Happy New Year!
I’m sure you’ve seen a lot of national headlines about the real estate market over the last year. Every market is different, so I wanted to share some local stats and my thoughts about where we’ve been and where we’re headed.
While an overall recession was not declared, the Twin Cities real estate market entered a housing recession in June of 2021. A housing recession doesn’t mean home values are falling, it means there’s a slowdown in activity in the housing market over a particular period, usually a few months but sometimes longer – this time it was much longer! Home sales peaked in the twelve-month period ending in June of 2021, when there was a total of 68,179 home sales. We saw a gradual decline in sales until May of 2022, when mortgage rates broke 5% for the first time since 2011. Sales dropped dramatically at that point, with the lowest number of sales reported in the twelve-month period ending September 2024, at 44,320 homes sold. The Twin Cities hasn’t seen sales that low since April of 2012 as we rebounded from the Great Recession.
It seems like we’ve finally reached the light at the end of the tunnel, though (knock on wood).
In 2024, the Twin Cities posted a slight increase in home sales (1.8%) over 2023. The median sales price increased 3.3% during the same time – much more tempered than what we saw in previous years.
Looking ahead into 2025, we expect rates to continue hovering in the mid-6% range. We’ve seen people become more accustomed to this “new normal” of mortgage rates, which we think has helped fuel the increase in transactions. We expect home sales to continue rising slightly from 2024 and expect the median sales price to continue rising, but at a more modest pace.
The good news for buyers in 2025:
Houses that need a little TLC may be disproportionately undervalued and pose a unique opportunity to buy at a discount, or with other financial incentives – closing cost contributions and/or interest rate buydowns.
The inventory of homes for sale should continue to increase this year.
The good news for sellers in 2025:
Home values are likely to increase moderately
With rates normalizing in the 6s, more buyers are returning to the market.
Pricing your house correctly and staging it well gives you a good chance of selling quickly and for favorable terms.
Let me know if you or any of your friends/family have any questions about the year ahead, or anything else real estate related for that matter!
In addition to helping clients buy and sell traditional real estate, I’ve also helped a number of clients expand their rental portfolio and purchase or lease commercial space. If you know of anyone looking for these particular services, I’d be happy to help there as well.
The market has been changing quickly and I’m in a unique position to help take advantage of new and existing opportunities.
Take Care,
Jonathan