Record Home Prices Kick off 2020 Real Estate Season
A new report released this month from the Minneapolis Area Realtors and the St. Paul Area Association of Realtors shows home prices ended 2019 at an all-time high. The median sales price in the Twin Cities metro reached $280,000, a 5.7 percent spike over the previous year.
“The numbers that we’re seeing are kind of a bit of a shock,” said Brandon Doyle, a realtor based in Maple Grove with RE/MAX Results.
Prices rose across the northwest suburbs.
Maple Grove saw prices rise 5.8 percent to $314,885. The city of New Hope climbed 6.5 percent to $259,900. One of the hottest markets was Brooklyn Center, which jumped 7.8 percent to $220,000.
“So what we’re seeing is they are kind of moving a little bit further out. Some people are moving into Brooklyn Center, which is a very affordable area in town. It has very good housing stock,” said Doyle.
Exurb areas like Waverly and Otsego also showed significant rises, Doyle noted.
Home Prices Rising Linked to Lower Mortgage Rates
There’s a reason the prices continue to rise. Doyle says low-interest rates are keeping buyers in the game.
“People buy based on their payment and not based on the purchase price,” Doyle said. “So right now we’re seeing low interest rates, which is helping push the values up. Interest rates are actually down a whole percentage point from last year.”
Mortgage rates are currently 3.5 percent as opposed to 4.5 percent last January. New loan products that require just a $1,000 down payment also helped fuel the growth. Rising rent costs are another factor.
“Rent prices have gone up at the same rate,” said Doyle. “So actually right now, it is still more affordable to buy a home with a low interest rate. There are some great options where you can get into a home with as little as a $1,000 down with the various loan programs. So that’s actually a little bit more attractive than coming up with a deposit and first month and last month rent for some people.”
Tale of Two Markets
Doyle also says it’s a tale of two markets. Starter homes – or those $350,000 or less – are going fast. But so-called “move-up” homes of $500,000 and above are sitting longer.
“That market is actually a complete flip,” said Doyle. “There’s a lot of different options available including new construction so a lot of the sellers of the more luxury, larger homes are having challenges.”
First-time home buyers will have to be patient, however, Doyle said. They will likely face multiple offer scenarios.
“Don’t get discouraged if you lose out in multiple offers the first time,” Doyle said. “More and more homes get listed every day. So there will be more opportunities and you’ll have a better idea of what you’re looking for exactly and what you need to come in for an offer to make it work.”