As we reflect on the year so far, we've observed a decline of approximately 27% in the total number of closed sales within the Twin Cities market compared to the same period last year. One of the major challenges facing consumers is affordability, as interest rates continue to linger in the high 6's. Although these rates remain historically low, the surge in prices, inflation, and interest rates has weakened consumers' purchasing power. With nearly 62% of mortgage holders having a rate of 4% or less by the end of 2022, there is less incentive for those who simply wish to relocate to take the plunge, which ultimately contributes to low inventory levels. While there has been a slight increase in supply in recent months, we are still witnessing only a fraction of the inventory levels seen during the great recession. As of May 2023, the metro area had a mere 7,699 homes for sale, which is a staggering 78% LESS than the peak of 34,048 homes in 2009.

Despite the higher interest rates and the supply-demand imbalance, we expect the market to maintain stable prices. There is a growing "shadow demand" of buyers eagerly awaiting any improvement in affordability or increase in supply. These potential buyers serve as a safety net, preventing any significant market decline. It's important to note that we are currently facing a shortage of housing across the Twin Cities, as well as nationally. Given these factors, I remain optimistic about real estate for those fortunate enough to own and invest. However, it's crucial to acknowledge the increased volatility in the market, and the days of purchasing properties at any price, as seen during the height of the pandemic, are behind us. Historically, the second half of the year has presented excellent shopping opportunities, as other buyers take a break from the competitive spring market. During the National Association of Real Estate Editors' annual conference, Joel Kan, the deputy chief economist of the Mortgage Bankers Association (MBA), shared that the MBA expects loan rates to average 5.6% by year-end, and overall lending volume is expected to reach $1.8 trillion. This is a significant improvement over current rates. For 2024, the MBA forecasts rates in the 5.5% range and a 25% increase in originations, primarily driven by purchase mortgages.