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With inflation at its lowest level since February 2021, the Federal Reserve is likely to lower its benchmark rate, which could drive mortgage rates down even further. The shelter component (owned or rental housing) of August inflation was actually the highest of any sector including gas, food, electricity, and medical care. This partly reflects a higher mortgage rate environment as well as rising home prices. But some of the distortions from the last five years could be in the rearview, as the months’ supply of inventory is greater than the August 2019 figure of 2.6 months. In other words, the balance between housing supply and demand has normalized back to pre-pandemic levels. Typically, around 4-6 months is considered balanced, while lower figures reflect a sellers’ market, and more than 6 months’ supply indicates a buyers' market. For comparison, there was just one month of supply statewide in early 2022. 

“As we look towards the upcoming months, we continue to be optimistic. It all comes down to affordability and availability,” said Geri Theis, President of Minnesota Realtors®. “September activity should be strong with the lower interest rates, but August numbers will not reflect that yet. Fortunately, given the increase of homes on the market, our buyers may find some relief.” 

Regional Dynamics 
Market activity always varies across areas, price points, and property types—sometimes dramatically. St. Cloud was the only region to see more new listings and the only region with more pending sales than last year. Home prices rose the most in the Alexandria, Bemidji and Duluth/North Shore regions, but prices were down in Fergus Falls, Detroit Lakes and Grand Rapids. The most undersupplied markets were the Twin Cities and St. Cloud while the regions with the most supply were Detroit Lakes and Bemidji. 

Twin Cities Metro Overview
For the most part, the state and the Twin Cities metro follow similar trends. For example, seller activity was down 4.8% in the state and down 3.3% in the metro. And sales fell around 10% in both the state and metro. At $352,000 in statewide versus $389,700 in the metro, home prices almost always have a premium in the major population center. But at 38 days for the state and 40 days for the metro, homes are selling more quickly in greater Minnesota. Twin Cities home sellers accepted 98.7% of their list price compared to 98% statewide. The metro had 2.6 months of supply while there were 3 months of inventory statewide. Minnesotans aspiring to homeownership are still facing some challenges. A September rate cut combined with more inventory will offer some relief. 

August Statewide Closed Sales Year Over Year: