Homeownership Just Got More Out of Reach for Many Minnesotans

Minnesota’s housing market has been on a rollercoaster ride over the last two years and would-be homeowners have been taken along for the ride.

A report from the Joint Center for Housing Studies (JCHS) at Harvard University released earlier this summer sheds new light on just how out of reach homeownership has become both nationally and in Minnesota.

In 2020 interest rates were slashed to almost historic lows in an attempt to offset potential economic downturn due to the COVID-19 pandemic. As a result, buyers flooded the market looking to lock-in a mortgage at these rate levels – especially first-time homebuyers.

JCHS’s report finds that almost 2.2 million individuals across the nation became homeowners between the first quarter of 2020 and the first quarter of 2022.

Subsequently, this squeeze on inventory in the market lead to home prices skyrocketing when the supply of homes for sale majorly under paced demand levels. JCHS’s report states that there were fewer existing homes for sale in January 2022 than there were at any point since the late 1990s. Meanwhile the asking prices for homes shot up during this time period. The median existing home price in the Twin Cities currently sits at just over $377,000 – 12% higher than the median price in 2021.

The report determines that the annual income needed to be able to afford a median-priced home in the Twin Cities in nearly $104,000; an estimate that is about $20,000 more than the current median household income in the Twin Cities.

Nationally the median home price-to-income ratio in 2021 reached a record high with the median home price 5.3 times more than the median household income in the United States.

Moreover, the report from JCHS also noted that rents have also been climbing since the beginning of the year and have led to a notable increase in these households paying a larger share of their income on housing costs. Consequently, these current renters are left with little wiggle room to save money to put towards a down payment ­– a commonly cited hurdle for first-time homebuyers.

Escalating prices and record-low inventory continue to price out buyers across both the Twin Cities metro and Greater Minnesota. These market barriers coupled now with the highest interest rates in a decade have pushed the dream of homeownership further out of reach for the many Minnesotans who want it.