Closed Sales Fall, Interest Rates Rise, and Home Prices Inch Higher

By MNR News posted 03-10-2023 03:08 PM

Buyers take advantage of increased negotiating power
MINNEAPOLIS (March 10, 2023) With closed sales down more than 22% compared to February 2022, higher interest rates continued making homebuyers wary. Following an encouraging descent to just over 6% in January, the rate on a 30-year fixed mortgage rose to 7.2% by the end of February. New listings also declined, dropping 23% year over year as just under 4,600 homes came on the market. Because the overall supply remains at a historic low—only 1.3 months of inventory—competition for desirable properties is still robust. The median sales price reached $315,000, up 3.4% over last February. Even so, sellers who were getting nearly 100% of their asking price in 2022 averaged 96.5% this February, a 3.2% reduction. Homes were also taking longer to sell, spending 53 days on the market on average, up nearly 13% from a year ago. This increased the total number of properties for sale by nearly 11% compared to February 2022.

Trends in Minnesota reflect slowing buyer demand across the country. Although sales prices continued rising in February, growth in home prices has tapered from its peak two years ago. In some areas, sellers have cut prices to entice buyers whose purchasing power has been eroded by inflation and persistently higher interest rates. Buyers who had the resources to stay in the market during this period found they had increased negotiating power and were able to close on properties they could not compete for a year ago. As spring approaches, the state of the housing market will depend on the pace of inflation, mortgage rates, and continuing job creation. Longer term, low inventories, and affordability will remain persistent challenges in Minnesota until the pace of construction increases, and down-payment assistance is more widely available.  

February year-over-year summary of key market indicators 

  • Closed sales decreased 22.4% to 3,145 

  • Median sales price increased 3.4% to $315,000 

  • Average sales price increased 2.2% to $361,342 

  • New listings decreased 23.0% to 4,569 

  • Pending sales decreased 23.1% to 4,056 

  • Days on the market increased 12.8% to 53 days  

  • Homes for sale increased 10.9% to 8,190 

Closed Home Sales Across Minnesota by Region

In February, closed sales declined in all 13 regions compared to a year ago, bringing Minnesota’s average number of closed home sales down 22.4% year over year. The smallest declines were seen in Arrowhead at 11.7%, West Central at 16.9%, and the 7-County Twin Cities at 19.4%. The largest declines were reported in Southwest Central at 40%, Upper MN Valley, also at 40.0%, and Northwest at 46.4%. See the chart below for more details comparing closed home sales for February 2023 to February 2022.

The seven-county Twin Cities region comprises Anoka, Carver, Dakota, Hennepin, Ramsey, Scott and Washington counties. The official Minneapolis-St. Paul-Bloomington metropolitan statistical area recognized by the Census Bureau consists of 16 counties, on 
which MAR & SPAAR local associations report. 

About Minnesota Realtors® 

Minnesota Realtors® (MNR) is the membership organization supporting all 22,000 Realtors® in the state of Minnesota. MNR is dedicated to helping Realtors® succeed in providing comprehensive and informed guidance to their customers seeking to buy or sell a home. MNR provides Realtors® with a code of ethics, continuing education, real estate transaction forms, legal services and dispute resolution, as well as lobbying and advocating for homeownership rights and the real estate industry. MNR works in partnership with the National Association of Realtors, as well as more than 15 affiliate regional associations within Minnesota. MNR is a non-profit organization founded in 1919, with headquarters in Minnetonka, Minnesota, and a branch office in St. Paul, Minnesota. Find us at  www.mnrealtor.comand follow us on Facebook, Instagram, Twitter and LinkedIn.