Twin Cities’ housing affordability reaches worst level in 18 years

Luke Fleck - 05/23/2022

By Nick Halter, Axios

  • But with interest rates on the rise, housing affordability is at its worst level since at least 2004, according to a monthly report from Minneapolis Area Realtors/Saint Paul Area Realtors Association.

Driving the news: Average interest rates on a fixed 30-year mortgage have reached 5.2%, up from about 3% a year ago, according to Freddie Mac.

  • At the same time, home prices in April were up 10% compared to a year ago, with the median sale price now at a record $370,000.

Data: Freddie Mac, Redfin; Chart: Simran Parwani/Axios

A Redfin analysis says that the minimum salary required to afford a median priced home in the Twin Cities metro was up 23% in March, compared to March of 2021.

  • You now need to make an annual salary of $65,732 to afford a median priced home.

How it works: For a $370,000 house with a 20% down payment, a jump in the interest rate from 3% to 5% is the equivalent of adding $341 to a monthly mortgage payment.

The intrigue: The rising rates have so far not cooled the sellers market as homes continue to sell quickly and for above asking price.

  • The rising monthly costs have buyers lowering their price targets, said Mark Mason, president of the Saint Paul Area Realtors Association.
  • "If you're lowering your price point, a lot of times now you're looking in a different neighborhood as well," he said.
  • Some buyers are instead choosing riskier adjustable interest rate loans with lower initial rates that could jump later.

The article was published and first appeared in Axios Twin Cities.

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