Housing affordability in the Twin Cities hits worst level since 2004

Illustration: Annelise Capossela/Axios

Homebuyers in the Twin Cities have been able to weather soaring prices in recent years thanks to historically low interest rates.

  • But with rising interest rates, housing affordability is at its worst since at least 2004, according to a monthly report from the Minneapolis Area Realtors/Saint Paul Area Realtors Association.

Driving the news: According to Freddie Mac.

  • Meanwhile, home prices in April were up 10% from a year ago, with the median sale price now hitting a record high of $370,000.
Data: Freddie Mac, Redfin;  Graphic: Simran Parwani/Axios
Data: Freddie Mac, Redfin; Graphic: Simran Parwani/Axios

A Redfin analysis says the minimum wage required to afford a median-priced home in the Twin Cities metro rose 23% in March, compared to March 2021.

  • You now need to earn an annual salary of $65,732 to afford a home at the median price.

How it works: For a $370,000 home with a 20% down payment, a jump in interest rate from 3% to 5% is equivalent to adding $341 to a monthly mortgage payment.

The plot: Rising rates have so far not dampened the seller’s market as homes continue to sell quickly and above asking price.

  • Rising monthly costs are causing buyers to lower their price targets, said Mark Mason, president of the Saint Paul Area Realtors Association.
  • “If you lower your price, you’re often looking in a different neighborhood as well,” he said.
  • Some buyers instead choose riskier adjustable interest rate loans with lower initial rates that may increase later.

And after: Mortgage rates are expected to rise throughout the year and stay at 5% or above in 2023, according to Freddie Mac’s trend forecast.


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