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As Twin Cities median homes top $350K, more renters are giving up on owning

For some in the market of homebuying, today's tight housing supply means browsing with more urgency. For others, it means putting their plans on hold.

MINNEAPOLIS — With the median home price in the Twin Cities now breaking $350,000 for the first time, more and more renters are losing confidence that they'll ever actually own a home.

An annual survey by the Federal Reserve Bank found that, on average, only 43.3% of renters expect to own a home at some point in the future, down from 51.6% in 2021. That is the lowest level since the Fed began asking the question in 2015.

Local realtors say the Fed's decision to raise interest rates to combat inflation is the latest blow to a market that was already extremely tight.

"In my 29 years, I've never seen the market so tight before," said Denise Mazone, president of Minneapolis Area Realtors. "I mean, I've seen it where it's a seller's market or a buyer's market, whatever, but never to this extreme."

Despite this typically being a very busy time of year, the latest report from the Minneapolis Area Realtors shows just one month of home supply. Mazone says that is up just slightly from February.

"That won't bring a balanced market until there are maybe four or five months worth of supply," Mazone said. "This is across the metro. I have been showing properties in Ramsey, St. Francis, Cambridge, Anoka, everywhere, and it's the exact same wherever you go."

Kent Erdahl: "Is it tight across the board, or are there certain price points that everybody wants, but that nobody can find right now?"

Denise Mazone: "It's straight across the board, but if you're a first-time homebuyer, the $250,000-and-under range is even worse."

The Fed's decision to raise interest rates in an effort to slow down inflation is complicating things even further for many of those shopping in that price range.

"Maybe they could afford a $240,000 house and now they only qualify for $215,000 or $220,000 — depending on their credit — they just won't be able to buy as much," Mazone said. "And then there are cash buyers. I just lost out on a deal today because it was a cash buyer and they were going to close next week. You can't compete with that, even though my offer was almost 20% over list price."

And with another expected rate hike coming soon, the worry isn't just about buyers.

Erdahl: "Is there a concern that with interest rates higher now, that people will be less likely to want to sell their home or get out of the mortgages that they've locked in?"

Mazone: "Oh indeed, absolutely, because when they sell, they're going to have to buy somewhere. You're going to pay that much or more when you move to another property."

Erdahl: "Do you have people, at this point, who are just like, 'We've tried it for a while, I'm just going to sit back on the sideline?'"

Mazone: "Oh, absolutely. All the time. I just had a family, we put ten offers and they finally said, 'We're done. It's just too much for us emotionally, and so we're just going to take a break.' They ended up only taking a week break and came back, and we finally got one."

Despite all that discouraging news, Mazone says she and other realtors are still closing deals, and with prices and mortgage rates continuing to climb, she says it's still a good idea for homebuyers to keep looking, stick to a plan and remain patient.

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