In recent years, the real estate market in the Minneapolis-St. Paul metro area has undergone a significant transformation, primarily driven by rising mortgage rates and a changing balance between supply and demand. Previously, low mortgage rates and a shortage of homes fueled a fast-paced, competitive market where sellers could expect multiple offers above asking price. However, this summer marked the beginning of a shift, as higher interest rates and an increased inventory of homes have given buyers more options and more time to consider their purchases. According to data from the Minneapolis Area Realtors, there was enough inventory across the 16-county metro area to last about 2.5 months, signaling a shift toward a more balanced market compared to the heavily seller-driven conditions of the past.
While this change in the market is still in its early stages, it is already having a noticeable impact on both buyers and sellers. For those looking to sell their homes, the process now requires more time and effort, with fewer instances of bidding wars or waived contingencies. Homes in desirable price ranges, especially those between $250,000 and $350,000, are still selling quickly, but properties priced lower or higher are taking longer to move. Entry-level buyers and those looking to downsize are particularly feeling the effects of these market shifts, as homes in their price range remain scarce, creating continued competition. At the same time, many homeowners with low mortgage rates are reluctant to upgrade to more expensive homes, given the prospect of higher interest rates, further contributing to the limited supply of move-up homes.
In certain parts of the metro area, the supply of homes has improved more dramatically than in others. For example, in Edina, which is typically one of the most expensive markets in the region, there has been an increase in the availability of homes priced below $300,000, many of which are condos or townhouses. These types of properties have become slightly more difficult to sell due to rising homeowners association fees, which make monthly payments unaffordable for some buyers. Meanwhile, in nearby St. Louis Park, the inventory of starter homes has more than doubled, offering increased opportunities for first-time buyers. However, in other high-demand suburbs like Andover and Mound, the supply of affordable starter homes remains critically low, with listings lasting only days before being sold, adding pressure on buyers in these areas.
Despite these changes, sellers are still experiencing success in many parts of the metro, particularly when properties are well-priced and move-in ready. Properly staging homes and pricing them competitively can still lead to multiple offers, even in a slower market. For higher-end properties, the market remains more unpredictable. Upper-bracket homes, particularly those priced over $500,000, are seeing slower sales, with cash buyers having a slight advantage as they are less affected by rising interest rates. Overall, the shifting dynamics of the Twin Cities real estate market mean that both buyers and sellers need to adjust their strategies and expectations in this new landscape, where conditions are slowly moving toward greater balance between supply and demand.
David Gooden | Luxury Real Estate Agent