The Minnesota housing market is currently experiencing a period of transition marked by rising inventory, declining sales, and modest price growth. This shift comes after a period of high demand and rapid price appreciation. Here are the latest trends in the Minnesota real estate market.

Current Minnesota Housing Market Trends

Key Market Trends

• Inventory Levels are Increasing: The monthly supply of Inventory, which measures the balance between supply and demand, has risen to 3.0 in August 2024, up 15.4% from the previous year. This indicates a shift towards a more balanced market, with more homes available for buyers to choose from. The number of Homes for Sale also saw an 11% increase year-over-year, reaching 16,165 in August 2024. This rise in inventory suggests that the intense seller's market conditions of recent years are easing (Minnesota REALTORS®).
• Sales Activity is Declining: Both Pending Sales and Closed Sales have decreased in August 2024 compared to the previous year. Pending Sales, which represent homes under contract, dropped by 10.2%, while Closed Sales, indicating completed transactions, fell by 9.5%. These declines suggest a cooling in buyer demand, possibly influenced by rising interest rates and increased inventory levels.
• Home Prices Show Modest Growth: Despite the slowdown in sales, the Median Sales Price in Minnesota continues to rise, albeit at a slower pace. In August 2024, the Median Sales Price reached $352,000, reflecting a 1.7% increase from the previous year. This suggests that while price growth is still occurring, it is moderating from the rapid appreciation seen in previous years. The Average Sales Price also showed a similar trend, increasing by 4.1% to $422,974 in August 2024.
• Housing Affordability Remains a Concern: Despite some moderation in price growth, housing affordability remains a challenge in Minnesota. The Housing Affordability Index, which measures the ability of the median household income to qualify for a mortgage on a median-priced home, has shown slight improvement, reaching 94 in August 2024, up 5.6% from the previous year. However, this still indicates that housing costs remain relatively high compared to income levels.

Regional Variations in the Minnesota Housing Market

While the overall trends point towards a cooling market, there are variations in performance across different regions of Minnesota. For example, the Northwest Region experienced a significant 32.1% decline in Closed Sales in August 2024, while the Upper Minnesota Valley Region saw a 25% increase in Closed Sales during the same period. These differences highlight the importance of considering local market conditions when analyzing trends.

Here's a closer look at some notable regional variations:

• Twin Cities Region: The 7 County Twin Cities Region saw a 13.5% decrease in closed sales, with homes selling for a median price of $380,000, a 1.3% increase. The 16 County Twin Cities Region experienced similar trends, with an 11% decrease in closed sales and a 2.3% increase in median sales price to $380,000.
• Greater Minnesota: Many regions outside the Twin Cities saw larger decreases in closed sales, including the Arrowhead Region (-19.7%), South Central Region (-23.5%), Southwest Region (-32.6%), and Northwest Region (-38.9%). This suggests that the slowdown in the housing market is more pronounced in these areas.
• Price Growth Variations: While most regions experienced price growth, some areas saw more significant increases than others. For instance, the Southwest Central Region saw a 14.8% increase in median sales price, while the North Central Region experienced a 12.9% rise. On the other hand, some areas, like the South Central Region, saw a decrease in median sales price (-6.4%).
• Days on Market: The number of Days on Market increased across all regions, indicating that homes are taking longer to sell. This is another indicator of a cooling market, as buyers have more time to consider their options.

Popular Counties in the Minnesota Housing Market

Here are some of the more populous counties and key trends observed:

• Hennepin County: As the most populous county in Minnesota, Hennepin County, encompassing Minneapolis, saw a 5% increase in new listings, but closed sales decreased by 15%. The median sales price rose slightly by 0.6% to $380,000.
• Ramsey County: Home to Saint Paul, Ramsey County also saw a rise in new listings (4.7%) and a drop in closed sales (10.5%). The median sales price in Ramsey County increased by 6.5% to $330,000.
• Dakota County: Another populous county in the Twin Cities metro area, Dakota County experienced a notable increase in new listings (6.9%) and a smaller decrease in closed sales (5.6%) compared to other metro counties. The median sales price in Dakota County decreased slightly by 2.6% to $380,000.
• Anoka County: Located north of Minneapolis, Anoka County saw a significant decrease in both new listings (-14.5%) and closed sales (-11.1%). The median sales price in Anoka County increased by 3.9% to $367,750.
• Washington County: East of Saint Paul, Washington County experienced a substantial increase in new listings (17.4%) and a moderate decrease in closed sales (-6.4%). The median sales price in Washington County decreased slightly by 2.3% to $429,900.

These trends suggest that while the Twin Cities metro area, as a whole, is experiencing a cooling housing market with decreasing sales, certain counties like Dakota and Washington counties are showing more resilience with smaller decreases in sales activity and continued, though moderate, price growth.

Minnesota Housing Market Forecast 2024-2025

The average Minnesota home value as of September 30, 2024, is $334,240, reflecting a 1.0% increase from the previous year. The typical time for a home to go pending is around 22 days. The median list price in Minnesota is $351,633 — Zillow.

Regional Housing Forecast in Minnesota

The data by Zillow presents a comprehensive forecast of home value changes across numerous Minnesota MSAs, covering the period from September 2024 to August 2025.

Regions Poised for Home Price Growth:

• Fergus Falls leads the projected growth with an anticipated increase of 2.2% by August 2025.
• Brainerd follows closely, expecting a 1.9% rise in home values during the same timeframe.
• Bemidji is forecasted to experience a 1.2% growth.
• Several other regions show promising, albeit more modest, growth projections:
  • St. Cloud, Winona, Owatonna: Projected to see a 0.8% increase.
  • Hutchinson: Anticipating a 0.6% rise.
  • Albert Lea and Willmar: Forecasting a 0.7% growth.

Regions Facing Potential Home Price Declines:

• Grand Forks, ND, despite its location in North Dakota, is included in the Minnesota MSA data and exhibits the most substantial projected decline at -3% by August 2025.
• Marshall is expected to experience a notable decrease of -2.3%.
• Worthington follows with a projected decline of -0.7%.
• Minneapolis, Duluth, Rochester, and Faribault are also anticipating declines, ranging from -0.7% to -1.6%.

Neutral or Minimal Change in Home Price:

• Red Wing, Alexandria, New Ulm show projections close to neutral, with changes ranging from -0.6% to 0.3%.

Buyer's or Seller's Market?

The current market in Minnesota leans towards being balanced. Factors supporting this include:

• Slight increase in average home values (1.0%) year-over-year.
• Median sale-to-list ratio of 1.000, indicating homes are generally selling close to their asking price.

However, it's crucial to consider regional variations within the state. Areas with projected price declines might favor buyers, while regions experiencing growth could be more advantageous for sellers.

Will Home Prices Drop in Minnesota?

The data suggests a potential softening of prices in some MSAs, particularly in the short term (next quarter) and extending to August 2025. Minneapolis, Duluth, and Rochester all exhibit forecasts indicating price drops during these periods.

While the data doesn't indicate an impending crash, it's important to acknowledge that market conditions can be influenced by various unpredictable factors, such as interest rates and economic shifts.