(Data Sources: You can track Twin Cities housing market trends here. You can track mortgage rates here. You can track home builder confidence here. You can track lumber prices here. You can track showing volume here.)
If you omit COVID-19 market dynamics (2020 & 2021), the market in the Twin Cities has historically peaked in mid-May for pending sales and in June for closed sales prices. This year, that's exactly what happened with the median home price having reached a new, all-time high in June as inventory began to catch up with decelerating demand.
With mortgage rates now double where they started the year and with housing prices coming off another move up from the spring market, housing affordability has experienced its fastest drop on record and is now at its lowest level since 2006, just before the financial crisis.
Collapsing affordability has put a damper on demand and overall sales volume in 2022 with units traded down 20%, YOY and showing volume now having fallen below January levels. With that said, there are still certain market segments where competitive inventory remains low enough to continue to support current price levels.
Also of note, through the pandemic, there has been a developing disparity in market conditions between the inner city housing segments in all price points of Minneapolis and St. Paul and their comparative housing segments in the suburbs and that disparity has continued to exacerbate in 2022. I will analyze the divergence between city markets and suburb markets more in depth in my next blog post.
The Median Home Price: The median home price in the Twin Cities moved up another 1.3% in June to a new, all-time high of $380K. That is up 8.5% YOY and is likely the peak for the 2022 market cycle.
Home Inventory: The home inventory level in the Twin Cities moved up 13% in June to 8,250 units. That is also up 13% YOY and is the first time since 2019 where inventory has risen YOY.
Pending Home Sales: 5,597 homes came under contract in the Twin Cities in June. That is down 8.2% MOM and down 17.5% YOY and is the lowest level of pending sales in June, since 2014, as collapsing affordability continues to impact demand and sales volume.
New Listings: 7,970 new listings hit the Twin Cities market in June which is down 1.1% MOM and down 5.8% YOY. Collapsing affordability is primarily impacting demand but it is also secondarily impacting new listings as some move up buyers are deciding to stay in their current homes in the face of the higher prices and rates.
Mortgage Rates: The average 30-year-fixed mortgage in the U.S. as of July 5th, 2022 is 5.54%, down 4.6% MOM but up a whopping 100% YTD.
Lumber Prices: Lumber prices continue to dis-inflate with other commodities, flat year over year but down 50% YTD, from their winter peak.
Home Builder Confidence: "The NAHB housing market index in the US extended losses for the seventh month running to hit 55 in July of 2022, the lowest reading since May of 2020 and compared to 67 in June and much lower than forecasts of 65. “Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction, and financing exceeds the market value of the home". In another sign of a softening market, 13% of builders in the HMI survey reported reducing home prices in the past month to bolster sales and/or limit cancellations”, said NAHB Chairman Jerry Konter. The current sales subindex dropped 12 points to 64; buyer traffic fell to 37 from 48, and sales expectations in the next six months declined by 11 points to 50." source: National Association of Home Builders
This concludes my Twin Cities housing market insight for July of 2022. Please don't hesitate to call us at 952-222-SOLD if you would like to go more in depth on a particular market segment or dive into the current fair market value of a property that you currently own or manage.
Sources: NorthstarMLS, Infosparks Data, Hedgeeye Risk Management, FreddieMac.com, Nasdaq.com, TradingEconomics.com, fred.stlouisfed.org
By Nick Leyendecker, Co-Founder | Broker | REALTOR®