Monthly cost of buying a Twin Cities home increased $900 in two years

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Mortgage rates hit a 23-year high in late 2023, though relief may be on the horizon and not a moment too soon. A new home-sales report for January showed that the monthly payment on a median-priced home in the Twin Cities metro rose from $1,760 in 2021 to $2,680 in 2023.

The report, jointly released by the Minneapolis Area Realtors and St. Paul Area Association of Realtors, also said that the Housing Affordability Index has reached its lowest level for the month of January since 2004 and that affordability is “now at roughly 2006 levels.” This increase in price is attributed by the report as being an effect from high mortgage rates.

The report did not provide specific numbers for the affordable housing index.

Amy Peterson, the president of SPAAR, said that the increase in monthly payments has “definitely” impacted the attitudes of potential homebuyers. But when you look at rent, she said, that has also gone up.

“Everybody’s seeing increased costs,” she said. “It’s a matter of looking at the whole picture and what are your options are in terms of finding a place to live.”

According to the report, the level of inventory, which sits at 1.7 months’ supply, is “too low for prices to fall, but rates are too high for prices to rise much.” Compared with a year ago, the median home price rose 2.3% to $350,000 last month. Listings are up 18.0% compared to last January.

Jamar Hardy, the president of the Minneapolis Area Realtors, said in the report that the last two months have the potential to be a “turning point.”

“The easing of rates combined with an increase in listings and inventory should mean somewhat smoother sailing for buyers,” Hardy said.

Pending sales have increased 8%, with the bulk of that being newly constructed homes, which are up 33.8%. Pending sales of previously owned homes increased 3.3%. Pending sales of homes priced at more than $500,000 were also up 14.6%, while homes under $500,000 were up a smaller 6.3%.

Peterson said that part of these trends is simply what is on the market. Some homebuyers may have the ability to purchase a new construction if they aren’t finding what they need in the more limited previously owned market. She also said the increase in sales over $500,000 may be from the new constructions being more expensive.

The days on the market was down to 56 days, as compared to 61 days in January 2023.

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