VOL. 6 ISSUE 4, AUG. 2022
THE MINNESOTA HOUSING INDUSTRY NEWS SOURCE BY HOUSING FIRST MINNESOTA • HOUSINGINDUSTRYNEWS.ORG
Closed home sales in June declined by nearly 14% year-over-year across Minnesota.
Interest rates and affordability cause cooling effect on Minnesota’s housing market As the Federal Reserve continues to raise interest rates in an attempt to bring down 40-year-high inflation, it has had a clear impact on the local housing market. Minnesota was facing a housing inventory and affordability crisis prior to the Fed raising rates, which was pricing many families out of homeownership. With the Fed’s efforts to increase the federal funds rate, higher mortgage rates have been the last straw for many families looking to purchase a home. Closed sales of homes in June declined by nearly 14% compared to a year ago, with a total of 9,208 properties sold across the state, according to the Minnesota Realtors®. New listings of homes for sale were also down 6.4% year-over-year. With homes sitting on the market a little longer the total number of homes for sale increased, up 21.4% over last June. The market now has a 1.7 months'
supply of homes for sale, which is still far below a balanced market of five months' supply of homes for sale. Even with more homes on the market, prices continue to climb as the market remains competitive. “As we look at the decline in closed sales, it’s important to remember that these numbers are relative to last June’s abnormally heated market. What we are seeing this month is more closely aligned with historical norms for this time of year,” said Chris Galler, CEO of the Minnesota Realtors. “Still, as higher interest rates and inflation continued to play a role, many first-time buyers were sidelined. The buyers who are successfully competing have the money to stay in the game. This dynamic is unlikely to change until we can help more buyers close the gap with tools like down payment assistance, and broadly increase construction of more affordable homes.”
The new construction sector of the housing market is seeing a cooling effect from interest rates as well. According to the U.S. Census, the number of permits pulled for new single-family homes are down 19% from this time last year. In the Twin Cities, metro permits for new single-family homes are down 9% year-to-date, according to June data from the Keystone Report. National housing sales have reverted to pre-pandemic 2019 levels, according Zonda’s latest National Housing Market Update. Ali Wolf, Zonda’s chief economist, says there is an argument to be made that many parts of the country have softened and weakened in response to the ongoing economic conditions. “Housing slows quicker than the rest of the economy, because when the rest of the economy is good, interest rates go up and
INSIDE THIS ISSUE
St. Paul rent control challenged in federal court PAGE 4
Inflation impact on construction materials continues PAGE 10
Students build a solid foundation for careers in construction PAGE 12
CONTINUED >> PAGE 6
Cities and homebuilders weigh in on Burnsville park fee case The League of Minnesota Cities and Housing First Minnesota have both submitted friend-of-the-court briefs to the Minnesota Supreme Court in the dispute over Burnsville’s park fees. Puce v. Burnsville, the case before the Minnesota Supreme Court, tests a 2004 law that requires individual determinations to be made when a city demands a land dedication fee in lieu of land. Property owner Almir Puce sued Burnsville over being charged a park fee when the city had no stated park need and the city could not state CONTINUED >> PAGE 4 HOUSING INDUSTRY NEWS
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