What’s happening in the Real Estate market?

Over the last few years, the Twin Cities area has seen a significant increase in real estate market values. In May of 2020, the median sales price in the Twin Cities was $285,000. In May of 2022, the median sales price was $350,000. This is a significant increase that was driven by low-interest rates, and bidding wars caused by a lot of buyer demand combined with very little inventory.

Today’s interest rates are hovering around 5.5%. This is up from the 2.5% to 3% interest rates we saw 6 months to a year ago. Inventory remains low with about 6,300 listings in the Twin Cities area which is just a little lower than this time last year.

In the objective view, we are in a seller’s market. Homes are being priced today using the recent sales that when listed, were bid up in multiple offers and now that they have closed, are being used as comparable sales to price the new listings. This means that today’s sellers are getting the price past sellers got. Due to higher interest rates softening buyer demand, sellers are not as likely to get the additional 10%-15% on top of the list price. Many appropriately priced listings are still selling above list price, however, it is not to the degree seen in the recent past. To reiterate the previously made point, however, Sellers are still fully reaping the benefits of the significant appreciation of the past couple of years.

For buyers, the rising interest rates have made it more expensive to buy. On the flip side, buyers are not needing to compete as aggressively as they did in the past. Some Buyers have thought of playing a waiting game to see where the market will go. The waiting game is unlikely to be fruitful as interest rates are unlikely to come down and housing prices are unlikely to drop due to the continued inventory shortage causing demand to be greater than the supply. Rent prices have also increased making renting an unattractive alternative.

If you don’t intend to make a move but currently own a home, you’ll likely see an increase in property taxes. You should also check with your home insurance provider to make sure you are properly insured for the current value of your home. As a renter that does not plan on buying, you may see an increase in rent. If you hope to buy but are wondering if now is a good time, it is likely as good a time as any time in the near future to buy.