Rising house prices caused in part by record low inventory is starting to wear thin on prospective homebuyers.
That's according to Minneapolis Area Realtors and St. Paul Area Association of Realtors, which in its latest monthly update said that affordability has hit its lowest level since 2004 in the metro, with the average sale price hitting $370,000 in April.
That represents a 10% increase in average sale price compared to 2021, with the groups noting that this will likely be exceeded over the next few months.
But in its report, there are signs that the "sellers market" in the Twin Cities could be running out of steam following a period of intense competition for housing.
"Declines in affordability have continued to weigh on some buyers who are already fatigued from writing several offers," the report says.
"Historically low interest rates have been offsetting the effect of rising prices on monthly mortgage payments. But that’s quickly changing as the Federal Reserve races to combat high inflation by raising rates."
The Twin Cities house price boom has been driven in no small part by the lack of housing supply. In April, housing inventory was down by 9.2% to just 5,758 available units, which represents the 25th consecutive month of declines.
Even with buyer fatigue present, the realtor associations say that this limited supply "will likely keep prices firm," even though sales are falling.
"Despite affordability concerns, the supply-demand imbalance will likely keep prices firm," they add. "Some buyers may need to re-evaluate their target price to keep monthly payments at a level they’re comfortable with."
The number of signed purchase agreements fell by 9.2% this April compared to April 2021, and sellers listed 7% fewer homes than last year.
"Sellers may feel attached to their interest rate and reluctant to list their homes to avoid higher interest rates," the report notes.
In terms of where houses are being bought and sold, sales in Minneapolis fell by 3.2% while in St. Paul they fell a whopping 17.7%, but there were increases in Hopkins, Mounds View, Wyoming, and Somerset, Wisconsin.