Higher rates cool Minnesota sales as buyers gain leverage

(Oct. 16, 2026)— Minnesota’s housing market lost momentum in September as mortgage rates pushed past 7% for the first time since January 2025. In fact, September rates reached their highest level since late 2023. Pending sales, a leading indicator for closings, fell 11.5% statewide and 11.7% in the Twin Cities metro. Statewide, it was the steepest monthly drop of 2026. Closed sales slipped 1.2% statewide to 6,262 and 3.1% in the metro to 4,049 in September. Sellers kept coming, with new listings up 2.4% statewide to 9,372 and 3.0% in the metro to 6,571, though the statewide gain was the smallest since January.

Other snapshots of the September market include:

• New listings rose 2.4% statewide and 3.0% in the Twin Cities metro
• Pending sales decreased 11.5% statewide and 11.7% in the metro
• The median sales price was down 0.7% statewide but up 1.3% in the metro

More homes for sale give buyers more options

Statewide inventory climbed 12.9% to 21,090 homes, about 2,400 more than a year ago and a seven-year high, and months of supply rose from 3.3 to 3.7. The metro had 12,411 homes for sale (up 11.2%) and 3.2 months of supply, up from 2.9. Supply is still below the five to six months typically seen in a balanced market, but the direction is clear: inventory is growing. "Higher rates have made some buyers hit pause, and we shouldn’t sugarcoat that. But buyers who are ready to move have more choices than they’ve had in years. That means more options, including more room to negotiate and more room to request repairs or concessions,” said Wendy Uzelac, President of Minnesota Realtors^®.

Significant differences between market segments across the state:

• Pending sales under $400K were down 12.8%; sales over $1M decreased 2.2%
• Single-family home sales fell 8.9%; condo sales declined 11.5%; townhome sales were 17.8% lower
• Previously owned sales were down 10.5%; new construction sales slipped 5.9%
• Two-bedroom home sales decreased 14.5%; four-or-more bedroom home sales fell 5.9%
• Non-waterfront home sales declined 11.1%; private waterfront home sales were down 9.8%
• Sales fell 8.8% in Minneapolis and were 9.2% lower in St. Paul

Slower sales give buyers more time and leverage

Less competition is showing up in negotiations. Statewide, homes spent 56 cumulative days on market to reach an accepted offer, up 14.3% from a year ago, and sellers received 96.8% of their original list price, down from 97.5% last September. In the metro, homes took 48 cumulative days and sellers received 97.7%, compared with 44 days and 98.4% last September. “In the Twin Cities, prices have held up even while homes are taking longer to sell. That gives buyers time to do their homework and gives sellers a good reason to price realistically from day one,” said Aarica Coleman, President of Minneapolis Area REALTORS^®.

Median price dips statewide; affordability still strained

The statewide median sales price edged down 0.7% to $354,900, about $2,550 below last September, while the Twin Cities median rose 1.3% to $395,000. Average prices—which are often skewed by higher priced sales—rose 2.5% statewide and 3.7% in the metro. Year to date, the statewide median is up 1.1% to $362,000 and the Twin Cities median is up 1.5% to $399,000, so September’s dip stands out against a backdrop of modest gains. Higher rates continue to squeeze affordability. At a 7.5% mortgage rate, the typical payment on the median priced home in Minnesota tops $2,800 per month. Though that’s still under the 30% of pre-tax median family income in Minnesota—the traditional affordability benchmark—many people still feel shut out of homeownership. “Higher rates are a real headwind, but buyers now have more homes to look at and more time to decide. Working with a Realtor^® can help buyers make the most of those options and negotiate with confidence,” said Danielle Bickham Pelton, President of Saint Paul Area Association of REALTORS^®.

Economy and rates

The biggest question facing the economy and housing market remains where interest rates go from here. After cooling earlier in the year, inflation has proven more persistent than expected, prompting the Federal Reserve to shift hawkish. The Fed raised its benchmark rate a quarter point on Sept. 16, its first increase since 2023. Mortgage rates follow Treasury yields more closely than the Fed’s own rate, and the 10-year yield has climbed above 5% and recently reached its highest level since 2002. The average 30-year fixed mortgage rate rose from about 6.7% in August to 7.03% on Sept. 24 and reached 7.4% on Oct. 8, the seventh straight weekly increase, according to Freddie Mac.

Recent economic data paint a mixed picture. Job growth has moderated and consumers remain cautious, but spending, business investment and overall economic activity are holding up. That combination of resilient growth and lingering inflation has kept mortgage rates elevated. And because many September contracts were signed before rates peaked, closings may stay soft into the fall. Rates will likely remain the swing factor to watch heading into winter. If they stabilize, paused buyers could return to a market with more options than they’ve seen in years; if they keep climbing, expect continued softness in sales and further gains in inventory. Minnesota’s market is still driven by local jobs, incomes and housing supply, and the supply picture is improving even as financing gets tougher.

These monthly press releases are shared with Minnesota-based media and prepared jointly by SPAAR, MAR and Minnesota Realtors^®.