November 28, 2023 Josh Sprague

Twin Cities Housing Market Outlook

The pandemic disrupted the economy in historic ways, and vastly reshaped the housing market. Huge increases in demand (work from home, exodus from cities to suburbs, low rates), coupled with record low supply, gave way to sharp increases in home prices.  Starting in 2022, the Fed began to cool inflation with a series of rate increases, causing mortgage rates to double in over a year.  In 2024, how will these market forces impact your housing values in the Twin Cities?  And what will be the best strategy for buying and selling a home? Read on for our 2024 Twin Cities Housing Market Forecast and Predictions.

The Impact of Rates

Before we begin, let’s take a look at the greatest economic lever in the housing market, mortgage rates.  Here is an historic chart of mortgage rates from 2000-2023, with grey areas marking the recessions during that period.  In 2022,  rates break from their stable, downward trajectory and begin to rise precipitously, going from 3-4% for a 30 year fixed mortgage in Q1 2022 to 7-8% in Q3 2023.   And in 2023, on the far right, rates finally begin to dip again as the Fed stops raising rates. In 2024, we anticipate this downward trend to continue, with rates reaching as low as 6% by late 2024:

The Easing of Prices

Lower rates will ease supply, as sellers in their “golden handcuffs” of 3-4% mortgage rates will begin to move again and release more inventory into the market, easing the balance between supply and demand.  Accordingly, 2024 housing prices will keep leveling off and stabilize.   We can already see the beginning of this trend in 2023 in the Minneapolis Case Schiller Price Index, below.  After a long, sharp increase in price appreciation from 2020 on, the far right of the chart shows a leveling off:

This “market cooling” has also shown up in bellwether Minnesota markets like Edina, where in 2023 closed sales dropped 28% year-over-year, market time increased 19%, and median price appreciation slowed to 1%.   Take a look at these recent statistics from October and the far right of the chart, where you can see year-over-year changes:

2024 Real Estate Advice

Based on the foregoing, we advise sellers to take advantage of the seasonally strong 2024 spring market, which starts in January and ends in May.  With mortgage rates falling and a seasonal bump in demand, we expect the best sales prices of the year during this period.  For buyers,  take advantage of the easing of rates to pursue purchases in the first half of the year, where competition will also be less.  And in the second half, look for better deals and continued lower rates on purchases.   As always, we would love to work with you 2024 and invite you to check our our Buyer & Seller Services Page for more information!

Contact us

We look forward to hearing from you!