Minnesota's Housing Market: Summary of Q4 2023

By MNR News posted 01-29-2024 11:23 AM

As the year winds down, the housing market tends to follow suit. When Q4 began in October, the real estate market had slowed more than usual due to rising mortgage interest rates—they were near 8% in mid-October and averaged 7.6% for the month. Closed sales were down in October, November, and December, a sign that many buyers and sellers remained hesitant to enter the market given the persistent affordability challenges.

Unique Quarter
That said, Q4 was unique in a few notable ways. First, new listings were up (YOY) each month, with December seeing the highest increase—12% more listings hit the market in December 2023 than in the same month a year prior. Second, home prices were also up each month (YOY) throughout Q4, which was consistent with what we saw for most of 2023. Finally, pending sales increased 8.7% in December, which is the first time we’ve seen a YOY gain in that category since November of 2021.

So, while Q4 closed what was, overall, a down year in 2023, some key metrics signaled reasons to be hopeful for a housing market recovery in 2024. The Federal Reserve’s decision to hold interest rates steady at its December meeting, while suggesting there could be multiple rate cuts in 2024, caused mortgage rates to decrease to close the yearwith rates ending December at 6.61%.
Inventory and Interest Rates 

Two of our key pieces of data in these quarterly reports have focused on inventory and interest rates. On the inventory front, while there are still many barriers to overcome, we’re encouraged by home builders pulling more permits for single-family homes in both October (110% increase from the same month a year prior) and November (47% increase from the same month a year prior). If we continue to see interest rates decrease, that should help housing production increase. It’s important to note that reduced rates will likely lead to increased buyer demand, so home prices will continue to rise until we can build more homes at a large volume here in Minnesota.