House prices in Twin Cities rising more than U.S. this summer

House prices in the Twin Cities outpaced the nation this summer, as buyers hurried to take advantage of recent declines in mortgage rates and a summertime spurt of listings.

The median home price of all closed sales in the metro was $399,900 during July, which was 4.5% higher than last year, according to new data from Homes.com. That’s more than twice the gain of the national average and the highest annual increase since March.

“Buyers are motivated,” said Eric Schneider, an agent with Fazendin Realtors in Wayzata. “Buyers have more options, but the listings I’ve brought to market recently have been flooded with inquiries and showings.“

For much of this year, economic uncertainty and persistently high mortgage rates have caused a stalemate between buyers and sellers, who are both struggling to decide when is a good time to make a move. With no sign of significantly lower rates on the horizon, many aren’t willing to wait.

On Monday, Minnesota Realtors said there was a nearly 6% annual increase in house listings throughout the 16-county metro in July. Buyers stepped up, causing a 4.3% increase in pending sales.

Across much of the metro, move-up buyers are driving that increase. They have enough room in their budgets — or enough equity in the home they already own — to absorb the impact of today’s current mortgage rates.

During the first week of August, nearly 30% of all house shoppers toured properties priced from $300,000 to $399,000, according to data from Minnesota Realtors. But the biggest increase in pending sales that week happened in the $500,000 to $599,000 price range. And with listings still scarce in some areas, sellers netted nearly 100% of their asking price, the group said.

Buyers Brittany and Alan Powell were shopping for a move-up house that’s closer to Brittany’s job in Golden Valley. A good school district was tops on their list, but room for two kids and two dogs was also critical. They found about 30 good options, but the competition was stiff. At one showing, there were 10 other prospective buyers, and that house ended up selling for $200,000 more than the asking price.

Brittany Powell said there seems to be a clear divide in the market. Well-located, moderately updated homes attract immense attention and command high prices. Those in less desirable areas or with outdated features — many unchanged since the 1990s or early 2000s — sit on the market much longer.

The Powells, outbid on a previous house, ended up buying in Plymouth. But it wasn’t without stress.

“The homebuying process was somewhat frustrating,” Brittany Powell said. “Sellers still had the upper hand, particularly for homes that were updated and met our criteria.”

Schneider said a growing number of buyers are making compromises on what they want, or they’re adapting to the reality that economic conditions won’t change anytime soon. He recently fielded multiple above-asking offers on two metro-area houses that needed TLC.

More than 40% of all closings during the month sold for more than list price, according to Redfin. That share is above the national average and one of the reasons prices are still rising.

The driver of many of those bidding wars: the realization that slight declines in mortgage rates, which are saving buyers thousands of dollars every month and causing an uptick in purchase applications, might not last through the summer.

As of Aug. 14, the average 30-year fixed-rate mortgage (FRM) was 6.58%, according to a weekly Freddie Mac survey. That was down from the previous week, the lowest level since October and only a tad higher than a year ago.

“Borrowers out there know that they’re not going to get another 3% or 3.5% rate [like during the pandemic],” said John Hummel, head of retail home lending for U.S. Bank. “So all of a sudden, they’re going a mindset that it might be time to get serious because they could go back up.”

Redfin said recent rate declines have caused the median monthly mortgage payment to reach a seven-month low of $2,631 during the four weeks ending Aug. 10. That’s down $215 from $2,846 in May, when rates hit a peak of 7.08%.

“It’s tempting to think that supply and demand are the only factors driving home prices,” said Frank D’Angelo, president of Minneapolis Area Realtors, in a statement. “But move-up buyers looking for more space and higher-end sales are making up a larger share of the pie, and that product mix also impacts home prices.”

Brian Anderson is the director of market analytics for CoStar Group, which produces the Homes.com report. He said though house listings are on the rise, inventory levels remain low. Just as important, he added, the local economy remains strong.

New data showed that while tariffs and other headwinds appear to be taking a toll, Minnesota’s economy continues to outperform the nation when it comes to key measures, including unemployment, wage growth and labor force participation.