It was a more subdued January for home buying — and selling — in the Twin Cities metro than last year, but early signs point to another competitive spring market.
Buyers last month signed 2,560 purchase agreements, 19.3% fewer than in 2022, according to a monthly sales report from the Minneapolis Area Realtors. But with new listings also down double digits and more buyers than sellers in some areas, prices eked out yet another annual gain.
The median price of all January closings was $342,000, a modest 2.7% increase over last year.
That small-by-comparison price gain will come as a bit of relief to would-be buyers who have watched prices increase double digits for about three straight years, more than triple the 3.2% historical average for the region.
"Anyone concerned about runaway home prices should be comforted by the more typical price growth we're seeing, which gives buyers a chance to catch their breath and incomes a chance to catch up," said Brianne Lawrence, president of the St. Paul Area Association of Realtors.
There were 3,285 new listings during the month, 10.6% fewer than last year. That left buyers with 14.5% more listings at the end of January compared with last year.
Still, there aren't enough houses to meet demand. At the current sale pace, there were only enough listings for sale to last 1.3 months (a "balanced" market has a four- to six-month supply) and houses sold relatively quickly with houses selling on average in just 60 days.
Though that still makes it a seller's market, it's stacking up to be a much better time to be a buyer than last year. Higher mortgage rates have made it a much less competitive market in large part because shoppers have less buying power than they did last year at this time.
Last month, half of all sellers sold homes at or below 97.3% of their list price compared with 100% at the same time in 2022.
Still, sellers are getting multiple offers in some parts of the metro.
"The market seems just as hot as last year this time — multiple offers for the eighth week in a row," said Krista Wolter of Coldwell Banker Realty, who recently sold a $595,000 house in Minneapolis within days of it hitting the market.
Jennifer Cutter and Sara Kranz of Edina Realty agree that it's stacking up to be another busy spring. They said a 25% increase in mortgage applications at Edina's mortgage company show that buyers are getting ready to shop.
"We're definitely seeing buyers come into a state of acceptance on interest rates," Cutter said. "The paralysis of analysis is really starting to loosen and buyers are seeing the opportunity to get back into the game."
Kranzsaid buyers have had the opportunity to digest the impact of higher rates. "They're feeling more comfortable and are moving on from rate shock."
Kranz and Cutter said they expect the spring market to be on par with last year, though not at the same pace or with the same intensity.
Buyers aren't overbidding they way they did in 2022, and fewer are waiving inspection contingencies, they said. At the same time, Kranz and Cutter said, they've been advising sellers to have their houses in top-notch condition.
"It's still a great seller's market, but it's more of a fair market," Kranz said. "It feels more balanced."
