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

by Than Merrill | @ThanMerrill
Published on Wed, Feb 10 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: $306,249

  • 1-Year Appreciation Rate: +7.4%

  • Average Days On Market: 67

  • Median Rent Price: $1,800

  • Price-To-Rent Ratio: 14.17

  • Unemployment Rate: 4.5% (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 9,356 (1.0%)

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Minneapolis real estate investing

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 10.5%; that big of an increase in just two years has detracted from flipping profit margins.

In addition to higher home prices and lower profit margins, the Coronavirus also forced the Fed’s hand to lower borrowing costs. As of January, the average commitment rate on a 30-year fixed-rate mortgage was about 2.74%, according to Freddie Mac. While slightly above where they ended 2020, interest rates remain historically low and catalyze home purchases.

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

How is the housing market in Minneapolis? The answer shouldn’t surprise anyone: it is doing really well. However, there is plenty of room for improvement. According to data provided by RealtyTrac, a nationally recognized online marketplace for foreclosed and defaulted properties, the Minneapolis real estate market is home to an average amount of foreclosures: default, auction or bank-owned.

With one in every 9,356 homes in some state of distress, the city’s foreclosure rate is hovering right around 1.0%. To put things into perspective, the U.S. foreclosure rate is somewhere in the neighborhood of 0.8%.

The overwhelming majority of distressed homes in the Minneapolis housing market are up for auction. Otherwise repossessed by their original lenders, auction homes make up 73.3% of the city’s foreclosure inventory. The remaining foreclosures are bank-owned, which means the inventory failed to sell at auction. Regardless of the type of foreclosure, however, these homes represent a great buying opportunity for Minneapolis real estate investors.

Here’s a list of the neighborhoods in Minneapolis with the highest distribution of foreclosures:

  • 55439: 1 in every 3,711 homes is currently distressed

  • 55436: 1 in every 6,049 homes is currently distressed

  • 55430: 1 in every 8,223 homes is currently distressed

  • 55437: 1 in every 8,244 homes is currently distressed

  • 55410: 1 in every 9,013 homes is currently distressed

Minneapolis real estate trends suggest the city’s relatively low foreclosure rate is due for an increase. In particular, the wake of the Coronavirus is expected to result in a heightened level of foreclosure filings. The financial hardships resulting from lockdowns and quarantines is almost assuredly going to increase the number of homeowners who can’t keep up with mortgage obligations, at least compared to years past.

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 $306,249. In one year’s time (December 2019 to December 2020), the median home value has appreciated 7.4%.

The latest increase may be attributed to several factors, not the least of which is the area’s price-to-rent ratio. At 14.17, the price-to-rent ratio suggests it is actually cheaper to buy a house than to rent one. As a result, it’s safe to assume more people are leaning towards purchasing than renting, which would lead to more demand. Attractive prices, in conjunction with a lack of available inventory, should explain the latest increases.

Over the last two decades, some neighborhoods have contributed to the city’s appreciation rate more than others. In fact, here’s a list of the highest appreciating Minneapolis neighborhoods since 2000 (according to NeighborhoodScout):

  • City Center

  • W 28th St / Lyndale Ave S

  • E Lake St / 3rd Ave S

  • W Lake St / Lyndale Ave S

  • Portland Ave / E 35th St

  • France Ave S / W 44th St

  • Hennepin Ave / W Lake St

  • W 50th St / France Ave S

  • W Lake St / Nicollet Ave

  • Central Ave SE / 1st Ave NE

The Impact Of COVID-19 On The Minneapolis Housing Market

Nearly 12 months 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.

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 that was 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

Have you thought about investing in the Minneapolis real estate market? Does Minneapolis real estate investing interest you in the slightest? If so, what are you waiting for? We would love to know your thoughts on real estate in Minneapolis in the comments below:

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*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either expressed or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.
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