Twin Cities, Minnesota:
2026 housing Market Predictions
Curious what the 2026 housing market might bring for the Twin Cities? You’re definitely not alone! This is one of the top questions I’m getting from my clients lately. I’m here to give you true, local predictions for the Twin Cities housing market – based on current data, local trends, and what I’m actively seeing day to day with buyers and sellers. No hype, no fear-mongering—just a realistic look at what may be ahead.
I’m Bailey Zimbelmann, a local Twin Cities real estate expert and residential specialist. If you want to stay ahead of market shifts this year, be sure to subscribe to my youtube channel.
Home Price Predictions:
Home prices over the course of 2025 grew to a median of $395,000 across the 7-county Twin Cities metro. This was a 2.8% increase year over year, a much needed market stabilization as compared to the two years following the pandemic increases.
You likely already know the answer as to why we saw prices level out after the 2020-2022 madness… interest rates. This was a reflection of buyers being more price sensitive & seeking value rather than bidding prices up aggressively.
So how does 2025 play into pricing moving forward here in 2026? I anticipate to still see an annual increase in pricing, likely between 2.5%-3.5% – very similar to what we saw over this last year.
Let’s dig deeper into why…
There are two primary impacts to take into consideration:
- Inventory
- and Interest Rates
At it’s core, the real estate market is a supply and demand equation. If the market is flooded with inventory, but demand is low – of course prices would come down (think 2008). If inventory is low, but demand is high (think low interest rates) then home prices sky rocket.
Inventory
Inventory did increase slightly last year, but overall inventory has been low compared to historical standards since before the pandemic. And unfortunately, I expect that issue to remain the same again this year for three different reasons:
- Statewide population and generation statistics – The latest generation report for Minnesota shows that millennials make up the largest part of our population (20.7%), which is a huge demographic at prime home buying age. As of late 2025, the median age of a first-time homebuyer in the U.S. hit an all-time high of 40 years old, which is up from 38 in late 2024. So the inventory we DO have available is being absorbed at high rates.
- New construction – which just hasn’t been able to keep up the pace with buyer demand. Since the housing market crash of 2008, builders just don’t flood the market with inventory anymore. We did start to see new construction increase in 2023, but there is still a need for more to counter balance demand/population growth at this point in time.
- Previously owned homes – We are going to keep seeing low inventory in this category as well because of the “lock in effect” caused by historically low rates from 2020-2022. During this time, if you already owned a home you most likely refinanced your 30 year mortgage and many people are still willing to stay longer in a home that no longer fully fits their needs simply because of the affordability and interest payments. Though I do expect this effect to have less of an impact starting in about 2027.
Interest Rate Projections
The other reason why I expect home prices to have a moderate increase in 2026 rather than a boom is interest rate projections. Major economists believe that by the end of the year interest rates will be hovering right around 6%, which is basically where we are at right now. I don’t expect the Federal Reserve will be too eager to cut rates in an attempt to keep the market stabilized.
Final Thoughts:
There you have it… My predictions for the 2026 market are
- Moderate increase of 2.5-3.5% in home prices
- Interest rates to hover right around 6%
- Still limited inventory, keeping us in a slightly more balanced yet seller’s market.