Q2 2022 Twin Cities Real Estate Market Update
Updated: Oct 23, 2022
Recapping the Real Estate Market in the First Half of 2022
As we have seen throughout 2021, the housing market consisted of historically low interest rates & low inventory throughout the first part of 2022. With so many buyers in the market during this time, we have also seen record-high home prices & even bidding wars due to high demand & low supply. As inflation began to rise at the start of Q2 however, the Real Estate Market began to see a large portion of buyers being priced out of purchasing a home. This is due in part to those high home prices but also due to the Fed beginning to raise interest rates to combat inflation. Read on as we discuss each of these market factors in more detail and provide specific insights into the Twin Cities in Minnesota.
Mortgage Rates Are On The Rise
In June of 2022, the Fed announced it would raise the Fed Funds rate by 75 basis points marking the largest increase since 1994. What’s interesting about this increase is that it was the second large hike within a month with another significant increase expected in July. According to experts, the Fed has another 175 basis points to increase over the next 4 months based on today’s median projections. For those that are active in the Real Estate market, these increases in the Fed Rate directly correlate with the mortgage rates available to buyers, meaning we can expect the mortgage rates to continue to climb through Q3 of 2022. How high these rates will go or for how long they will remain high is up to speculation at this point but we can assume we will still see the effects of these changes going into 2023.
You can read more about the Fed Rates in the article FOMC Surprise: Fed Follows Biggest Rate Hike in 22 Years with Another, Larger One (+75bps) by Realtor.com.
Average Home Price Continued to Climb in Q1
This may seem pretty obvious to you if you have been actively looking to purchase a home but the average listing price is continuing to rise. With supply chain issues & an increase in the rental market, inventory has struggled to recover to a balanced supply & demand. This imbalance of inventory raised home prices above what many potential buyers could afford in a time of increasing rental costs. By the end of Q1, March prices were up 20.6% nationally which reflects the competitive spring market along with the current inventory situation. As mortgage rates continue to climb to combat inflation, it’s expected that the development of new homes along with regular listings will improve inventory and potentially slow the rising costs of houses.
You can read more about the increase in home pricing in the May Article by Realtor.com
Current U.S. Housing Market Is Least Affordable Ever
As the average 30-year fixed mortgage rates have more than doubled since this time last year, it’s safe to say that purchasing a home isn’t nearly as affordable as in 2021. When we look at the average value of the home on the market compared to last year, we also see a significant increase year over year. Many experts argue that these two components working simultaneously together against buyers’ interests marks the least affordable moment in the U.S. Housing Market.
Housing Inventory Shows Signs of Improvement
With such a significant jump in mortgage rates & the current home values being higher than many can afford, many industry experts are expecting a major hike in available inventory and even massive price cuts. As fewer buyers are entering the market, the delivery of newly constructed or remodeled homes that were delayed due to supply chain issues early in 2022 could possibly lead to a more balanced inventory.
For more insights on how inventory could potentially improve by the end of 2022, visit the Realtor.com Article Here.
Current Market Insights for the Twin Cities in Minnesota
The 2nd quarter of 2022 saw a number of interesting movements in housing inventory and market timing. The number of closed sales and houses listed for sale both rose for the third straight month in 2022! Could this be the beginning of an increase in overall inventory or a seasonal shift? And the Days on Market (the number of days from list to contract date) decreased for the 4th straight month.
Have a question about your home buying or selling options or the Real Estate market in general? You can schedule a Zoom Meeting with Grimm Realty Group to discuss your housing needs, lifestyles, & future goals!
Realtor.com: FOMC Surprise: Fed Follows Biggest Rate hike in 22 Years with Another, Larger One (+75bps)
Realtor.com: S&P Case-Shiller: March Prices Up 20.6%, Reflecting Competitive Spring Market
Realtor.com: 2022 Housing Market Forecast Midyear Update: More Options for Home Shoppers
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