Minnesota Housing Market Trends
According to new data, days on the market decreased as the median price increased due to the scarcity of inventory. Housing demand continues to outstrip supply in the entire state. Minnesota Realtors released July 2022 data, stating that the state's median sales price increased by 7.9 percent to $339,900. Below is the latest report of the “Minnesota Housing Market” by Minnesota Realtors®.
The report shows the residential real estate activity of the entire state of Minnesota, composed of single-family properties, townhomes, and condominiums combined. Percent changes are calculated using rounded figures. Fueled by high-interest rates for home mortgages, the Affordability Index, a measure of housing affordability, declined by 24.6% in July. In July, we also saw a slowdown in the Minnesota real estate market, with closed sales down 19.2% compared to July 2021.
Minnesota Housing metrics that increased year-over-year:
- Median Sales Price + 7.9%
- Avg. Sales Price + 9.0%
- Homes for Sale + 6.4%
- Months Supply + 18.8%
Minnesota Housing metrics that decreased year-over-year:
- Pending Sales – 19.5%
- Closed Sales – 19.2%
- Days on Market – 3.8%
- Affordability Index – 24.6%
- Pct. of Orig. Price Received – 1.7%
- New Listings – 14.2%
Minnesota Housing Market Forecast
Minnesota home prices continue to rise as more buyers compete for the same properties. Since the last decade (Sept 2012), the typical home value in Minnesota (statewide) has appreciated by nearly 98% (Zillow Home Value Index). Currently, the typical value of homes in Minnesota is $334,858. Minnesota home values have gone up by 10.1% over the last twelve months and 25.4% over the last two years.
The rate at which homes are being sold on the Minnesota housing market has unquestionably slowed down, but this is more indicative of a return to the norm than anything else. Housing demand is still present, indicating that this situation is neither a bubble nor a crash. The cooling of the Minnesota real estate market is good news for buyers who are getting tired of being outbid in the state's red-hot market or who are experiencing buyer fatigue.
All-Transactions FHFA House Price Index for Minnesota (Quarterly)
- Q2 2022: 546.85
- Q1 2022: 512.59
- Q4 2021: 501.08
- Q3 2021: 492.55
- Q2 2021: 469.80
A decline in pending sales in July means the closed sales will also drop in the coming months. Because a home goes under contract a month or two before it is sold, the pending home sales generally lead to closed sales by a month or two. The trend of prices surging and sales falling will continue in the coming months.
The Months Supply of single-family homes in Minnesota is 1.9 months, which is tilted towards the seller side. When the demand for housing is high, but supply is low, home prices often rise. It is said that five or six months of supply is associated with moderate home price appreciation. Anything lower means a sellers' market.
Here's Zillow's forecast for some of the metro areas in Minnesota. None of the MSAs of Minnesota are predicted to see a home price decline in 2023.
| Minneapolis-St Paul, MN home values are forecasted to rise 0.6% between July 2022 to July 2023. |
| Duluth, MN home values are forecasted to rise 1.9% between July 2022 to July 2023. |
| Rochester, MN home values are forecasted to rise 1.4% between July 2022 to July 2023. |
| St. Cloud, MN home values are forecasted to rise 2.4% between July 2022 to July 2023. |
| Mankato, MN home values are forecasted to rise 2.1% between July 2022 to July 2023. |
| Brainerd, MN home values are forecasted to rise 4.2% between July 2022 to July 2023. |
| Faribault, MN home values are forecasted to rise 0.1% between July 2022 to July 2023. |
| Fergus Falls, MN home values are forecasted to rise 1.3% between July 2022 to July 2023. |
Minnesota Real Estate Appreciation Rate
According to Neighborhoodscout, Minnesota's median home value is around $297,269. The real estate appreciation rate in Minnesota in the quarter (2021 Q4 – 2022 Q1) was 2.28%. In the last twelve months (2021 Q1 – 2022 Q1), it has been 14.87%. In the last two years, it has been around 22.2% while the cumulative appreciation rate in the last decade has been around 127.11%. Angle Inlet, Oklee – Plummer, Browns Valley, Newfolden, and Clinton are among the Top ten highest appreciating cities in Minnesota since 2000.
Home prices are directly affected by demand, which, according to real estate experts, isn't going away anytime soon. However, they are not rising as quickly as they once did, and Minnesota real estate agents predict that prices will level off or rise slightly this year. Some of this is most likely due to rising interest rates.
Moderate price appreciation has historically been accompanied by a six-month supply. Construction has slowed for much of the pandemic, owing to labor shortages and supply-chain issues that have made certain materials difficult to obtain. Minnesota's housing supply is still well short of a balanced real estate market.
Sources:
- https://www.mnrealtor.com/buyers-sellers/marketreports
- https://fred.stlouisfed.org/series/MNSTHPI#
- https://www.zillow.com/mn/home-values/
- https://www.neighborhoodscout.com/mn/real-estate
- https://fred.stlouisfed.org/series/ACTLISCOUMN#
