I keep hearing from people worried that the real estate market is going to crash. Of course we don’t know what the future holds, but signs indicate otherwise, as least under current conditions in the Twin Cities metro. All real estate is local, so the warning signs below could apply to some pockets, but not to the overall Twin Cities at this time. Also keep in mind that it is usually a combination of factors that are needed to set a crash in motion.
Home prices rising faster than income
According to a recent report from the Bureau of Labor Statistics, the Twin Cities metro area saw compensation costs, like wages and salaries, climb 5.7% between March 2024 and March 2025. This is higher than the nationwide rise of 3.4%. Wages specifically rose by 4.7% between March 2024 and March 2025 in the Minneapolis/St. Paul area.
Median year-over-year home sale prices in the Twin Cities rose 3.5% in both March and April 2025.
Mortgage rates spike sharply
When the Federal Reserve increased interest rates to curb inflation in 2022, mortgage interest rates rose sharply before settling down again. But although housing sales slowed down, it didn’t cause a crash because the housing supply was low. Mortgage rates have remained fairly steady the last few years.
Inventory builds up
According to the chart below from the Minneapolis Area Association of Realtors, inventory has been in a falling pattern since the crash in 2008 when inventory was high. It is slowly increasing now, but there was still only a 2.3 month supply in April 2025… a long way to go to get to a balanced inventory of 5-6 months. Instead of inventory growth to unhealthy levels, we are slowly moving towards a more healthy real estate market.
Foreclosures climb
New foreclosure listings in the Twin Cities are even lower than they were in 2007, before the crash. Low inventory has kept prices strong, resulting in enough equity to keep foreclosures low.
Unemployment starts to rise
According to the US Bureau of Labor Statistics, the Minnesota unemployment rate in April 2025 was 3.2%, up from 3.0% in April 2024 and below the national average average of 4.2% in 2025.
At this point in time, none of the markers indicate the housing market is in danger of another crash. However, what will happen in the coming months is as yet unknown… stay alert and keep an eye on the warning signs.
Sharlene Hensrud, RE/MAX Results – shensrud@homesmsp.com
