Prices up, home sales down as local market continues to shift

Higher mortgage rates are taking some of the froth off the housing market in the Twin Cities, but with more buyers than sellers in some areas house prices are still increasing at a steady clip.

During June, buyers signed 5,544 purchase agreements, 18.4% fewer than the same month last year and the lowest June figure since 2014, according to a monthly report from the Minneapolis Area Realtors. Closings were also down from last year, but were up slightly compared with 2020.

The median price of those sales increased nearly 9% to a record $380,000.

“People [buyers] are relaxing a little more,” said Carla Ferrell, a long-time Twin Cities real estate agent. “The sense of urgency has backed off a bit.”

On Saturday, Ferrell hosted an open house at a house in Plymouth she listed a couple days earlier for $439,900. Though more than a half dozen prospective buyers toured the house, she’s yet to receive an offer. She expects one by end of the week.

She said buyers now have the luxury of a little more time to ponder their purchases as higher mortgage rates temper demand.

“It’s quickly shifting to being a more normal market,” she said. “But it’s still more of a seller’s market than than a buyer’s market.”

Open houses — which are much more common than they were just a couple months ago when many houses were selling within hours — are just one of many signs that the housing market is shifting. Houses are taking slightly longer to sell, and buyers are much more likely to offer a price reduction than they were just a few months ago.

That rebalancing is happening as higher mortgage rates and house prices erode affordability.

Last Thursday, Freddie Mac said the 30-year fixed-rate mortgage (FRM) averaged 5.51% with an average 0.8 points, according to its weekly rate survey. That’s up from the previous week when it averaged 5.30%, and 2.88% a year ago.

“With rates the highest in over a decade, home prices at escalated levels and inflation continuing to impact consumers, affordability remains the main obstacle to homeownership for many Americans,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

The increase in rates — and record high home prices — caused the housing affordability index in the Twin Cities during June to fall to its lowest level since at least 2004.

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