The seasonal spring market is exceptionally robust in Minnesota, and is the best time of year to sell a home. And now is about the time sellers start thinking about it! But before sellers make their decision, they often want to know the answers to these questions:
What is the overall health of the market? How is my city and area performing compared to the overall market? And what can I expect from this year’s spring market? To find these answers, we need to take a quick look back at 2023, and look at the impact of mortgage rates on the Minnesota housing market. Let’s get started!
2023 ANNUAL HOUSING REPORT
Fortunately, real estate professionals in the Twin Cities have access to the best statistical analysis and reporting in the country through our professional association, the Minneapolis Area Association of Realtors (MAAR). Each year, the Association puts out a year-end report to track the performance of the Twin Cities housing market on key metrics, including median price, monthly supply of inventory, and foreclosure rates. Best of all, these statistics are broken down by county and city, so that customers can get a more specific read on their local market conditions.VIEW ANNUAL REPORT
In 2023, with mortgage rates hitting a 2-decade high, the Minnesota housing market supply experienced declining inventory levels, as sellers sat on their hands and delayed sales due to the “golden handcuffs” of their current mortgage rates. Who wants to move off a 3% rate and buy a home with a 7% rate? And so, many homeowners stayed put, exacerbating a 2-year trend in declining inventory and declining home sales. In fact, closed sales dropped 18% in 2023, after dropping a whopping 19% in 2022.
On the demand side, buyers slowed down their purchases of home as rates rose and affordability dropped. The only outlier activity was in the luxury home category, where more cash-rich (and non-financed) buyers continued to upgrade their housing. This cash buyer phenomenon has already showed up in January luxury sales, which we comment on below.
With supple and demand both dropping at similar rates, median price remained stable, albeit the rate of increase slowed significantly. Twin Cities housing prices were up 1% over 2022, with median sales price rising to $368,000. Edina median price rose to $600,500, a 3% increase from 2022, and a whopping 27% increase from 2019 just before the pandemic. Premier Edina neighborhoods like Arden Park, Edina Country Club, Minnehaha Woods, and Parkwoods Knolls saw significant increases in luxury home sales, especially above $2 million mark where cash-rich buyers flourished (see Edina Neighborhoods Page).
2024 MARKET PREDICTIONS
As rate increases eased in Q4 of 2023, closed sales began to rise again. We expect this trend to continue and are looking at a vigorous seasonal spring market, followed by a slower second half of the year, depending on the speed of rate drops. In January, showings across all price categories were up significantly, and showings in the luxury home market of $1 million and above were up 90% over last year! Moreover, the percentage of showings in the $800k and above category doubled from last year, as cash buyers and cash-rich homeowners continue to trade up and into the luxury housing segment.
Listings that are fully prepped and staged can expect shorter market times and higher sales prices in the digital marketplace. As always, if you have questions about your own home’s market value, or are looking for ways to spruce up your home for the highest return on the market, feels free to contact us for a free walkthrough. We specialize in strategic home prep and staging plans!