How do these significant sector of home buyers impact the wider real estate market in Minnesota?
By early 2023, the inventory of homes available remained roughly half of what it was in 2018.
Price Trends and Affordability
Home prices rose dramatically during this period.
Shutterstoock
The Minnesota Realtors Association reports that the statewide median price increased about 35% from 2018 to 2022.
This rapid price appreciation far outpaced income growth and made it harder for moderate-income buyers to afford homes.
New listings also declined, as homeowners locked into low interest rates grew reluctant to sell.
Buyers with families or plans to start families overwhelmingly seek single-family homes with yards.
In Minnesotas smaller towns and suburbs, detached houses are the norm.
This strategy grew in popularity as rents increased and buyers sought creative affordability solutions.
Low mortgage rates through 2021 made trading up to a bigger home relatively affordable in terms of monthly payments.
Indeed, by late 2022, housing mobility had decreased people were moving less frequently due to affordability constraints.
when moving was too difficult or expensive.
This stay-put trend contributed to lower housing turnover.
Minnesota has a storied cabin culture there are over 135,000 seasonal/recreational properties across the state.
During the pandemic, demand for these vacation properties skyrocketed.
By 2022 and 2023, the vacation-home boom began to cool.
As offices re-opened and borrowing costs rose, fewer households were in the market for a discretionary second property.
FHA loans remained vital for those with smaller down payments or lower credit scores.
Many under-$250K households, especially younger buyers, took advantage of FHAs 3.5% down option.
One challenge that emerged, especially in 20202021s hot market, was seller aversion to FHA/VA offers.
Many cities and nonprofits also offer down payment assistance grants or loans.
From 2018 to 2023, thousands of households under $250K income leveraged these programs to achieve homeownership.
Interest Rate Impacts
Households in this period benefited from historically low interest rates through 2021.
Another NAR survey found just 24% first-time in the 202223 period.
The median age of first-time homebuyers climbed into the mid-30s by the early 2020s.
High home prices, student debt, and difficulties saving for down payments all contributed to Millennials delaying homeownership.
This is still far below their share of the population, but its an improvement from earlier years.
The period also saw the launch of culturally specific homebuyer education and pathways to ownership initiatives.
Regional Variations: Twin Cities vs.
Greater Minnesota
Twin Cities Metro
The 7-county MinneapolisSt.
Paul metro area experienced some of the strongest price gains and tightest inventory in 20182023.
By 2022, multiple offers were common on any affordable listing in the cities or inner suburbs.
First-time buyers often expanded their search to outer-ring suburbs or even exurban communities to find houses in their budget.
These provided relatively affordable options for moderate-income singles or couples who wanted to stay in the city.
From 2018 to 2023, however, even rural Minnesota saw significant appreciation.
Some counties experienced 50%+ increases in median sale price over five years.
For instance, Aitkin Countys median jumped from about $171K in 2018 to $265K in 2022.
Cloud, Duluth, or Mankato to buy decent single-family homes for well under $300K in this period.
This created unusual competition in small markets that are normally slow-moving.
But even by 2017, conditions were far more balanced than the late 2010s that followed.
Stricter lending standards post-2008 made FHA the go-to for buyers with modest incomes and credit.
