The residential real estate market in the Twin Cities has been interesting through the first quarter of 2022. We began the year with a historically low supply of listings for sale. As anticipated, the low supply trend has continued due to unprecedented buyer demand. The demand has been driven by a variety of factors, the two most notable being the collective reevaluation of how people want to live post-Covid-19 and the anticipation of escalating interest rates. While sales have been trending upward since January, there are many buyers left frustrated by the inability to purchase the home they desire.
Massive buyer demand limited sales in the first quarter, not a shortage in new listings as one may have expected. Between 2013 and today, there have been between 70,000 and 78,000 new listings annually; there were 74,431 new listings in the past twelve months. At the same time sales have increased significantly. In 2013 there were 53,636 real estate sales in the Twin Cities, in 2021 there were 66,086 sales which was a 23.2% increase. As you can see, the listing shortage has been caused by demand, not supply.
One of the primary drivers of buyer demand has been the result of Covid-19. The pandemic caused everyone to stay home for long periods which caused many to rethink how and where they live. Some determined they needed more space, other less. Pools, larger yards, and sport courts are in much higher demand than before. Many people are now working remotely, with no expectations of going into their office ever again, meaning they can live anywhere they choose. The other reason for the intense buyer demand is low mortgage interest rates, coupled with the belief that these rates will be increasing. This makes sense: buyers want to lock into a low rate before interest rates increase even more. A 30-year fixed mortgage has increased from 3.375% – 3.5% in January to 5.125% – 5.25% as of this writing. It’s too early to know for certain, but we do not anticipate rates having a dramatic impact on the market but it may slow down buyer demand.
It is no secret that it is a seller’s market in the Twin Cities housing market, so why aren’t more people taking advantage of this and selling? The reason is that most sellers need to buy after selling and many potential sellers have decided to stay put until conditions for buying improve. It’s debatable whether this is a good or bad decision but it is undeniable that, when conditions improve for buying, they will worsen for selling.
There are currently 4,816 properties for sale in the Twin Cities, the lowest in recent history. This has changed the dynamics for buyers and sellers. In today’s market buyers are usually competing against other offers, homes are selling quickly and for prices above list price. As you can imagine, this market is difficult, stressful, and frustrating for buyers. Our advice to buyers is to stay focused on their goals and make well-informed decisions versus emotional decisions.
It has been an active and interesting market so far in 2022, one that is far from a typical real estate market. At times like this, it is imperative to work with a trusted and knowledgeable Realtor®. At Fazendin Realtors we take great pride in keeping up with the most current trends in the market. We are also keenly aware that new and innovative tactics and strategies must be employed to help our clients achieve their real estate goals. If you have any questions about the market or your own property, we encourage you to connect with us. We are happy to provide a complimentary market analysis of your home.