Across Minnesota, higher mortgage rates take a toll on home sales and listings

The doubling of mortgage rates over the past year is beginning to take a toll on home sales across Minnesota.

This week, mortgage rates topped 6% for the first time in 14 years as lenders continue leaping ahead of the expected hikes to the main rate set by the Federal Reserve.

On Friday, a new report from the Minneapolis Area Realtors showed the lowest monthly sales figure for any August in eight years and the lowest number of listings for any August in at least a decade.

“We’re seeing a less competitive landscape as the market has slowed given current interest rates,” said Denise Mazone, a Twin Cities real estate agent and president of Minneapolis Area Realtors. “But the silver lining is that a less frenzied market could spell more inventory and opportunity for persistent buyers.”

A similar story is unfolding across the state. St. Cloud experienced the steepest decline of all regions for home closures, a 26% year-on-year drop.

House prices are still rising, sales are happening quickly and sellers are still getting close to their asking prices. At the same time, entry-level and working-class buyers are having to stretch their budgets as they shop for a dwindling number of listings.

The move to a 6% mortgage rate from 3% a year ago has a bigger effect on monthly payments than most people think, said Chris Galler, chief executive officer of Minnesota Realtors.

“In most people’s minds, they go, ‘Oh, that’s only 3 percent,'” Galler said. “It’s not. You really have to look at the impact, which is that it’s 100 percent more interest.”

Because of that, the monthly payments on a $270,000 house today are the same as a $310,000 house purchased a year ago. “That’s about $40,000 that they lost out on as far as buying capacity,” Galler said.

In the Twin Cities last month, buyers signed 4,981 purchase agreements, 24% fewer than last year and the lowest figure for any August since 2014, according to Minneapolis Area…