Pending sales drop as Twin Cities housing market cools

House hunters can finally breathe a little.

What's happening: The blistering Twin Cities housing market of the past two years is starting to cool.

• Pending sales over the past three week are down 23% compared with the same time period last year, per new data from the Minneapolis and Saint Paul Area Association of Realtors.
• There are now 12% more homes on the market than a year ago.
• More sellers are dropping their asking price. Nearly 40% of homes on the market in June had dropped their price. A year ago only 30% had dropped their price, according to Redfin.

But, but but: The market is still very much tilted toward sellers.

• The median sales price for a Twin Cities home hit $380,000 in June — up from $375,000 a month ago and up 8.6% from a year ago.
• Plus, the amount of homes on the market remains very low compared to historical trends.
• An expert with the Minneapolis Fed told Axios last month that she doesn't expect more than a slight dip in home prices in the Twin Cities.

Between the lines: The largest factor for the cooling market is that rising interest rates have made it more expensive to buy a house.

• Rates for a 30-year-fixed mortgage jumped from below 3% last summer to 5.81% in late June, though they dipped to 5.51 last week, according to Freddie Mac.

What they're saying: “While buyers should know that mortgage rates are still well below their long-term average, the increase in rates has had a real impact,” said Denise Mazone, president of Minneapolis Area Realtors. “Today’s buyers are more sensitive to that.”

What we’re watching: New listings and pending sales. If more listings flood the market this summer and buyers don’t bite, that’s when we would start to see more power shift into buyers' hands.