Navigating the Housing Market in Western WI and the Twin Cities: A Look at the Recent Trends in New-Home Sales

As we move further into 2025, the housing market remains a challenging landscape for both buyers and sellers—especially for those looking to purchase newly built homes. The latest data from the U.S. Census Bureau shows a sharp decline in new-home sales, with a 10.5% drop in January compared to December. This is just one of the many indicators that the housing market is continuing to grapple with significant hurdles.

While new-home sales are experiencing a slowdown nationwide, the Twin Cities and Western Wisconsin markets have their own unique dynamics, which could offer both challenges and opportunities for prospective homebuyers and sellers in the region.

The Current State of New-Home Sales: A National Perspective

According to the data, the median sales price for new homes in January rose to $446,300—a 3.7% increase from the previous year. However, despite this rise in prices, new-home sales dropped significantly. Builders are finding that larger, more expensive homes are selling faster, while smaller, more affordable homes are struggling to attract buyers. The biggest drop in sales occurred in the $300,000 to $399,999 price range, which saw a noticeable decline from 16% of new-home sales in December to just 13% in January.

In contrast, the more expensive homes in the $500,000 to $599,000 range saw an increase in sales, making up a larger portion of the market share. This trend suggests that buyers are still drawn to higher-end, newly built homes, but the more affordable options are becoming less desirable for many.

For homebuyers in Western WI and the Twin Cities, this data may be concerning, as the market for new builds is facing these challenges. However, it is important to recognize that these trends are not uniform everywhere—and understanding the local market conditions is key.

How the Twin Cities and Western WI Fit into the Bigger Picture

While the overall U.S. market saw significant declines in new-home sales, the West region was an exception. Sales in the West rose 7.7% in January compared to December, largely because of milder winter weather. On the other hand, the Midwest, including areas like the Twin Cities and Western Wisconsin, experienced a significant drop of 16.7% in new-home sales. This decline can likely be attributed to the severe winter storms that disrupted many real estate transactions in January.

However, while the weather played a role, the Twin Cities and Western WI markets are still seeing a lot of movement, especially as the spring season approaches. Local homebuilders may be feeling the pinch, but the lack of inventory in the resale market means that new construction could become even more appealing for buyers looking for fresh, customizable homes.

Impact of High Mortgage Rates

Another critical factor that continues to affect the housing market across the country, including in the Twin Cities and Western WI, is the elevated mortgage rates. As of January 2025, the average rate for a 30-year fixed mortgage hovered above 6.8%. These high rates have made it harder for many homebuyers to afford both new and existing homes. Fannie Mae’s revised forecast suggests that mortgage rates will remain around 6.8% throughout the year, which may limit buying activity for many prospective buyers.

In this environment, homebuyers need to be more strategic about when and how they enter the market. Pre-approval for a mortgage is now more crucial than ever before. By securing pre-approval, buyers can act quickly when they find a home that meets their needs, especially as competition for well-priced homes heats up in the coming months.

The Ongoing Appeal of New Homes in Western WI and the Twin Cities

Despite the challenges posed by rising prices and higher mortgage rates, newly built homes still offer several benefits that are attracting buyers in the Twin Cities and Western WI. New homes typically come with modern features and customizability options that resale homes cannot offer. Additionally, newly built homes often come with warranties and lower maintenance costs, which can be a major draw for buyers looking for peace of mind in their new home purchase.

Furthermore, new homes help address the ongoing supply shortage in the market. While existing home sales have continued to decline, new construction can play an essential role in filling that gap. In Western WI and the Twin Cities, where inventory is often tight, new builds offer a viable solution for buyers who are ready to invest in a brand-new property.

What Does This Mean for Sellers?

If you're a homeowner in Western WI or the Twin Cities looking to sell, these trends could be an opportunity. As the spring market picks up, there will likely be more buyers looking for homes, and those who are willing to list their homes—especially if they are priced competitively—could see quicker sales.

However, sellers need to be mindful of market shifts. While the new-construction market is cooling off in certain price ranges, there are still plenty of buyers interested in higher-end homes, and the demand for these properties remains strong. Sellers should consider working with an experienced real estate agent to price their homes correctly and stage them effectively for the best possible offers.

Key Takeaways for Buyers and Sellers in Western WI and the Twin Cities

1. Higher-end New Homes Are Still Selling: If you're a buyer looking for a new construction home in the Twin Cities or Western WI, the market for homes over $500,000 may offer more options and less competition.

2. Mortgage Rates Are a Key Factor: With mortgage rates staying above 6.8%, buyers should plan their financing carefully. Getting pre-approved early and exploring different financing options will help you navigate the market more effectively.

3. Sellers Have an Opportunity in Spring: The spring market is historically one of the best times to sell, and with low inventory in many areas, sellers in Western WI and the Twin Cities may see favorable conditions for getting their home sold quickly.

4. Local Factors Matter: The severe weather in January affected sales in the Midwest, but with milder weather on the way, the spring season could see a rebound in activity. It’s important to stay informed about local market trends and adjust your strategy accordingly.

In conclusion, while 2025 is shaping up to be a challenging year for homebuyers and sellers alike, there are still opportunities to be had—especially for those looking in the Western WI and Twin Cities markets. By understanding the current trends and adjusting your strategy accordingly, you can position yourself to make the most of the housing market, whether you’re buying or selling.

If you’re ready to take the next step, reach out to a local real estate agent who can help guide you through these complex conditions and find the best opportunities in your area.