According to new data from Minneapolis Area REALTORS® and the St. Paul Area Association of REALTORS®, the Twin Cities housing market last year was a tale of two markets.
The first half of 2022 reflected much of the all-out frenzied feeling of the previous year and a half. Fierce and competitive buyer activity with multiple offers over-asking situations were common throughout the beginning of 2022 due to the number of homes for sale sitting at the lowest level in 20 years.
But then, in the second half of the year, the Federal Reserve Bank began to increase interest rates in order to put pressure of the overheated economy.
Consequently, mortgage rates began to rise, more than doubling from an average 3.25% to 7% at their peak. Buyers began to see their projected monthly payments increase – leading to a slowdown in activity throughout many areas of the market. According to the report, after hitting a 20-year record high in 2021, home sales retreated to the lowest level since 2014.
Sellers, more so in the second half of the year, also showed a hesitation in listing their homes – leading to an exacerbation of an already unbalanced market. In 2022, there was a 10% decrease of homes listings compared to 2021. The report notes that the Housing Affordability Index reached its lowest level since at least 2004.
“I went from sifting through more than 10 offers with my sellers to counseling them about being patient while on the market all within one year’s time,” said Jerry Moscowitz, President of Minneapolis Area REALTORS®. “Inflation may be turning a corner and rates could moderate by summer. If that happens, pent-up demand will surface and we’ll go right back to a competitive market with bidding wars where demand far exceeds supply.”