Now is the best time in years to go house-hunting in the Twin Cities

For the first time this decade, homebuyers are gaining an edge in a market sellers have commanded for years.

House-hunters having slightly more time and less competition to make the biggest purchase of their lives might not seem like much. But the added leverage is perhaps a wee reward for dealing with the harsh reality of higher mortgage rates, few listings, rising insurance costs and record home prices.

Or it’s a sign of sellers orchestrating their own undoing. Many have continued to list their homes at elevated prices, assuming buyers will pay anything like they did in the early days of the pandemic.

But buyers can’t afford as much house as they did when mortgage rates were at record lows. And they are much less willing to overpay or take on a fixer-upper, which has flummoxed sellers who expected their house to sell as quickly as they did even a year ago.

“There is a little bit of a correction going on,” said Jennifer Livingston, an Oakdale sales agent and president of the St. Paul Area Association of Realtors (SPAAR). “We’re in a new normal, and people are starting to realize that.”

Buyers still outnumber sellers in much of the Twin Cities. But on average, homes in the metro area sold in 69 days during February, according to SPAAR. That’s 10 days longer than last year and the slowest pace in at least seven years.

Nationally, a Redfin analysis showed in January, there were enough listings to last 3.7 months at the current sales pace, the most in six years. Market dynamics vary dramatically by region, but the biggest slowdown was in parts of Florida and Texas, where the average days-on-market exceeded 10 months compared with 2.4 months in the Twin Cities.

Lana and Aaron Higgins can attest to that: The couple just went through selling their Houston home and buying a new abode in the Twin Cities.

Offloading their 2,899-square-foot Texas house took nine months and several price cuts. Their 3,000-square-foot Minnesota home had been on the market for nearly a year, and they paid $415,000 for it, $65,000 less than the list price.

“Housing shopping was easier than house selling,” Lana Higgins said.

While the scales have started to balance toward buyers, it’s still far from a balanced market.

“Historically, a buyer’s market has been defined as when months of supply reaches four to six months, but old definitions don’t fit the reality of today’s market,” said Chen Zhao, Redfin economics research lead, in a statement. “Many buyers don’t feel like they are in a buyer’s market, with home prices at near-record highs and mortgage rates elevated.”

Mortgage rates have been hovering near historical averages but have nearly doubled since the beginning of the pandemic. House listings are still relatively scarce, causing bidding wars that in turn ratchet up prices. In February, the median price of all Twin Cities sales increased 6.1%, the biggest annual gain in more than a year.

The cost of insurance is skyrocketing as well, with the typical payment on a median-priced home in the metro about $2,800 — a $700 per month increase compared with four years ago.

“Prices, incomes and rates all matter,” Livingston said. “That hasn’t changed.”

Waning affordability is affecting first-time buyers and bargain shoppers the most, causing the market time on the least-expensive houses to increase the most. During February, houses priced at less than $120,000 took 80 days to sell, 20% longer than last year.

That’s in part because many of the most-affordable houses are also in need of the most repairs, making them ineligible for the kinds of government-backed mortgages those cash-strapped buyers need.

Last month, a house on Elliot Avenue near Lake Hiawatha in Minneapolis was priced at $139,000, nearly $100,000 less than its original listing after hitting the market nearly 200 days ago. The house — which the listing touts as a “great development opportunity” — has no kitchen cabinets, and some of the walls are stripped to the studs. It’s being sold “as-is,” which means the buyer has to assume all responsibility for the condition of the property.

Though sales of luxury homes have outpaced every other segment of the market, buyers in that price range have far more options than most, giving them more time to peruse their options. On average, houses priced at more than $1 million took 79 days to find a buyer, nearly twice as fast as those priced at $350,000 to $500,000.

A $1.234 million house for sale in Oak Grove has been on the market for more than 270 days. That northern suburb, along with Lake Elmo and Mendota Heights, had the longest market times in the metro, according to SPAAR.

Debbie McNally, a sales agent with several $1 million-plus listings in the metro, said today’s buyers — even wealthy ones — aren’t willing to overpay if the house isn’t professionally staged and move-in ready. She has two multimillion-dollar listings in Minneapolis and another in Excelsior that recently received offers but only after many months on the market and price cuts.

“People are nervous about the economy, tariffs and the political situation,” she said. “And they want perfection. That sells and sells quickly.”

During February, houses in the Twin Cities sold the fastest in North St. Paul, Carver and Columbia Heights; all of those cities have an abundance of houses priced from $350,000 to $500,000. That price range is short on listings and big on demand, causing many houses in the communities to garner multiple offers.

For the Higgins family, the stress of trying to sell in Texas, one of the most sluggish markets in the nation, only made the timing of their move more challenging. They couldn’t buy a house in the Twin Cities until they sold the one they owned in Houston, and they were shopping remotely.

When a listing that met their criteria came on the market, their agents, Cheryllyne Vaz and Andy Hardwood, quickly scheduled a Facebook video walk-through tour.

With a budget of $450,000 to $500,000, the family — who were moving north with their three kids to be closer to Aaron Higgins’ office in Chicago — saw plenty of listings that fit their needs, including a big yard with easy access to the airport.

They saw the house they eventually bought early on in their hunt, but another offer claimed it before they could. Like many deals these days, however, that offer fell apart, and the house came back on the market.

They quickly pounced on it without ever going to Rosemount to see it.

“It was scary,” said Lana Higgins, who only saw her new home in person on closing day. “But I was pleasantly happy.”