2024 has been a year of recalibration for the housing market as it moves past pandemic-driven extremes. Nationally, mortgage rates, home prices, and housing supply have painted a complex picture, while Minnesota mirrored many national trends with some local nuances.
MORTGAGE RATES: STILL HIGH BUT STABILIZING
Mortgage rates remained a dominant factor shaping the housing market in 2024. After peaking at over 7% in early 2024, the average 30-year fixed mortgage rate dipped to around 6.5% by mid-year.
“The decline in rates is welcome news for buyers, but affordability remains a challenge,” noted Freddie Mac in a recent report. The high rates have created a “rate-lock” effect, where homeowners with previously secured low mortgage rates hesitate to sell. This reluctance has significantly contributed to tight inventory conditions nationwide and locally.
NEW CONSTRUCTION: RESILIENCE IN OVERALL HOUSING ACTIVITY
In the Twin Cities, there was a notable 15% year-over-year increase in single-family home permits in November, indicating sustained demand for new homes in the region. This suggests a strong appetite for homeownership and reflects confidence in the single-family housing market.
As of November, Twin Cities homebuilders had pulled permits for over 5,860 single-family homes for the year, a 15% increase compared to 2023.
HOME PRICES: MODEST RELIEF FOR BUYERS
Home prices, which steeply rose in previous years, have shown signs of softening. Nationally, prices increased by about 4.5% year-over-year through mid-2024 – reaching a peak in summer at $426,900, according to the National Association of Realtors.
In Minnesota, the housing market reflected the national narrative with some regional variations. According to Minnesota Realtors, the state median home price was up 5.3% to $347,500, and the metro median price was up 4.1% to $380,000 in October. However, inventory remains limited, with supply levels far below the six-month threshold for a balanced market.
LOOKING AHEAD
As 2025 approaches, the housing market is expected to see gradual stabilization. Freddie Mac forecasts continued declines in mortgage rates, which could invigorate buyer activity. However, affordability challenges and persistent supply constraints will likely temper recovery.
Zillow’s recent housing market forecast for 2025 anticipates a modest 2.6% increase in home values, mirroring the growth observed in 2024. Existing home sales are projected to reach 4.3 million, up from 4.1 million in 2023 and an expected 4 million in 2024.
Overall, Zillow’s 2025 housing market forecast points to a more balanced and active market, with modest home value growth, increased inventory, and evolving buyer preferences. Nevertheless, the unpredictability of mortgage rates remains a significant factor that could influence market conditions.
