Andy Babula, finance professor and director of the real estate program at the University of St. Thomas Opus College of Business, recently spoke with the Minnesota Star Tribune and WCCO Radio about the Twin Cities housing market.
From the Minnesota Star Tribune story:
When Matt Baker started selling real estate about four decades ago, a $100,000 home sale was something to really celebrate, and a $1 million sale wasn’t even imaginable.
Today, after years of steady appreciation, that seven-figure price tag is considered an entry-level house in some parts of the Twin Cities. And just an average metro-area home has never been more expensive. ...
Last month, a closely watched housing affordability index – that takes into consideration incomes, home prices and mortgage rates – fell to a new low. Since the beginning of the year, that affordability index has tumbled nearly 7%, making homeownership unattainable for thousands of would-be buyers.
“The big increases we experienced a few years ago have made the cost of purchasing a home a challenge. So any increase today, even if it is in line with inflation, is like pouring salt on our wounds,” said Andrew Babula, director of the real estate program at the University of St. Thomas. “For many individuals, paying over $400,000 for a home can be overwhelming and feel out of reach.”
That new milestone, he said, has more mental than economic significance. After double-digit price gains during the pandemic, buyers just can’t afford to pay much more. So house prices are now rising more slowly, at about the same pace as inflation.
From the WCCO Radio interview:
Host: The median house price in the Twin Cities breaks $400,000 for the first time. Andy, is this a significant thing or is this just a big, big number?
Babula: I think that it’s both. It is a big round number. It was a big deal when we hit $200,000 and a big deal when we hit $300,000. It’s just another number in some cases. On an emotional and mental level, it’s a big deal.
