This article was published and first shared in Pioneer Press .
It wasn’t that long ago that Justin DuChemin could all but guarantee a rush of offers well above asking prices to home sellers looking to list properties, even old homes that could use a little TLC.
DuChemin, a real estate agent with Re/Max, said multiple attractive offers are still coming in for houses that have been thoroughly readied for market, but demand has slackened as interest rates have risen. Sellers are increasingly surprised, and sometimes disappointed.
“We don’t seem to be selling stuff like $40,000 or $50,000 over list price, with offers like ‘You can name my first child,'” quipped DuChemin, recalling the feeding frenzy that made for unusual national headlines as recently as March.
“Overall, home sales are definitely down,” said DuChemin, who is helping to sell his neighbor’s home in Maplewood. Buyers “are not gangbusters to move into the next phase. There’s a disparity right now between what sellers want to sell their homes for and what buyers are willing to pay.”
His outlook is echoed both locally and nationally by new home sale reports from agencies such as Re/Max, the St. Paul Area Association of Realtors and the Minneapolis Area Realtors.
In July, year-over-year home sales fell 25 percent in St. Paul and 17.5 percent in Minneapolis, according to the St. Paul and Minneapolis Realtor associations. Cities such as Monticello, Golden Valley and Orono saw some gains, while Stillwater, Chanhassen and Fridley experienced lower demand than a year prior.
That doesn’t mean home prices are down anywhere in step, but they may finally be stabilizing a bit.
HOME SALES AT $375,000, WHICH IS UP — AND DOWN
According to Re/Max, the median home sales price in the Minneapolis-St. Paul-Bloomington statistical area was $375,000 in July, down from $380,000 in June but still up significantly from $350,000 in July 2021.
Overall, “the sales are down but the values are up,” said Tracy Baglio, a Keller Williams real estate agent in the Stillwater/St. Croix Valley area, and immediate past president of the St. Paul Area Association of Realtors. “Interest rates slowed things down. They stopped the frenzy of 10 or 20 offers. We haven’t had a sale yet that hasn’t had multiple offers, but now we have three or four offers. They’ve still exceeded the list price, but they’re not as wild.”
That’s not necessarily bad news, said Baglio. “It really gives the first-time homebuyers a better chance of competing and winning, just because there’s less competition,” she said. “It’s still a seller’s market.”
Buyers who recalled the near-catastrophic collapse of the housing market during the Great Recession of 2008 may have flinched and paused when they saw interest rates climb from near-record lows in the last few months. Would a newly-purchased property lose 30 percent or more of its value in a matter of months, much like many Twin Cities homes did little more than a decade ago? If so, some figured that holding off until a market crash might be a good time to find deals.
Except many experts believe the housing market probably won’t crash, given the amount of needed housing that was simply never built during the Great Recession. In the St. Paul market, even a 25 percent drop in sales has yet to fundamentally slash prices. DuChemin noted the crash of 2008 was partially fueled by corrupt lending practices and adjustable rate mortgages issued to inexperienced buyers with unforgiving terms. The industry has since matured.
“We’re getting back to that more balanced market between sellers and buyers, which is a great thing for buyers. But it’s still a great time to sell,” DuChemin said. “There’s not going to be an opportunity to buy at a discount in the next six to 12 months. A lot of buyers were waiting for that crash, because a lot of buyers are priced out of that first-time homebuyer’s market. I just don’t think you’re going to see that.”
Baglio, who is on her fifth house, said she received the following advice, which has served her well.
“‘We marry the house and we date the interest rate,'” Baglio said. “Get in the home and refinance when you see an opening later. There’s always an opportunity.”
BY THE NUMBERS: SALES DROP, PRICES RISE
Re/Max’s “National Housing Report,” issued Wednesday and focusing on 53 metro areas, found a double-digit drop in home sales from June to July, as well as a double-digit increase in homes for sale. The two trends triggered the first decline in the national median sales price since January.
Median sales prices reached $415,000, which is down 2.9 percent from June but still up 8 percent from July 2021. Year-over-year sales were down 26.3 percent from a year ago.
There were 13.3 percent more homes for sale nationally in July than in June, and 30.4 percent more than a year ago, according to Re/Max. Inventory, or months of supply, is now at 1.8 months nationally, which is double what it was in May.
The overall picture — prices up, sales down — is a bit more nuanced than many buyers and sellers have grown accustomed to over the past year or two. Re/Max found that the Twin Cities’ metro saw a similar pattern, with year-over-year home sales falling despite an increase in inventory, and prices rising 7 percent in July compared to a year ago but softening 1.3 percent compared to this June.
The St. Paul and Minneapolis Realtors associations found pending home sales across the metro were down 23.3 percent in July compared to a year prior and down 12.8 percent below July 2019.
“Buyers have been hampered by increased mortgage rates, still-low inventory, strong home prices and some economic uncertainty,” reads their latest joint advisory. “Buyer activity has been softening for 11 of the last 12 months as most acknowledge the frenzied demand of 2020 and 2021 couldn’t last.”
Nevertheless, they found homes in the metro sold for a median of $375,000 last month, 7.1 percent more than in July 2021.
Frederick Melo | St. Paul reporter
Frederick Melo was once sued by a reader for $2 million but kept on writing. He came to the Pioneer Press in 2005 and brings a testy East Coast attitude to St. Paul beat reporting. He spent nearly six years covering crime in the Dakota County courts before switching focus to the St. Paul mayor's office, city council, and all things neighborhood-related, from the city's churches to its parks and light rail. A resident of Hamline-Midway, he is married to a Frogtown woman. He Tweets with manic intensity at @FrederickMelo.