The Minneapolis housing market is holding its own in an economy that is still trying to find itself. That said; the city of Minneapolis is expected to see additional gains in the coming year. Zillow’s 1-year forecast expects prices to jump by as much as 1.2 percent. The recovery exhibited by the Twin Cities in 2014 is fully expected to transition over into 2015, as the strong, local economy should promote the growth of the real estate sector. Nearly every market indicator for the city is better than it has been since the recession took hold. For all intents and purposes, the Minneapolis housing market is the healthiest it has been in more than seven years.
Those looking to sell a home in Minneapolis will find conditions rather favorable. Accordingly, homes are now selling twice as fast as they were in 2008. However, buyers have found that inventory restrictions have driven up prices in the area. In fact, the active supply of homes in the area reached a 12-year low. The 7 percent drop in inventory has made it more difficult for buyers to find a home at the price they want.
“When it comes to inventory and housing availability, the market is returning to more solid footing,” Tom Weiner, president of the St. Paul Area Association of Realtors, said. “The number of new listings and closed sales of lender-mediated properties is less than half of what it was in 2012. This positions the for-sale inventory to enjoy high values in 2015.”
Homes in Minneapolis currently boast a median price of $219,100. Due largely, in part, to the 5.3 percent appreciation rate in the last year, Minneapolis homes are now valued higher than the national average. Subsequently, the average U.S. home is valued at $216,567, and appreciated 4.7 percent over the course of a year. Perhaps even more encouragingly, the Minneapolis housing market persisted to outpace the national average in appreciation for three years, 36.7 percent and 28 percent respectively.
Minneapolis, much like most of the country, was fortunate enough to benefit from generous appreciation rates over the last three years. Homeowners in the Minneapolis housing market were, therefore, reintroduced to the equity they had lost after the recession. The following highlights how much equity has been gained relative to the year of the home’s purchase:
- Homes purchased in the Minneapolis housing market one year ago have appreciated, on average, by $14,200. The national average was $12,783 over the same period.
- Homes purchased in the Minneapolis housing market three years ago have appreciated, on average, by $66,446. The national average was $55,406 over the same period.
- Homes purchased in the Minneapolis housing market five years ago have appreciated, on average, by $47,807. The national average was $49,675 over the same period.
- Homes purchased in the Minneapolis housing market seven years ago have appreciated, on average, by $9,740. The national average was $9,474 over the same period.
- Homes purchased in the Minneapolis housing market nine years ago have appreciated, on average, by $17,564. The national average increased $3,419 over the same period.
The strength of the Minneapolis housing market is buttressed by the equally impressive job sector it boasts. In fact, the entire state of Minnesota has received praise for the strength of its economy. Minneapolis even casts a shadow over cities like Denver and San Diego, each of which have strong job sectors in their own right. Experts familiar with the Minnesota market believe the local economy will expand by more than 3 percent in the coming year. Minneapolis, for what it is worth, should be at the forefront of said expansion. The city already has a ridiculously low unemployment rate of 3.6 percent, more than 2 percent below the national average. At fewer than 4 percent, Minneapolis has the lowest unemployment rate of any major metropolitan city. However, while unemployment growth in the region is on par with the national average, it could do to improve. Nonetheless, the job sector remains the main driver of supply and demand in the Minneapolis housing market.
The diversity of the Minneapolis job sector is credited with the recent explosion in apartment building construction. Similar to the rest of the country, Minneapolis rental rates are reaching record highs. However, it is the creation of new units that has investors excited. According to Thomas O’Neil, vice president of Midwest FHA operations for Minneapolis-based Dougherty Mortgage, more than 110 apartment buildings have been added to the city since 2010. Rental rates in Minneapolis certainly explain the increase in apartment building projects. Accordingly, the Minneapolis housing market has recently cracked the list of top 10 most expensive rental markets in the country. Buy and hold investors may want to look into this market, specifically.
2015 is expected to witness sweeping changes in the Minneapolis housing market. For starters, home prices are expected to rise as much as 8 percent. Perhaps even more importantly, for this particular market, new listings could grow by as much as 12 percent. Such an increase in inventory should balance the market. That said; the number of home sales is expected to increase as well. An increase of home sales would be particularly encouraging, as last year’s numbers represented the second highest in a period of 10 years.
Of course, some neighborhoods will contribute to the city’s recovery more than others. According to Trulia, the most popular neighborhoods in Minneapolis are Tangletown and Linden Hills. However, those looking to get into the market should consider the following neighborhoods as well:
- Lowry Hill
- Loring Park
More than 3 percent of the owners in Minneapolis are considered behind on their mortgage payments. However, when compared with the national average of 6.4 percent, Minneapolis is doing very well. The amount of homeowners that are actually underwater, however, is considerably higher. More than 16 percent of those that own a home in Minneapolis owe more on their property than it is worth.
Minneapolis Housing Market Summary:
- Current Median Home Price: $219,100
- 1-Year Appreciation Rate: 5.3%
- Unemployment Rate: 3.6%
- 1-Year Job Growth Rate: 1.7%
- Population: 400,070
- Median Household Income: $67,194
- Average Days On The Market: 78
Minneapolis Housing Market Q1 Update:
The Minneapolis real estate investing market should benefit from the 5,527 homes that are currently in some state of distress, according to RealtyTrac. Of those homes that are in foreclosure, the great majority are bank-owned, or sitting on the books of institutional lenders as non-performing loans. In fact, 63.1 percent of all the foreclosed properties in Minneapolis are of a bank-owned nature. The remaining foreclosures are all scheduled to be placed up for auction in the near future. The total number of foreclosures in the Minneapolis housing market, however, has declined 61 percent over the course of a year.
The Minneapolis real estate investing market will appreciate the discounts these properties offer. According to RealtyTrac, the average, non-distressed property in the area has an average sales price of $199,900. Distressed properties, on the other hand, have an average sales price of $130,000, or 35 percent lower than non-distressed homes. That is a savings of almost $70,000 per property.
As for the whole of the Minneapolis housing market, prices continue to grow relative to last year. Not only have appreciation rates topped 6.5 percent, but the current median home price is just above the national average ($210,000). In the 13-county metro, house prices during March were 3 percent higher than last year, just shy of a 4.1 percent increase nationwide.