Twin Cities homes aren't as overvalued as other metro areas
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The Twin Cities housing market is one of the least "overvalued" major metropolitan areas in the country, according to a recent analysis.
What's happening: Buyers in the Twin Cities are paying about 19% more for a home than what they should have expected considering past trend lines, according to researchers at Florida Atlantic University and Florida International University.
- That ranks 76th out of the 100 largest metro areas in the U.S.
Zoom out: 15 metro areas have housing markets overpriced by more than 50%. The top three include Boise, Idaho; Austin, Texas; and Ogden, Utah.
How it works: Researchers ranked the most overvalued housing markets of America’s 100 largest metros by determining the premiums buyers are paying. The larger the premium, the more overpriced a market is. The researchers’ data dates back to 1996 and covers single-family homes, townhomes, condominiums and co-ops.
The intrigue: Rising interest rates have increased the inventory of homes on the market and slowed sales, but have not yet reduced the median sales price in the Twin Cities — it reached a record $375,000 in May, according to the Minneapolis Area Association of Realtors.
- “Recent buyers in many of these cities may have to endure stagnant or falling home values while the market settles – and that’s not what they want to hear if they had planned to resell anytime soon," said Ken H. Johnson, an economist in FAU’s College of Business.
What they're saying: Recent home buyers may not feel the same pain locally because the Twin Cities has not historically been a boom-and-bust housing market, said Libby Starling, director of the community development and engagement department at the Federal Reserve Bank of Minneapolis.
Starling expects some buyers on the lower end of the market — like those buying their first home — could be priced out. But she doesn't see a big drop in prices coming.
- "I would anticipate the (median sales) number flattening out, maybe dropping a little bit. I see more stability than a significant drop in that value."
- "(We're not at) as much risk of a significant loss in home values," she added.