If you are looking to move to the Twin Cities or already live in the region, this market update is for you! It doesn’t matter if you are looking to move now, or even five years from now – staying well informed sets you up for financial success in the long run.
I’m Bailey Beckman, a Twin Cities resident and local realtor, which means I live in market data.
I don’t believe in “doom & gloom” OR “roses & sunshine” tactics, so this update is just pure local information and data. I will cover the sales prices, interest rates, inventory and more for the month of October 2023.
Sales Prices Still on the rise - (+) 2.5%
Home prices rose 2.5% year over year – a $9,000 increase now sitting at a median of $365,000 across the 16-county metro. This is a slight dip in comparison to September, which confirms that we are shifting gears as we head into the fall/winter off season.
I expect to see the monthly prices continue to drop until we hit the beginning of the spring market, which typically happens in February. Here you can see that September in the orange tends to be the beginner marker for our slow season and activity picks back up in February in the green.
Homes for sale are DOWN - inventory is limited
Part of the reason as to WHY home prices are still up in the Twin Cities (despite the increased interest rates), is because homes for sale are DOWN.
Homes for sale dropped 6.5% compared to last year in the month of October, limiting inventory even more. This lack of inventory has kept the market competitive for buyers.
WHY is inventory at historical lows??
If you watched my market update from last month (September 2023), I dove into why we are seeing this limited inventory trend. The term is called the “lock in” effect. Homeowners that were able to purchase or refinance their mortgages over the last few years are “locked in” to interest rates between 2 and 3%.
Owners in this situation are less likely to sell, unless they have to.
So what type of market are we in...
We are in a position of the market where limited inventory is still maintaining home prices, but higher interest rates have taken several buyers out of the demand equation overall.
This can be seen in the month’s supply indicator also known as absorption rate.
- A seller’s market is between 0-3 months supply
- Balanced is between 3-6 months
- A buyers market is 6+ months.
For the month of October, we did see the months supply increase 20% to 2.4 months. So we are edging closer to a balanced market, but still in a seller’s market.
This means more buyers were empowered to negotiate with sellers on terms of offers, including seller paid closing costs and purchase prices.
Affordability & Interest rates
The issue of affordability is still on the forefront of most real estate conversations. Increased home prices paired with interest rates between 7 to 8% unfortunately have booted several would-be buyers out of the market.
Now that being said, according to Business Insider we may see rates drop to between 6 and 6.7% by May 2024. This would make a pretty significant impact on the affordability trends that we are seeing right now.
Looking ahead over the next few months, the Twin Cities housing market will slow down in the winter off-season.
- We should expect to see sales prices decrease slightly month over month and the days on market to increase.
- We also see fewer new homes listed during the off season, so inventory will stay limited, keeping our months supply between 2.4 months and 3 months.