For Malik Samuel, the expected closing of his new house in St. Paul’s Highland neighborhood is a dream come true.

“This is more of a personal dream kind of thing,” he says. “Been a long time in coming. I’ve wanted to be a homeowner for a while now.”

But Samuel, 27, a program coordinator at the University of Minnesota, says getting to this point took a solid year.

“The market is pretty expensive right now, so that doesn’t help,” he notes. “Trying to get it on a single income is pretty tough when you’re trying to get in the right area you’re looking for, and you want the house to have all the features you want.”

Samuel isn’t alone.

Just ask Patti Jo Fitzpatrick, president of the Minnesota Realtors.

“It has been a tough year, and I always counsel my buyers, have your patience,” she says. “Materials are expensive, labor is expensive, and regulations are expensive.”

On Tuesday, realtor groups held a joint news conference to discuss their latest report on the Minnesota Housing Market.

One of the highlights is that would-be buyers are being ‘hindered’ by rising prices, a shortage of homes and higher interest rates.

“Throughout the year, the 30-year mortgage rate averaged about 6.7%. That was down from 2023, but still the second highest level since 2001,” declared Jennifer Livingston, president of the St. Paul Area Association of Realtors. “And it’s a stark difference from the sub-4.0% mortgage rates buyers had grown accustomed to between 2012 and 2021.”

The realtors say there were key differences between market segments in the Twin Cities.

For example, sales under $300,000 were down 8.5%, while sales over $1 million rose 12.3%.

The report also says the median price of a home in the metro is now $380,000 — an increase of 3.3% over the previous year.

“Again, that’s great for existing homeowners but has been a barrier to aspiring homeowners,” noted Frank D’Angelo, the president of Minneapolis Area Realtors.

The realtors say one reason for the low inventory is that some homeowners have low interest rates — so low, in fact, that there’s not a lot of motivation to move out and find a new home.

Livingston says 2024 ended with a 3.4% decrease in inventory.

“People out there that have that low interest rate, and they’re married to that, want to stick with that,” Fitzpatrick explains. “So, they’re not moving and that makes it hard because then we don’t have inventory for that.”

Despite these factors, the realtor groups say home sales rose 1.8% in the Twin Cities and 1.1% statewide compared to 2023.

Minnesota Realtors says it partnered with a broad coalition of partners, including Habitat for Humanity and Minnesota Homeownership Center, to secure $150 million in state funding for first-generation homebuyer downpayment assistance.

So, what’s causing those high interest rates?

Livingston says the federal government has had an impact.

“As the Federal Reserve began raising interest rates to combat inflation, one consequence was higher mortgage rates,” she notes. “This deeply harmed affordability and caused a significant drop in sales.”

Fitzpatrick says the feds are talking about possibly two rate cuts this year.

“Sometimes the mortgage industry bakes these rates in ahead of time,” she says. “So, they might change the interest rate, but we’re not seeing a fluctuation in the rate because they’ve already been baked in.”

Fitzpatrick says the realty industry hopes to lobby state lawmakers to ease construction regulations to cut costs.

“Typical year in Minnesota, to build a new construction property, it costs $50,000 to $100,000 more than to build the same home in Wisconsin or one of our neighboring states,” she explains. “Just the regulations, so expensive.”

Samuel says he hopes to close on his new home on Feb. 21.

His advice, in these tough times?

Pack your patience and research the market carefully.

“Save your money, invest in yourself, invest in your career,” he says. “Don’t rush it either. It’s a big decision, don’t rush it, there’s no rush.”

The realtor groups say they believe pent-up demand will increase sales by up to 10% in 2025.

But they also say prices could rise as much as 6%.

“You know, the elections are behind us, that stalled the market a little bit,” Fitzpatrick says. “So, I think we’re going to see more people buying and selling.”

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