There were more sellers than buyers in the Twin Cities last month, giving house hunters more options than they've had in several months.
During October, buyers signed 3,611 purchase agreements, 37.7% fewer than last year at the same time, according to the Minneapolis Area Realtors. Closings, a reflection of deals signed two to three months ago, were down 33.5%.
House listings were also down, falling nearly 20% compared with last year. Houses sold on average in just 36 days and the median price of those sales increased 4.7% to $356,002.
Though houses are taking longer to sell and prices are increasing more slowly than they did earlier this year, it's still a seller's market in the Twin Cities because there are only enough listings to last 1.9 months. The market is considered balanced between buyers and sellers when there's a four- to six-month supply of listings.
Still, with rates hovering at just a little more than 7% for a 30-year fixed-rate mortgage — about double what was available a year ago — buyers are having to adjust their budgets and their expectations.
Real estate brokerage Redfin reported today that a typical homebuyer in the Twin Cities last month would have needed to earn $96,602 to afford a $359,000 house, a 45.3% increase over last year. The monthly mortgage payment on that house would be $2,415, compared with $1,662 last year.
Nationwide, the typical buyer would need to earn $107,281 to afford the $2,682 monthly mortgage payment on an average home compared with $73,668 a year ago.
The situation has become increasingly perplexing for buyers.
"Sellers have a little more control than they should," said Arlisa Bullock, a first-time buyer in the Twin Cities. "It's not going to be their time for much longer."
Bullock has been readying herself for homeownership for several years, but in some ways she was unprepared for the expectations of many sellers today.
PRG's Homestretch program helped her establish her credit and a budget and she's working with Habitat for Humanity's home buyer program, which has enabled her to lock in a mortgage rate that's lower than what's available today.
"It's been a long time coming," she said. "I did a lot of of footwork."
Bullock has been renting a duplex. Her rent, which is higher than her expected mortgage payment, has recently increased. She's hoping to spend less than $300,000 on a house, but is qualified to spend upwards of $385,000. She wants to buy in one of the northern suburbs and is considering duplexes as well as single-family houses.
"I'm looking at all possibilities that are out there," she said. "I'm looking for something that feels like me."
She started seriously shopping in August and has seen several houses that would suit her needs, but she's waiting for sellers to become a little less greedy and more flexible on price.
"I have a good enough price range so I have a lot of options," she said. "It's a matter of where do I want to be and do I want to grown old in this house?"
She has made a couple offers, but found sellers unwilling to budge on price or terms.
In one case, the house suited her needs but was so close to a freeway the road noise was deafening. She offered slightly less than the asking price and the seller rejected the offer and didn't make a counter offer. It took three months for those sellers to find a buyer.
"Some people just aren't willing to budge," she said.
Though the annual decline in pending sales was the biggest since 2010, sellers got nearly 100% of their asking price during October.
Bullock's real estate agent, Nene Matey-Keke of Compass, said while the decline in prices is welcome news to buyers, higher rates have priced many of them out of the market. He's gone from having about a dozen buyers in the pipeline to five or six.
He said that in addition to higher rates and concerns about a possible recession, anxiety about midterm elections have been weighing on buyers. He expects the post-election buying season to improve.
"Rates matter, but I think people at this particular moment are very distracted with inflation of everything else — and you're talking about a summer that has been up in the air from a political standpoint," he said. "People are saying, 'It's expensive for me to buy, my overall life got more expensive and I don't know where we're going as a country right now.'"
He said that that sellers also have to adjust their expectations. The days of putting a sign in the yard and quickly selling the house are gone.
"If it now takes three weeks to sell a house, does that mean it's Armageddon? No. Properties that are actually prepped for sale are selling," he said. "If you price right and give your property a haircut and clean clothes it's going to be significantly more attractive than the one that's been neglected."