Minnesota home prices fell in February

It was a cold Sunday afternoon in Moorhead. Snow and wind have been battering Minnesota all weekend and despite the sun, the roads were still icy.

Nonetheless, Justin and Amanda Ottesen bundled up and spent the day touring open houses. 

“(We’ve been) actively looking for two months, but wanting to look for a few years now,” Justin Ottesen said. “But it’s just been a roller coaster with how the market had been earlier.”

They’ve been renting in Fargo for more than 20 years and they said rent keeps going up. 

Everything’s going up in price, and (we) might as well actually own what we’re living in,” he said. “So it feels like an investment instead of just paying somebody.”

They decided to try to take advantage of the recent trend in Minnesota’s home prices, which were 1.5 percent lower last month compared to a year before, according to new data from the trade group Minnesota Realtors.

Buyers ‘pump the brakes’

Completed home sales fell by almost 8 percent in February compared to the year before. Sellers are responding to the decreased demand and accepting lower prices than they were in past years. 

Minnesota Realtors President Wendy Uzelac said during the COVID-19 pandemic, market conditions favored sellers. 

“They were getting multiple offers on basically every single house that hit the market, and because of that, they received a higher asking price for their homes,” she said.

Sellers have benefited from a shortage of homes for sale in the state. That shortage still exists — there’s roughly two months of inventory on the market, and four to six months is considered healthy.

But Uzelac said consumers may be feeling anxious about the economy. Inflation is still running high, and the U.S. economy lost 92,000 jobs last month. 

“People do pay attention to what’s going on nationally, and sometimes some of that economic anxiety can make them pump the brakes a little bit on making big purchases,” she said.

Uzelac said Minnesota may be headed toward a balanced market that doesn’t particularly favor buyers or sellers.

“Sellers maybe just need to understand that buyers are going to be a little bit more picky as inventory comes up, and if the interest rates still stay at the levels they’re at, they have to maybe be enticed a little bit more to buy,” she said.

Minnesota is made up of many different local and regional housing markets. In Minneapolis, closed sales plunged 18 percent. Uzelac wouldn’t speculate on whether that had to do with the surge of immigration enforcement. 

“When we’re looking at housing data, the stats that we gather are just that: they’re just stats,” she said. “They’re not necessarily tied to a particular event, and it would be hard to infer that decrease in sales is really tied to what’s going on in the metro market.”

There’s also a lot of seasonal variation, Uzelac said, and she’s expecting activity to pick up across the state as the weather warms up. 

Stable market in Moorhead

Real Estate Agent Troy Peterson is hoping that’s the case, too. This past weekend, he held an open house, and no one showed up after an early morning of snowfall and strong winds. 

But he said the market in Moorhead has otherwise been consistent in the eight years he’s been working. 

“Due to the diverse job market and then the growing population, we’ve really just seen a lot of steady growth throughout the many years of real estate,” he said. 

As for Justin and Amanda Ottesen, they’ve never looked for housing in Minnesota because of the state’s higher income tax. But that’s changing with the dip in prices. 

“I don’t think it even felt possible to move to the Morehead side because of that tax,” Justin Ottesen said. “And it is feeling possible in some regards now.”