The Twin Cities housing market has become a buyer’s market in 2016 thanks to an improving economy, a lower jobless rate and rising equity. A lack of inventory is slowly pushing up sales prices.
But the recovery is uneven, with some areas seeing fast appreciation, while others are languishing, according to Ryan O’Neill, broker associate of RE/MAX Advantage Plus in Bloomington, Minnesota.
FIERCE COMPETITION FOR DWINDLING SUPPLY
A shortage of listings in the Twin Cities has sellers in control. At the peak of the housing market in 2007, more than 34,000 properties were listed for sale in the metro area. At the end of February, fewer than 11,000 active listings were available, down 22 percent from the 12,936 active listings in January, according to Minneapolis Area Association of Realtors.
New listings aren’t keeping pace with buyer demand, creating fierce competition in many Twin City neighborhoods as buyers try to outbid each other for a dwindling supply.
WHERE IT’S HOT
Prices have reached new highs in several markets, including Edina, St. Louis Park, Plymouth, Hopkins, Uptown and southwestern Minneapolis. First-tier suburbs like Plymouth, Maple Grove and Woodbury are extremely hot, says Bruce McAlpin, broker at Edina Realty in Monticello, Minnesota. The Chain of Lakes district—which covers five city lakes threaded by more than 13 miles of pedestrian paths—is popular with first-tier suburban buyers.
LOW UNEMPLOYMENT RATE
Minneapolis is a largely white-collar town, where jobs are plentiful because it is home to some of the nation’s biggest corporations, including 19 Fortune 500 companies like Best Buy, 3M, Target, Hormel Foods, UnitedHealth Group and General Mills, which was acquired by its rival Pillsbury in 1988.
The region also has the one of lowest unemployment rates in the nation. The Minneapolis-St. Paul metro’s unemployment rate is the second best among large metro areas, according to the Bureau of Labor Statistics.
OTHER BOOMING AREAS
The North Loop of Minneapolis
The neighborhood west of downtown Minneapolis and near the Warehouse District between Target Field and the Mississippi River—is becoming the city’s epicenter of art and commerce. Nestled along the Mississippi River within walking distance from the Warehouse District, the neighborhood was once home to bustling red-bricked warehouses, factories, railroad yards and mills. During the 1960s and ’70s, the area fell dormant, but it is getting a second wind as artists move into its abandoned warehouses, and new development is kick-starting a rebirth of the area. Restored lofts, restaurants and stylish boutiques are popping up and attracting hipsters and Millennials, in particular.
A new wave of urban development is triggering a renaissance in Downtown East. An office complex, a park and housing are going up on the east end of downtown, along with a mammoth new $1.1 billion pro football stadium for the Minnesota Vikings that is replacing the razed Metrodome.
Warehouse Historic District
The landmark neighborhood was once home to bustling railroad yards, factories, warehouses and mills. After falling dormant in the ’60s and ’70s, it has come back to life, dotted with restored warehouse lofts, stylish boutiques and restaurants catering to professionals and empty-nesters.
‘A LANDLORD PARADISE’
The Twin Cities metro area has one of the tightest rental housing markets in the nation. Rentals in all price ranges are in short supply across the Twin Cities. Low vacancy rates and rising rents may be a landlord’s dream, but they can be a nightmare for apartment seekers—and agents trying to list rentals for sale, according to Kari Lundin, an agent with Keller Williams Realty in Edina, Minnesota.
“There’s no inventory,” said Lundin, who specializes in buying and selling duplexes and other multifamily units and is known locally as the Duplex Chick. “Currently, there are only 53 properties in the MLS for Hennepin County, which includes Minneapolis, which is home to 1 million people. Our vacancy rate is below 2 percent. It’s a landlord paradise. Rents have gone up, and it’s a landlord free-for-all.
“In my duplex and triplex niche, we have no inventory because the investors are getting great rents,” said Lundin. “But they’re not selling because they fear the stock market.”
Minneapolis was not the poster child during the foreclosure crisis. Things were not nearly as bad as Las Vegas, Phoenix and Miami. But it did suffer plenty, with banks foreclosing on 208,200 homes in the Minneapolis metro from 2006 to 2016, according to RealtyTrac data.
Foreclosures activity peaked in 2009, when lenders repossessed over 36,000 Minneapolis homes. In February 2016, banks had repossessed only 1,741 homes. Between 2009 and 2010, about 60 percent of the homes on the market were foreclosed bank-owned homes.