin Cities:
#1 Sales Prices
Though home prices took a mini dip in July, they popped right back up to $380,000 across the 16-county metro. Year-over-year we saw a 2.7% increase in the median sales price, putting us right on par with the home cost in June of 2022.
Single family homes and townhomes saw the biggest annual increases, while condos actually took a dip in pricing.
Now I do expect home prices to start their seasonal decrease headed into September based on the historical trend lines. If we look over the last 10 years, you can see that August typically is that seasonal marker.
#2 Buyer Demand
Demand in the Twin Cities continues to stay strong, but not at the same historical rates as 2021 and 2022.
- The number of showings per listing is one of the top ways to see the impact of buyer demand in the market. The more showings there are per home, the more active buyers there are in the market. In August, we saw an average of 5.3 showings per home – flat compared to last August. Homes under $350,000 saw the most amount of activity, while homes above $350,000 cooled.
- Days on Market is the second market demand indicator. If the days on market increases it means that buyers are taking more time to make decisions and are passing on homes more frequently. In August the median days on market sat at 14 days, down 1 day compared to last year. So homes are still moving quickly.
#3 Inventory Shortage
Finding your dream home might take a little longer than you’d hope… We are facing a shortage of homes available for sale. In August, we dropped down to 8,308 homes on the market, a 9.7% decrease compared to last year. Since 2014, we have seen the available inventory get smaller and smaller. This is one of the primary reasons that we are seeing increased competition among buyers.
The BIG question you may be wondering is “why don’t we have inventory..” Many existing homeowners are choosing to sit back for longer. They are concerned about finding their next home in this competitive market and face difficulties leaving a locked mortgage interest rate that is lower than today’s rates. They feel stuck and it doesn’t open opportunities for new first time homebuyers in those starter level homes.
#4 Month's Supply (a.k.a. Market balance)
Less homes for sale with still solid demand trends, push us into a seller’s market. Multiple offers were still taking place in August, forcing buyers to compromise but not as competitively as last summer.
The month’s supply of homes is an indicator of market balance that I kind of like to think of as a crystal ball. The number is calculated by taking the inventory of homes for sale at the end of a given month, divided by the average monthly Pending Sales from the last 12 months. It’s also known as absorption rate.
- A seller’s market is between 0-3 months supply
- Balanced is between 3-6 months
- Buyers market is 6+ months
For the month of August, we did see the months supply increase by 15.8% to 2.2 months. We will keep an eye on this indictor through the off season to track regular seasonal trends in comparison to real market shifts.
#5 Affordability index...
Now I have to call out the elephant in the room… affordability. With higher interest rates and home prices still on the rise, it is no surprise that the housing affordability index is down 18.1% compared to August 2022.
I’m sorry this is bad news for buyers that choose to “wait out the market” starting back in 2021… The affordability index keeps getting tighter, pricing large numbers of buyers out of the market completely.
#6 Mortgage interest rates (30 year, fixed rate)
Looking ahead, the Twin Cities housing market is likely to stay competitive throughout the rest of 2023. Demand is expected to stay up, and inventory will be limited.
Interest rates did bump up again and they were trending between 7 and 7.5%. There are HOPES that rates will cool in late Q4 but I will believe it when I see it.
So there is your recap of the local housing market here in the Twin Cities for August!
No smoke up your butt, no fear tactics, just info. Check out my YouTube Channel for other informational real estate videos.