A SOFTER THAN USUAL FALL MARKET FUELED BY GEOPOLITICS AND MACROECONOMICS GIVES BUYERS ADDED LEVERAGE
Author: NICK LEYENDECKER
Data Sources: You can track Twin Cities housing market trends here. You can track mortgage rates here. You can track home builder confidence here. You can track lumber prices here. You can track the economic policy uncertainty index here. You can track gold prices here and silver prices here. You can track showing volume here.
The fall correction in home prices is being exacerbated this year by a combination of geopolitical factors (the realized economic consequences of the wars in the Middle East/Europe, and the uncertainty surrounding the future consequences of both), macro-economic factors (higher for longer interest rates, the long-term debt cycle, the potential for unforeseen consequences of the unprecedented 27% expansion of the money supply that was administered during the COVID era coming home to roost, and the uncertainty surrounding all the above), trade policy factors (the realized economic consequences and uncertainty surrounding US trade policy which has largely resolved from it's spring of 2025 peak, but remains elevated on a historical basis), and mid-term election uncertainty.
Fall market conditions are almost always softening in the micro from spring/summer market conditions but the season can go one of two ways. In some fall markets we get a fall push. The kids go back to school, parents get a chance to catch up with life, and buyers get back into the market to try to get moved before Christmas. Some years we get a "fearful fall". Any one of the above mentioned factors could tilt the fall market towards fearful, but the combination of all four makes it highly probable.
October Data Points - Twin Cities
Mortgage Rates:View Chart - As of 10/16/26, The average interest rate for a 30-year fixed mortgage is 7.37%. Aside from a brief stint in 2023, the last time mortgage rates were this high was in October of 2000 (when I was still in high school), a 26-year high.
Homes For Sale - All Prices: View Chart - As of October 1st, there are 12,584 units (homes, condos, townhouses, and lofts) for sale in the Twin Cities market, the highest inventory level since September of 2019, a 7-year high.
Pending Contracts - All Prices:View Chart - Pending sales for the Twin Cities market for the month of September fell to 3,554 units, the lowest September sales volume since September of 2010, a 16-year low. In the past 5 years since September of 2021, that is down almost 40%.
Homes For Sale - Ultra Luxury ($2.9MM+): View Chart - As of October 1st, there are currently 202 homes in the Twin Cities priced above $2.9 MM (an all-time high). As Keith McCullough at Hedgeye says, ever is a long-time. To put that into context, homes for sale priced above $2.9 MM have increased by 5X since their 2021 low of 41 homes for sale.
Pending Contracts - Ultra Luxury ($2.9 MM+):View Chart - For the month of September, there were 18 pended contracts for homes priced at $2.9 MM and above. That is down 40% MOM, but up 40% YOY, and up 2.5X from September of 2021. What has fueled the rise in sales volume at the upper end is primarily the increase in inventory and decline in prices since the 2023 ultra-luxury peak. The way to look at this market is that demand has gone up but inventory has out paced the rise in demand by 2X.
High-Level Perspective
Strategy for Buyers: I've long advised clients that fall is the best time to buy real estate and this year that advice is even more pertinent. Inventory peaks seasonally during the fall while demand is soft and softening. The fall is when buyers have the most leverage. This year, that leverage is enhanced. In the vast majority of cases, the sellers who are going to sell this fall will be high intent sellers at a 8 - 10 on a motivation scale. These are sellers who either have to sell, or would significantly benefit financially from selling even with the lower prices that will be yielded (ex: via taking advantage of the buyer's market on the other side, or via redeployment of capital into a more lucrative opportunity). Buyers also need to know that although the # of sellers out there is higher and rising, the # of sellers who are actually an 8 - 10 on the motivation scale are scarce. Competitively priced properties are still receiving multiple offers, its just that for most properties this fall, "competitive" will be a price that is at the low end of a comp-based fair market value range, or below.
Strategy for Sellers: In the macro, we are experiencing deflation in real time for many segments (especially the ultra-luxury segments), meaning lower highs and lower lows, year-over-year. Most of the properties that trade this fall are going to sell at the end of the their comp-based fair market value ranges, or below. If you have to sell or if you would experience a significant financial benefit from selling (for example you are going to take advantage of the buyer's market on a purchase this fall and you want to utilize the equity, or if you have a high-return investment prepared for re-deployment), then you need to figure out where the clearing point is and get positioned there ASAP. This is where an agent who has successfully navigated down markets, has a dynamic pricing process that takes all factors into account vs. a linear process that takes into account "the average of things", and who can give clear pricing guidance that gets your property positioned in-line or ahead of the falling price curve, can be critical. Historically, from a sales price to FMV perspective, the spring market almost always outperforms it's preceding fall/winter markets. If you're not a 8 to 10 on the motivation scale, you may want to devise a plan to pause, re-assess your intent/process, and prepare to re-position your property early next year after the market consolidates and the fall demand curve reverses.
Short Term Outlook: While we don't know what will come of the other three macro-economic factors listed above, we know that the mid-term election uncertainty will resolve one way or another, in November. If you go back and review the past 50 years of data you will see that the spring market has always created a behavioral related tailwind, even during recessions, including the great financial crisis of 2007 - 2011. In the late fall, early winter, new listings fall off a cliff, active sellers begin to pull their listings off the market to re-assess their intentions, the high intent listings sell/burn off, and inventory falls to a seasonal low by late December/early January. In January, demand forms a bottom and does a sharp U-Turn. In years like this, where uncertainty has had a major impact on demand, and then some or all of that uncertainty resolves through the 4th quarter, we can sometimes get a corresponding bounce back in demand at the end of Q4 that carries momentum into Q1. Although the spring tailwind is imminent, with all of the variables at play, only time will tell what will happen in the macro in 2027.
