How to price a home in Minnesota when the market is slowing

With mortgage rates on the rise and home sales slowing, it's an especially confounding — and precarious — time to be a seller in Minnesota.

Here's what's happening:

• Price gains are slowing, but on average sellers are still getting nearly their asking price.
• There are fewer buyers, but listings are still in short supply.
• Price reductions are the rise, but houses are still selling more quickly than normal.

Right now, this fall and heading into winter, what matters when pricing your home?

Comparisons have changed. Ignore what your neighbor sold their home for this summer — and what a prospective real estate agent may say about their record this spring and summer.

Instead, focus on what has been selling — and for how much — in the last few weeks.

"You need to focus on where the market is going, not where it was," said Kat Pap, vice president of strategic operations for Kris Lindahl Real Estate. "And that means we're looking at what sold in the last two weeks, not during the last 90 days."

Her advice is a reminder that the housing market is changing quickly and even the experts are having trouble forecasting what's next for housing.

Fannie Mae recently revised its sales and price expectations downward for this year and next. It now expects prices to decline nationwide during 2023, a change in forecast that came after it lowered its outlook for price gains this year.

Adjust your expectations

The Twin Cities, and much of Minnesota, is still considered a seller's market because house listings are in short supply and houses are selling quickly — after only 31 days on average in the metro in September. But buyers are taking more time.

"Some sellers think they're in the same position they were in a year ago, while some buyers think they're going to get deals like it's 2010," said Denise Mazone, president of the Minneapolis Area Realtors (MAR) and a Twin Cities agent. "As usual, the truth is somewhere in the middle."

Jonathan Lindstrom, a sales agent with REMAX Professionals, said that beyond the hype and the headlines about a changing housing market, many houses are still selling quickly, but just not as fast as they did earlier this year.

"Sellers aren't getting an offer within the first four hours on the market so they're getting nervous," Lindstrom said. "It's the ones that need a little work that become stagnant on market after three to four weeks, so the only thing they can do is reduce price."

He noted that during one recent weekend he had a listing that got six offers and sold for $50,000 over list price and wrote an offer for a client on a house in Woodbury. Even though his client was willing to pay $45,000 over the asking price, they didn't get it.

Still, he said, the market has changed. Lindstrom said the pandemic upended normal seasonal buying and selling cycles. Rising mortgage rates have only added to the chaos. Normal seasonal variations appear to be returning.

"The last couple years ago we forgot about normal," he said. "We're now in that normal fall slowdown."

Consider the competition

Before you price your house, you or a real estate agent needs to evaluate similar properties that have sold and closed most recently. It's generally a good idea to get a market analysis from a handful of agents — preferably three — so you can compare them. It's not always best to go with the agent who comes up with the highest price. Some agents woo clients with a pie-in-the-sky market analysis.

While there were just 9,002 houses for sale at the end of last month — about the same as last year — there are also fewer buyers, according to MAR. Last month, the trade group said pending sales were down nearly 30% compared with last year.

That means sellers need to be more aware than ever of their competition so they can be sure their house is priced competitively. And that means comparing the size, condition and location of your home to others that are on the market, but have also sold recently.

Without an agent you can do an informal version of a CMA by using the search function on the plethora of real estate websites operated by individual brokerages, but also by third-party listing sites like Zillow.com.

Many of those websites include home value/price estimates based on proprietary algorithms. Remember, though, those estimates aren't what you'd get from a local professional.

Pigs eat well, hogs get slaughtered

The importance of these four words can't be overstated: Don't overprice your house!

While fall and winter are typically the slowest buying seasons of the year, many agents consider them to be the best time to deal because people who are in the market are serious.

"People aren't moving to move," Pap said. "They're moving 'cause they have to."

Still, those buyers aren't willing to overpay.

Earlier this year, sellers in the metro got more than 101% of asking price on average. But in September sellers got 98.3% of asking price on average.

And over the past couple of years, monthly sales reports routinely showed price gains in double-digit percentage ranges. But in September, the median price of all sales increased 6.3%.

As long as a property is priced right, professionally staged and in tip-top shape, it will still sell quickly, said Krista Wolter of Coldwell Banker Burnet.

She recently received an offer on a $1.65 million house in North Oaks that had been on the market for two months. That offer came shortly after a price reduction.

"Some sellers started pricing too high," Wolter said. "Pricing and prepping is something you need to do right in this market and you will still have success."