7% interest rates are devastating Twin Cities homebuyers

The monthly cost to own a median-priced home in the Twin Cities has shot up by $1,000 in the past year, thanks to rising interest rates and prices.

Driving the news: Average interest rates for a 30-year fixed mortgage topped 7% last week, up from 3% a year ago, according to Freddie Mac.

• Meanwhile, the median sale price for a home in the metro jumped to $362,000 in September, up from $341,000 a year prior, according to Minneapolis Area Realtors data.

By the numbers: Assuming a 5% down payment, a monthly mortgage payment for a median-priced Minneapolis home, including taxes and insurance, would now top $3,000 — up from $2,000 last fall.

• That staggering increase has chilled the housing market, both in the Twin Cities and across the country. As interest rates have risen, the number of pending sales has plummeted by 28% over the past three months, per Minneapolis Area Realtors.

Why it matters: The rate hikes have made home ownership impossible for some buyers and decreased the buying power for others. That's especially true for first-time buyers in the lower price ranges.

Silver lining: The days of intense bidding wars, waived inspections, and buyers having to put up money for appraisal gaps are over for a lot of homes, said Nate Pentz of Pentz Homes.

• In fact, he said, buyers are getting concessions from sellers, which was rare in the spring.

• "We had a client who got almost $14,000 in concessions for an electrical repair on a $500,000-plus home," he said.

Pentz is telling clients to decide how much of a monthly payment they can afford. If they are comfortable paying that much, then now is a great time to buy.

• If they can swallow the payments for now, they will likely be able to refinance in the next couple years to lower their interest rate and payment amount, he said.

The intrigue: In some cities, prices are forecast to drop significantly. But experts have said they expect Twin Cities prices to remain more stable.