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If you’ve felt like the housing market has been holding its breath for the past few years, you’re not wrong. Between interest rates, tight inventory, and sticker shock, affordability has been the single biggest thing standing between most people and their next move. Here’s the good news: 2026 is shaping up to be the most balanced, opportunity-filled market we’ve seen in years. Not chaotic. Not frozen. Not a roller coaster. Just… functional. And honestly, that sounds pretty great.
Nationally, affordability improved in 2025 for the first time in three years. Most major economists agree that momentum continues in 2026, driven by the three factors that actually matter in the real world — and right here in the Twin Cities real estate market:
- Mortgage rates
- Housing inventory
- Home price growth
So let’s talk about what that really means for buyers and sellers in Minneapolis, St. Paul, and the surrounding suburbs — including the luxury market.
Mortgage Rates in 2026: Lower Than Last Year, Likely the “New Normal”
Mortgage rates have already come down nearly a full percentage point from their peak. That may not sound dramatic, but in real monthly payments, it very much is. Most forecasts call for rates to hover in the low-6% range throughout 2026. Not back to 3%. Probably not launching themselves back to 8%. More like… steady. Predictable. Boring in the best possible way. Where rates go from here depends on inflation, the job market, and whatever mood the Fed is in this year. But the important part is this: Rates are lower than they were, and stable enough to plan around.
For buyers: lower rates means increased buying power. That brings more move-up buyers back into the market and helps unlock price points that felt off-limits in 2023–2024.
For sellers: Rates in the 6s are likely the landscape. Homes are still selling. And with the equity most Twin Cities homeowners have, moving is very doable — with the right pricing and a plan that doesn’t rely on wishful thinking.
Twin Cities Inventory: More Homes, More Choice, More Leverage
Inventory nationally rose about 15% in 2025, with another 8.9% increase projected for 2026. Locally, we’re seeing the same thing. More homeowners are listing. New construction is contributing. And buyers finally have something they haven’t had in years: Options. Actual options.
For buyers:
More choice, less panic, and more room to negotiate. That can look like price reductions, closing cost contributions, inspection repairs — or simply the luxury of not having to convince yourself a house is “perfect” after a seven-minute showing.
For sellers:
You can no longer rely on “coming soon” buzz and weekend feeding frenzies. Pricing correctly and presenting the home well will matter again. Marketing, condition, and strategy now beat hype — and well-prepared, well-priced homes are absolutely still selling.
Home Prices in 2026: Slower, Healthier Growth
Most national experts are projecting modest price growth of around 1–2% in 2026. Not the explosive gains of a few years ago — but importantly, not a crash.
And while national numbers love headlines, the Twin Cities will continue to behave the way it always has: neighborhood by neighborhood. Some areas will outperform. Some will flatten. A few will correct slightly. That’s normal — and healthy.
For buyers this means: Less volatility. Fewer emotional bidding wars. More predictable pricing. Lower blood pressure.
For sellers: Equity is being preserved, even as the market becomes more balanced. That’s a good thing — even if it’s less exciting to talk about at parties.
2026 Twin Cities Luxury Market Forecast
Luxury real estate always plays by slightly different rules. And in many ways, 2026 sets up as a quietly strong year for Twin Cities luxury homes.
Luxury buyers are often less rate-sensitive than entry-level buyers — but rates still matter, especially for jumbo loans. As rates stabilize, we’re already seeing more high-net-worth buyers, relocation clients, and move-up sellers re-engage, particularly in areas like Wayzata, Minnetonka, Edina, the Lake Minnetonka communities, Southwest Minneapolis, and other established luxury pockets. At the same time, luxury inventory in the Twin Cities remains relatively limited compared to demand. There are only so many true lake homes, premium locations, architecturally distinctive properties, and high-end new builds.
That combination — steadier confidence, limited top-tier inventory, and improving affordability — points to a luxury market where:
- Homes will sell, but not automatically. Condition, staging, and marketing matter more than ever.
- Pricing precision becomes critical. Well-positioned homes will attract serious, qualified buyers, and overpriced homes will sit and require adjustments.
- Exceptional properties will continue to stand out, and turn-key distinctive properties will outperform.
- Custom builds and premium remodels will stay in demand.
- Off-market strategy and targeted exposure will matter more than ever.
This is not a frenzy market. It’s a strategy market. And in luxury especially, strategy makes the difference between “Sold” and “Price Reduced.”
More Homes Will Sell in 2026
As affordability improves, inventory rises, and prices stabilize, more people can actually move.
Zillow’s Chief Economist put it this way: “Buyers are benefiting from more inventory and improved affordability, while sellers are seeing price stability and more consistent demand. Each group should have a bit more breathing room in 2026.”
We’re already seeing that here in the Twin Cities — more balanced negotiations, fewer stalled decisions, and more homeowners finally moving forward instead of “watching the market” for the third year in a row.
The 2026 Twin Cities Market Bottom Line
2026 is shaping up to be a year of balance instead of chaos.
Expect:
- More predictable conditions
- Healthier negotiations
- Slower but steadier appreciation
- Better alignment between buyers and sellers
- A market that rewards preparation, not hope or hype
If you’ve been waiting for a market that feels navigable again — this may be it. And if you’re considering a move in the luxury space, the questions matter more than ever: How will your home be positioned? Who will it reach? And what strategy will protect your price?
If you want a hyper-local analysis of what these trends mean for your specific neighborhood, price range, or a potential move…Talk to Tracy.
