Still, it remains difficult for many low- to middle-income buyers to find affordable homes in Minnesota, particularly in the Twin Cities metro. Housing affordability suffered slightly overall in Q2, which is to be expected as prices and mortgage rates climbed.
However, there was a notable bright spot, and one that might signal a resurgent housing market next year. As the Federal Reserve hiked interest rates, inflation fell, bringing needed relief to consumers. The national inflation rate finished June at 3%. Because of the rapid decline in inflation, many economists predict the Federal Reserve won’t raise its interest rates again in the near future. Decelerating inflation should improve consumer confidence, and most critically, ease the pressure on mortgage rates and revitalize closed sales in 2024.
When mortgage rates fall, as predicted, that should prompt sellers to return to market and help ease inventory woes, though affordability may remain a thorn in the side for some buyers.