Luke Bolton and his young family have been planning since last summer to upsize from a two-bedroom condo in Minneapolis to a bigger, newer home closer to relatives in Iowa, despite mortgage rates not cooperating with their timetable.
The Boltons — like many other Twin Cities home buyers and sellers — decided to make the move this spring. Across the state, buyers and sellers are still grappling with the prospect that mortgage rates are likely to remain near 7% through much of the year after a recent inflation report dimmed hopes of a Fed rate cut sooner than later.
And yet, a listings logjam finally broke open and brought thousands of new homes to market, with new listings up 4% in March, causing the total number for sale at the end of the month to increase 8.4% to 6,879.
"We pushed ahead," said Bolton, who works remotely for an Atlanta-based trade association. "Our boys are not getting younger, their grandparents in Iowa are not getting younger, and life goes on regardless of what the Fed and inflation does to the mortgage interest rates."
Last month, buyers signed 4,028 purchase agreements, 7.8% more than last year at this time, according to a monthly sales report from the Minneapolis Area Realtors. Closings, a reflection of deals signed a couple months ago, were flat compared to last year, and the median price of those closings was $366,000, a 2.8% increase from last year.
"It's clear that people are ready and eager to get deals done," said Jamar Hardy, president of Minneapolis Area Realtors, in a statement.
The March report marks the fifth-consecutive month of year-over-year increases in new listings and the fourth-consecutive increase in pending sales. Those gains are a likely sign buyers and sellers have finally adjusted to today's mortgage rates — which are now in line with historic averages but nearly double what buyers nabbed two years ago — and are ready to move despite them.
The Boltons bought their Minneapolis condo several years ago, giving them enough time to earn equity to offset the impact of higher mortgage rates. With two boys, 11 and 14, they're able to trade up to a three-bedroom, two-and-a-half-bathroom new-build condo in Des Moines for $252,500.
Bolton started preparing for the move last summer by clearing out the condo, either selling or giving away unneeded items. The family refinished the kitchen cabinets, rented a storage unit for overflow items and — after almost daily trips to the storage locker — were ready to list the house in early March. That timed perfectly with a spring break trip to visit the Iowa in-laws so their agent could show the home while they were out of town.
"Waiting for the listing date was perhaps the hardest, since we have two active boys and didn't want to mess up the house," Bolton said. "So I got a family membership at Sky Zone and spent most of our free time between school and bedtime outside of our house."
The two-bedroom, two-bathroom condo listed at $199,900, making it affordable to many first-time buyers. Last month, there were only 494 properties for sale in that price range across the metro, only slightly more than last year at the same time. In contrast, buyers able to spend $350,000 to $450,000 had four times as many options.
Their agent, Jonathan Sells, said he quickly received an offer on the house after several showings, but the sale has yet to close. With more listings this spring, buyers have more choices and more time to decide, Sells said.
"I like seeing more balance in the market," Sells said. "It's no longer a 20-offers-in-two-days frenzy, which is pretty stressful for buyers. Balance is a good thing, and we're working toward that with more inventory."
Sells and other agents said while the pace of the market is far less frenetic than in past years, some listings in some areas are still receiving multiple offers and selling for more than the asking price. On average, houses across the metro sold in 54 days, four days faster than last year. And sellers accepted offers at 98.8% of their asking price, up 0.2% from last year.
The trends were similar across the state. Also Monday, the Minnesota Association of Realtors, which includes members in virtually every county across the state, said new listings increased 7.3%, slightly behind pending sales, which increased 11%. The group said the median price of all sales increased 4.7% to $335,000, while the average market time declined 3.9% to just 49 days.
The group said demand varied dramatically from region to region but also based on price point and property type. It said the Detroit Lakes, Alexandria and Brainerd areas saw the largest gains in new listings. Pending sales increased the most around Bemidji, Alexandria, St. Cloud and Brainerd. Prices increased the most in the Fergus Falls, Alexandria and Detroit Lakes regions. The most evenly balanced places between buyers and sellers included Detroit Lakes and Bemidji.
The tightest areas, meaning those with more buyers than sellers, included Rochester, St. Cloud and the Twin Cities.
On Thursday, the 30-year fixed-rate mortgage averaged 6.88%, according to a weekly Freddie Mac survey. That's up slightly from the previous week and about a half-percentage point higher than a year ago. Bolton said while mortgage rates were definitely a factor in his decision about when to sell, it wasn't a top priority.
Like many buyers struggling to swallow the reality their mortgage payment is going to be several hundred dollars more than it would have been in early 2022, the Boltons are crossing their fingers they'll be able to refinance in two to three years if rates fall.
"Some things are more important than merely financial considerations, such as family," he said. "So we are closing our eyes to the relatively high interest rates now and moving ahead with the plan."
