Minneapolis, MN Real Estate Market Trends & Analysis [Updated 2021]

by Than Merrill | @ThanMerrill
Published on Tue, Jul 6 2021

Jump To Another Year In The Minneapolis Real Estate Market:

The Minneapolis real estate market has followed the example set forth by national trends; that is to say, things are moving in an incredibly encouraging direction. In particular, prices continue to rise due to a distinct lack of inventory, and demand remains high in the face of historical appreciation. However, it is worth noting that while appreciation continues into its ninth consecutive year, real estate in Minneapolis is still relatively affordable. In fact, it’s cheaper to own a home in the Minneapolis housing market than to rent one, which bodes well for local investors. Long-term investors, however, look to benefit the most from tailwinds created in the wake of the Coronavirus.

Minneapolis Real Estate Market 2021 Overview

  • Median Home Value: $324,797

  • Median List Price: $392,967

  • 1-Year Appreciation Rate: +8.5%

  • Median Home Value (1-Year Forecast): +13.1%

  • Weeks Of Supply: 5.5 (-3.1 year over year)

  • New Listings: 1,778 (+9.8% year over year)

  • Active Listings: 8,020 (-28.0% year over year)

  • Homes Sold: 1,458 (+12.0% year over year)

  • Median Days On Market: 10.7 (-10.3 year over year)

  • Median Rent: $1,552

  • Rental Vacancy Rate: 6.7% (+2.3% year over year)

  • Price-To-Rent Ratio: 17.43

  • Delinquency Rate: 4.0% (-0.1% year over year)

  • Unemployment Rate: 3.8% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 429,606 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $62,583 (latest estimate by the U.S. Census Bureau)

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Minneapolis housing market trends

Minneapolis Real Estate Investing 2021

A few years ago, the Minneapolis real estate market ranked among the top cities where flipping rates increased the most. In a year where U.S. home flipping rates reached a nine-year high (2019), Minneapolis saw a more significant increase than most of the national housing market. According to Attom Data Solutions, only a handful of markets saw larger increases in home flips in the first quarter of 2019 than the Minneapolis housing market.

“Along with Raleigh, Charlotte, and Milwaukee, other metro areas with a population of at least 1 million and a home flipping rate increasing in the double digits were San Antonio, Texas (up 47 percent); Houston, Texas (up 41 percent); Atlanta, Georgia (up 38 percent); Pittsburgh, Pennsylvania (up 36 percent); and Minneapolis, Minnesota (up 33 percent),” according to the latest Q1 2019 U.S. Home Flipping Report.

It should be noted, however, that fundamentals have changed a lot in just two years. Since flipping rates peaked in 2019, homes have continued to increase in value; so much so that rehabbing has lost a lot of its attractiveness. From the start of 2019 to today, in fact, home values have increased 14.3%; that big of an increase in just over two years has detracted from flipping profit margins. Homes are too expensive to warrant using the flipping exit strategy in most cases.

In addition to higher home prices and lower profit margins, the Coronavirus also forced the Fed’s hand to lower borrowing costs. As of June, the average commitment rate on a 30-year fixed-rate mortgage was about 2.98%, according to Freddie Mac. While slightly higher year to date, an interest rate below three percent still represents a great opportunity. With borrowing costs considerably lower than in years past, it’s now possible for investors to simultaneously lower acquisition prices and increase monthly cash flow from properties placed in operation. With lower mortgage payments, investors can pocket more of the rent they charge each month.

Last but certainly not least, is Minneapolis’ 17.43 price-to-rent ratio; at that level, it’s more affordable to rent than own. As rent continues to remain the more affordable option, landlords should continue to see their units in high demand. The added attention affordability has awarded landlords will combine with inventory shortages to make renting the easiest option, even for those who can afford to buy. Consequently, the increase in demand will limit vacancies and allow landlords to increase rent accordingly.

The culmination of these unique fundamentals has turned the Minneapolis real estate investing community towards long-term investment strategies. That’s not to say flipping doesn’t remain a viable exit strategy in the Minneapolis real estate market, but rather that tailwinds created by the pandemic have made rental properties more attractive than ever.

Foreclosure Statistics In Minneapolis 2021

According to Attom Data Solutions’ Q1 2021 U.S. Foreclosure Market Report, a total of 33,699 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) in the first quarter of this year. According to the latest research, nationwide foreclosures are up 9.0% from the last quarter of 2020 but down 78.0% from this time last year.

“The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. So it’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.”

The Minneapolis real estate market is no exception to the expected rise in foreclosures. Since moratoriums on foreclosures prevented many homeowners from losing their homes in 2020, any tempering of government aid will likely result in an influx of distressed homeowners. It is worth noting, however, that Minneapolis has the added benefit of a strong employment rate. Therefore, while foreclosures will rise over the course of 2021, they may be slightly more insulated than other cities. Still, foreclosures will jump, and investors need to be ready to help. The whole Minneapolis real estate investing community can position itself to help distressed homeowners avoid foreclosures and bankruptcy,

Median Home Prices In Minneapolis 2021

The Minneapolis real estate investing community has seen a very positive trend regarding home values, which begs an important question: How much does it cost to buy a house in Minneapolis? The median home value in the Minneapolis real estate market is $324,797. In one year (May 2020 to May 2021), the median home value has appreciated 8.5%.

The latest increase may be attributed to several factors, not the least of which is the area’s price-to-rent ratio. At 17.43, the price-to-rent ratio suggests it is cheaper to rent a house than buy one. Traditionally, a 17.43 price-to-rent ratio would convince more people to rent, but it’s a moot point in today’s market. With a mere 5.5 weeks of available inventory, the Minneapolis real estate market is nowhere near a balanced market. Without enough listings to keep up with demand, prices will continue marching higher. As long as inventory remains tight, which it’s expected to, local prices may increase by as much as 13.1% over the next year.

The Impact Of COVID-19 On The Minneapolis Housing Market

Approximately a year and a half removed from the onset of the pandemic, the impact of COVID-19 on the Minneapolis housing market is starting to come into shape. For the better part of 2020, fear and uncertainty brought down many of the city’s most important indicators. It is safe to say there was a period of time nobody knew how the market would react. Fortunately, we have moved past uncertainty, and we have a better idea of the impact COVID-19 will have on the Minneapolis housing market.

Up to this point, government intervention has played the biggest role. In particular, interest rates were dropped to historic lows to inspire buyers to get off the fence. At the beginning of 2021, the average commitment rate on a 30-year fixed-rate mortgage from Freddie Mac sat somewhere around 2.74%. Rates under 3.0% have already convinced many buyers to participate in the market, and they should continue doing so for the foreseeable future. Homeowners and investors have shown up to take advantage of lower rates, and more are expected to do so sooner rather than later. The resulting activity should help everyone in the Minneapolis real estate market: buyers, sellers, and investors.

Still, there isn’t enough inventory to keep up with demand. Regardless of how low rates are, insufficient levels of inventory will keep driving prices up. In fact, some expect prices to increase for at least a few more years.

Minneapolis Real Estate Market: 2020 Summary

  • Median Home Value: $283,786

  • 1-Year Appreciation Rate: 3.4%

  • Median Home Value (1-Year Forecast): 3.5%

  • Average Days On Market: 67

  • Median Rent Price: $1,800

  • Price-To-Rent Ratio: 13.13

  • Percent With Negative Equity: 6.3%

  • Unemployment Rate: 3.0% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 425,403 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $58,993 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 8.83%

  • Foreclosure Rate: 1 in every 2,799 (3.5%)

Minneapolis Real Estate Investing 2020

Minneapolis real estate investing trends were shaped by the fallout from the Coronavirus. Surprisingly, however, the Coronavirus’s impact on real estate in Minneapolis wasn’t nearly as devastating as many had predicted at the time. When COVID-19 was officially declared a pandemic, the local real estate market shuttered and came to a standstill. Fear and uncertainty saw to it that nobody wanted anything to do with buying or selling a house.

The lack of activity onset by the Coronavirus didn’t last as long as many assumed. Within a few short months, the Minneapolis real estate market gained the momentum it had generated in previous years and even surpassed it. Thanks to historically low interest rates announced by the Fed, buying a home became a lot more attractive almost overnight. Borrowing costs justified higher acquisition costs, and buyers got off the fence in droves. In a relatively short period of time, demand skyrocketed, and investors were the primary beneficiaries.

The investors who had the most indicators working in their favor were long-term rental property owners. While rehabbing remained a viable exit strategy for Minneapolis real estate investors in 2020, long-term holds just made more sense for emerging market fundamentals. For starters, borrowing costs simultaneously made it easier to buy a home with traditional financing and increase monthly cash flow from tenants. Additionally, a lack of available inventory increased the number of people forced to rent, effectively mitigating the risk of vacancies while supply was constrained.

Minneapolis Real Estate Market: 2016 Summary

  • Median Home Price: $242,400

  • 1-Year Appreciation Rate: 6.3%

  • 3-Year Appreciation Rate: 22.4%

  • Unemployment Rate: 3.7%

  • 1-Year Job Growth Rate: 1.5%

  • Population: 407,207

  • Median Household Income: $69,111

Minneapolis Real Estate Investing 2016

Minneapolis real estate news was gaining a lot of positive momentum in 2016. Home prices and appreciation rates outperformed the national average during the second quarter, while home affordability remained strong compared to other markets. The median home price was $242,400 during the second quarter of 2016, as opposed to the national average of $239,167. Although home prices cooled considerably during the second quarter, prices were still up from the previous year.

As of July 2016, there were 6,840 properties in some stage of foreclosure. According to RealtyTrac, the number of foreclosures in July was 1.0% higher than the previous month and 47.0% lower than the same period in 2015. The number of REO properties increased 56.6% from the previous month but dropped 11.0% from the previous year. At the time, the Minneapolis housing market was one of the best places to find distressed properties.

A steady combination of increasing home prices and appreciation rates boosted the Minneapolis real estate market in 2016, but other factors also played a prominent role in the city’s expansion. The local economy in Minnesota was improving faster than the rest of the country, with unemployment rates and job growth easily surpassing the national average at the time. The unemployment rate was around 3.7% during the second quarter, as opposed to the national average of 4.9%. Although employment held up, job growth trailed the rest of the country. However, a growing economy in the second half of 2016 made Minneapolis real estate investing an attractive industry.

Minneapolis Real Estate Market: 2015 Summary

  • 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 Real Estate Investing 2015

The Minneapolis housing market held its own amongst an economy still trying to find itself during the recovery. The recovery exhibited by the Twin Cities in 2014 was fully expected to transition over into 2015, as the strong, local economy was expected to promote the growth of the real estate sector—and transition it did. Nearly every market indicator was better than it was when the recession took hold. For all intents and purposes, the Minneapolis real estate market was the healthiest it had been in more than seven years.

Those looking to sell a home found conditions relatively favorable. Accordingly, homes were selling twice as fast as they were in 2008. However, buyers quickly found that inventory restrictions drove up prices in the area. In fact, the active supply of homes in the area reached a 12-year low. The 7.0% drop in inventory made it more difficult for buyers to find a home at the price they wanted.

The strength of the Minneapolis housing market was buttressed by the equally impressive job sector it boasted at the time. In fact, the entire state of Minnesota received praise for the strength of its economy. The city already had a low unemployment rate of 3.6%—more than 2.0% below the national average. At less than 4.0%, the city had the lowest unemployment rate of any major metropolitan city. However, while unemployment growth in the region was on par with the national average, it left plenty to be desired.

The diversity of the job sector was credited with the expansion of apartment building construction. Similar to the rest of the country, rental rates reached record highs. However, it is the creation of new units that had real estate investors excited.

Minneapolis Real Estate Investing Statistics In 2015

Minneapolis real estate investing statistics

Minneapolis County Map:

Map of minneapolis neighborhoods

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