Short-lived mortgage rate dip fueled Twin Cities home-buying spike in October

Fueled by a temporary dip in mortgage rates and an increase in listings, house shoppers in the Twin Cities went on a fall buying spree in October.

Buyers signed 3,968 purchase agreements, a whopping 14% year-over-year increase, according to local and state real estate associations.

New listings were up nearly 9% year over year. This leaves shoppers a choice of 9,885 listings on the market, 7.8% more than at this time last year.

Those gains helped take some of the stress and pressure off buyers, giving them more options — and more time to shop.

"Things are as normal as they've been in a long time," said Matt Baker, a Twin Cities sales agent. "People have choices, and they can take some time."

There's more negotiating as well. Sellers accepted offers that were 97.8% of the list price in the metro — down from last year. On average, those offers were accepted after 45 days on the market, six days longer than the previous month and eight days longer than last year.

The October surge in pending sales was especially notable given that pendings have increased by double digits only once since early 2021 as buyers and sellers grappled with higher mortgage rates, which hovered slightly above 7%.

Closings, a reflection of the offers accepted about two to three months ago, were up only about 5%. Across the metro, those closings fetched a median price of $380,000, a 4.1% annual increase and one of the biggest gains all year.

Statewide, the trends have been similar.

Baker, a veteran agent and the former president of Coldwell Banker Realty, said the market has been remarkably resilient.

"It's extraordinary that the real estate industry improved as well as it did given the magnitude of the rate increase," he said. "It plateaued, versus a meaningful drop."

After six weeks of steady but gradual increases, rates have leveled off in recent weeks. On Thursday, Freddie Mac said the 30-year fixed-rate mortgage averaged 6.78%, down a bit from the previous week. A year ago at this time, the 30-year FRM averaged 7.44%.

Though rates are now at 30-year historical averages, buyers and sellers are still adjusting to higher borrowing costs that have eroded affordability and made buyers less aggressive and sellers more anxious.

Luke McGregor hated the recent experience of selling his home.

"I believe that the buyer seems to have more leverage," he said.

When McGregor and his now-wife had the opportunity to move to Walker, Luke's hometown, they listed their six-bedroom house in Plymouth in early spring for $975,000. Contrary to what they expected, it didn't sell.

They did get an offer the first week it was on the market, but because of various terms they didn't accept it. They regret that decision.

"Hindsight is 20/20. Your first offer is typically your best offer," said Luke McGregor.

They took the house off the market and in the summer hired Baker and Ellyn Wolfenson to take on the listing. Baker had the house professionally staged and did minor cosmetic touch-ups. He also put together a full marketing plan, including open houses.

After a price reduction and a couple of months on the market, the couple finally got an offer and closed last month.

McGregor's experience demonstrates the importance of making sure a house is in tip-top shape and priced competitively, Baker said.

"The market has definitely shifted, and putting a property on the market and sorting through offers was a point in time which wasn't normal," Baker said.

The market also is far more nuanced than it was a year ago with demand varying dramatically by price range and location. Some listings are still getting multiple offers and selling for more than list price, while others are lingering on the market and selling at discounted prices.

"We're seeing different activity in different price points, areas and segments such as condos or new construction," Jamar Hardy, president of Minneapolis Area Realtors, said in a statement. "What's impacting $1 million-plus buyers isn't necessarily on the mind of a $300,000 buyer, and condos and new construction are better supplied and more accessible than the existing single-family market, for example."