New Interest Rates Could Paralyze Minneapolis' Housing Market
About this video
Mortgage rates are back above 7%, but what does that mean for the Minneapolis housing market? Discover how rising interest rates affect monthly mortgage payments, home prices, and buyer demand across the Twin Cities and Dakota County. Explore mortgage rate forecasts for 2027, assumable FHA and VA loans, and strategies for buyers and sellers.
Key takeaways
- Mortgage rates are back above 7%. Jason cites Freddie Mac's 30-year fixed average of 7.28% as of October 1, 2026, up from 6.34% a year earlier.
- The Federal Reserve doesn't set mortgage rates. They follow the 10-year Treasury yield, and your own rate also depends on your credit, down payment, loan type and points.
- On a $415,000 Dakota County home with 20% down (a loan of about $332,000), principal and interest rise from about $2,064 a month at 6.34% to about $2,272 at 7.28%: about $208 more a month, close to $2,500 a year.
- Fannie Mae's September forecast, as quoted in the video, has rates around 6.8% for the rest of 2026 and 6.7% for 2027, so waiting for much lower rates could take more than a year.
- Homes are still selling: in Dakota County in August, closed sales were up over 7%, the median price rose almost 4%, homes averaged about 43 days on market and sellers got about 98% of their original list price.
- Assumable FHA and VA loans let a buyer take over the seller's lower rate. The buyer must cover the gap between the price and the loan balance with cash or a second loan, and assumptions usually take 45 days or more.
- Sellers with a low-rate FHA or VA loan should advertise that it's assumable, and price carefully, since higher rates mean fewer buyers qualify.
Questions this video answers
Does the Federal Reserve set mortgage rates?
No. Mortgage rates follow the 10-year Treasury yield, which the bond market trades every day. Your own rate also depends on your credit, down payment, loan type and any points you pay.
Can someone who isn't a veteran assume a VA loan?
Yes. A non-veteran can assume a VA loan, but the seller's VA entitlement may stay tied to that loan until it's paid off, so sellers should understand that before agreeing.
How much does a higher mortgage rate add to a monthly payment?
In Jason's example, a loan of about $332,000 costs about $2,064 a month in principal and interest at 6.34% and about $2,272 at 7.28%, roughly $208 more a month before taxes, insurance and association dues.
Read more: Twin Cities market report · Buy a home
Notes written by Huerkamp Home Group from this video. Figures are as stated in the video on October 23, 2026; check the current numbers in our market reports.
