By volume, home sales in the Twin Cities metro area reached a 20-year high in 2021. Last year, they plunged to their lowest level since 2011.

Single-family home sales dropped 20%, and even pricey but attractive new construction — once a hotspot of the housing market — dropped 3.9%. Overall, pending sales dropped 15% in 2023, according to three Realtors associations serving the 16-county metro area and western Wisconsin.

That’s not to say that prices softened or demand fell flat. In fact, high interest rates, rising prices and a shortage of inventory made 2023 a doozy of a year for homebuyers, especially first-time homebuyers who looked for deals but came up short.

Still, December saw an 8.7% increase in pending home sales as mortgage interest rates eased somewhat, and positive forecasts around both interest rates and the economy in general have left Realtors associations predicting a brisker pace for home sales in 2024.

“After more than a decade of underbuilding, we estimate we’re close to 106,000 units short of what’s needed to meet existing demand,” said Geri Theis, president of Minnesota Realtors, in a video update released in late January. “Challenges persist, but Minnesota seems well positioned to see the real estate market rebound this year.”

Median prices

The median home price for the 16-county Twin Cities metro hit a record $368,000 last year, up 1.4% from the year prior, and well above the 2019 median of $280,000, according to the joint release from the Minnesota, Minneapolis and St. Paul Realtors associations.

“Surprisingly, throughout the past year we still saw strong offers and relatively quick market times,” said Jamar Hardy, president of the Minneapolis Area Realtors, in the video update on the Twin Cities housing market released Jan. 29. “This now marks the 12th straight year of (home value) increase, which means significant equity growth for homeowners.”

Amy Peterson, president of the St. Paul Area Association of Realtors, noted that many homeowners who bought at low interest rates have been reluctant to “trade up” to higher-priced homes while interest rates are high.

“Fewer people moving means less available inventory, which tends to drive up home prices,” Peterson said. “Since 2020, the typical payment on a median-price home has risen from about $1,600 per month … to $2,700 per month in 2023. Realtors are continuing to educate buyers on the total cost of homeownership.”

Given interest rates, home insurance and other costs, an increasing number of homeowners are paying at least 30% of their income on monthly home payments, according to the Realtors groups. “This new reality creates a barrier for many,” Peterson said. “The good news is mortgage rates have been dropping in recent months, bringing buyers and sellers back to the market.”

Mortgage interest rates nearly tripled from 2021 to 2023 — from 2.7% to 8% — but dropped to about 6.5% in December.

The Realtors groups said multiple offer situations are still happening but have become less common, and tactics such as waiving inspections have become rarer. “Overall, buyers were more cautious and selective throughout the year,” they wrote.

Homes stayed on the market a bit longer in 2023 — 40 days, on average, compared to 31 days the year before. Of 748,000 home showings, the top 10 areas for showings were, in order, Minneapolis, St. Paul, St. Cloud, Bloomington, Plymouth, Brooklyn Park, Maple Grove, Woodbury, Brainerd and Eagan.

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