Developers look to attract first-time home buyers by curbing costs
ANOKA, Minn. — In the Twin Cities, new home listings are down, pending sales have fallen and mortgage rates are measurably higher than they were a year ago.
Home prices are increasing faster than incomes, making it tougher than ever for first-time homebuyers to make a purchase.
"We got lucky finding this model and it being in our price range," said first-time homebuyer Sofie Walz.
Sofie and her husband Wesley closed on their new home in Cologne last week.
"It took us about a year and a half, two years to get a good solid down payment," he said.
The newlyweds say despite high home prices and high interest rates, they moved forward on a purchase.
"We really didn't want to have to keep waiting to just hope that something was going to go down," said Sofie Walz.
In May, the median home price in the Twin Cities rose 4.1% to $385,000, according to Minneapolis Area Realtors Association.
Existing home prices are at $371,000 while new home prices are just over $500,000.
"That's way too high. If you've got a first-time buying couple that's in their twenties and they are both making $50,000 a year, they can't afford a house," said Dale Wills, CEO of Centra Companies.
Wills says he is focused on curbing housing costs by being more efficient in bringing single-family homes to the market at a price point buyers can afford.
"We've got a few projects in the Twin Cities currently that are in the low 300s, and you know we would love to see it lower. That's significantly more than what we were seeing 3-4 years ago," said Wills.
Wills says affordable homes in and around the metro are often bought before they're finished being built. It's a trend he says will continue as builders look for new sites.
"We have had one house in the last five months get finished without it being sold. There is a real demand for affordability and first-time buyers, we're building them as fast as we can build them, they sell," he said.
Going forward, there are serious concerns that a growing number of future homebuyers will be "priced out" of the market.
"My biggest fear is the inflation. We're in a really tough cycle. If interest rates were to suddenly to drop to 5%, because of the demand, new construction would take off. If it takes off, we're going to see inflation," said Wills.
Back in Cologne, Sofie and Wesley are thankful that with help from their financial advisor and a realtor, they were able to afford what they say will be their forever home.
"When you buy new construction it's always like oh, you're going to get this cookie cutter house but when you have an unfinished basement like this you can really tailor it to your needs," said Wesley Walz.
Developers say most first-time home buyers are also willing to move 30 minutes or more away from the Twin Cities core to find an affordable home. That's due in part to more Minnesotans working from home.