Home price cuts are more common in the Twin Cities area, but it’s still a seller’s market.

Price cuts on homes for sale are becoming more common in the metro area, a sign that higher interest rates are cooling one of the hottest parts of the Twin Cities economy.

According to Zillow.com, about 14% of active sellers cut the price of their home at least once in June. It is still below the national average, but above 10% in May and 7.6% in April.

Since the mid-2010s, Twin Cities residential real estate has been a seller’s market, and it has become more imbalanced in favor of sellers during the pandemic.

But with mortgage rates surging earlier this year, buyers, sellers and agents are looking to swing the market back in favor of buyers. Sales activity figures for May and June show that there is — but only a little — in.

“Certainly, things are rebalancing in a way that makes the landscape easier for buyers, but we’re still a long way from becoming a buyer’s market,” said David Arbitt, director of research at Minneapolis Area Realtors.

While more sellers are offering discounts, some are slashing prices. The average price reduction in Metro in June was just 3%. Meanwhile, buyers are also facing the reduced spending power that higher mortgage rates have created. And the number of homes for sale remains near historic lows.

“For what we wanted, I felt like thin pickings,” said Jenna Gerlach of Denver. She and her husband Mike want to move to the Twin Cities this fall.

“Looks like inventory is low and we don’t know what’s going on [mortgage] rates,” Gerlach said.

Rates have been volatile, shunning potential buyers. Even though the Federal Reserve raised its key rate again on Wednesday, mortgage rates fell slightly last week.

A weekly survey released on Thursday said 30-year fixed-rate mortgages average 0.8 points with an average of 5.30%. This is lower than last week, when it averaged 5.54%. At this time a year ago, the 30-year average was 2.80%.

The jump in rates means fewer people are able or willing to buy a home in the Twin Cities. During June, about 20% fewer buyers signed purchase agreements compared to the previous year. During the first three weeks of July, the decline looks even sharper.

On average, those who listed their home in June received an offer in just 21 days. As of March, it was one day faster than the year before and the fastest in nearly a year.

“The momentum has historically remained intense and is still half the market timing of 2018, 2019 and 2020,” Arbit said.

That’s because although buyers had more options at the end of June than last year, there is a dramatic lack of listings. At the current sales pace, there were only enough houses in the market during the last 1.6 months to June. While up 1.3 months at the same time last year, it is still well below the five- to six-month supply that is considered to be evenly balanced between buyers and sellers.

This imbalance is because the market is still relatively competitive and many sellers are still receiving more than their asking price. On average, sellers received 103.3% of their list price in June. While that’s down from 104.1% a year ago, it’s still the second strongest June in 20 years.

“This still leaves us in a strong seller’s market, just not as strong as it was last June,” Arbit said.

Nationally, the slowdown in the housing market is more pronounced. mortgage application Last week fell for the fourth consecutive week, the Mortgage Bankers Association reported. And an index of pending home sales fell nearly 9% in June, the National Association of Realtors said last week.

Cath Hammerseng, a Twin Cities area sales agent and former MAR president, said buyers are more hesitant. Some are assessing the interest rate situation and the impact of rising home prices. Last month, the average price across all closings rose nearly 9% to a record $380,000.

She said the housing market feels like it did in 2018 and 2019, when buyers had a little more time to decide and sellers had to work harder to get their homes ready for sale.

“More than ever, homes that aren’t turn-key or aren’t competitively priced … are dull,” she said. “Sellers who are overconfident aren’t seeing the results they think they’re going to see. On beautiful people, buyers are still competing and it’s the same multi-offer situation.”

Arbit said that while the market is adjusting, buyers are unlikely to pivot quickly to one more favorable.

“It doesn’t happen overnight or even in a few months,” he said. “We have underbuilt and undersupplied for so long that it will take time to even scale back towards a balanced market, much less than a buyer’s market.”

The Gerlachs were unwilling to wait. He planned to buy in the Twin Cities area in September, but like many first-time buyers, the threat of rising rates made him a little more eager to buy sooner than later. And friends shopping in the area warn them that the best homes are still selling out quickly, and sometimes for more than the asking price.

Plus, they were somewhat surprised when they found one of the first homes to remotely check off almost all of the items on their wish list.

So almost immediately after doing several virtual walk-throughs this month, Gerlach offered sellers of a home in Maple Grove a little more than the asking price, though there were no other offers. The couple knew that homes in the area were selling out fast and wanted to avoid a competitive offer.

Jenna Gerlach said, “It didn’t feel like we were in the driver’s seat. It certainly felt like it was a seller’s market.” “I just didn’t want to be in a situation where we had to make an offer and settle for a house we didn’t want.”

At the top of his wish list was a fireplace and a large yard for his boxers. Less than a day after listing the home, their seller quickly accepted their offer. The Gerlachs are getting ready to move on.

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