Buyers have outnumbered sellers in much of the Twin Cities this year with a pair of notable outliers: Downtown Minneapolis and St. Paul, where there are now more condos and townhouses for sale than buyers.
In a metro market with a dearth of homes for sale, downtown Minneapolis has seen a 5% increase in condo and townhouse listings during the first 10 months of the year as closed sales have dropped 34%, according to new data from the Minneapolis Area Realtors (MAR).
Agents say that after years of premarket sales and bidding wars, downtown has become, at least for now, a buyer’s market.
“It’s their ballgame,” said Isaac Kuehn, a sales agent based in the North Loop. “Sellers used to hold all the marbles.”
Much of the sudden shift is attributed to a downtown double-whammy: COVID-19, which shuttered the offices, restaurants and other attractions that lured buyers, and rising crime, which has forced many downtown dwellers to reconsider their options.
“We feel very fortunate that we sold when we did and we got a fair price,” said Lindsay Santala, who with her husband sold a two-bedroom condo a block off Washington Avenue this summer.
Four years ago, before the couple had kids, they bought the 1,800-square-foot condo because they both worked downtown and loved being within walking distance to their offices, sporting events and other attractions.
After their second child, they converted a den into a nursery and regularly used their building’s amenities, including the community room and pool.
When the kids started walking and COVID shuttered their offices and so many of the places they liked visiting, they decided to swap their condo for a house with a yard, more space for the kids and places to work remotely.
They listed it in early March, just before the COVID stay-at-home orders were issued, and got an offer about a week before George Floyd was killed.
The couple shopped for a house in south Minneapolis and the suburbs, but weren’t able to find one before their closing, so they moved in with Santala’s mother.
With crime on the rise, they’re now focused solely on the suburbs. “If we didn’t have kids we probably would have stayed,” she said.
Though this shift has sellers on edge, real estate agents say the situation is unlikely to be a repeat of the housing crash during the Great Recession.
Demographics favor multifamily living, and there’s a shortage of new moderately priced condos in the development pipeline.
“I sense most residents downtown are optimistic, but realistic in that things won’t bounce back overnight,” said Cynthia Froid, a sales agent with an office in the Mill District.
Last year Froid and others often sold condos before they hit the market. On average, it’s taking 47 days to sell a listing in downtown Minneapolis.
Agents say demand varies by area and price range, and with fewer corporate relocations and not as many suburban retirees coming downtown, seven-figure sales are often difficult to pull off.
“Buyers in this price category generally have the luxury of pressing the pause button,” said Froid.
Another reason a Great Recession rerun isn’t anticipated, agents say, is because there are only two condo projects in the pipeline.
Both are relatively small and unaffordable to most buyers, and both buildings are a couple of years from completion.
They are Eleven on the River, where the least expensive units are priced at just under $1 million, and less than three dozen units at the Residences at the Four Seasons atop the RBC Gateway tower.
For now, sellers are adjusting their expectations. The price per square-foot for condos and townhouses in downtown so far this year was $308, down 4% compared with last year, according to a rolling 12-month average of all sales.
And price reductions are becoming more common.
“Someone is going to get a deal from us,” said DeBora Bernick, who is among a large contingent of downtown condo owners who split their time between multiple homes, including “urban cabins” they bought so they could take part in sporting events, theater or other urban activities.
Bernick, who spends summers in Duluth and winters in La Quinta, Calif., bought a two-bedroom condo on the 23rd floor of a downtown high-rise two years ago.
She took a year to complete a top-to-bottom renovation, but ended up visiting far less than she expected, so late last year she listed the 1,200 square-foot condo for $550,000.
“It’s not that we don’t love it,” she said. “We’re not spending time there, and I don’t see us spending time there anytime soon.”
She acknowledges that she was initially trying to recoup her renovation costs and so the unit was priced higher than other similar floor plans in the buildings.
They’ve had several showings, but no offers, so she’s discounted the price nearly $80,000.
“I felt like we bought it at a good price so I could sell it for what I had into it,” she said. “But I’m not sure given what’s happening downtown.”
Her agent, Pauline Olsen, said that during the spring COVID shutdown and George Floyd riots buyers were scarce.
“I think there was a huge fear of downtown Minneapolis mostly because of what people were seeing on TV,” she said. “There was maybe a month where people were really scared, but they were scared everywhere.”
Buyers seem less wary today, she said, and they’re clearly motivated by price reductions.
She recently worked with a couple who relocated to the Twin Cities from Denver. After looking at a handful of units, they quickly bought a two-bedroom condo at Portland Tower the day after an $80,000 price cut.
Colleen LaBeau, who is marketing that project, said that the last three available new units at Portland Tower have since sold and that only 11 units are available at the Legacy, the last big condo project to be completed downtown.
Those units are all priced at more than $1 million, she said. When the building was first built, she expected it to not sell out until 2022.
“When COVID first hit, for three weeks [we] didn’t have a call,” she said. “It’s slowed down around the election, but we’re starting to get showings again.”
Despite an air of uncertainty about downtown Minneapolis, Dana and Pat Chabot are making a long-term investment in the city.
This month, they paid $10,000 less than the asking price for an upscale condo near the Mississippi River — the day it hit the market.
“Even if the market isn’t as hot as it used to be and we might have overpaid a little bit, it still feels like a risk worth taking,” said Dana Chabot.
For Chabot, the decision to move to downtown Minneapolis dovetailed with plans to retire to the city where he was born and still has friends.
For the past several decades the couple have lived in Madison, Wis. They had just returned home after house shopping in Minneapolis when their agent told them about a condo that had just come available.
They headed back to Minneapolis, did a tour and immediately made an offer.
Chabot, an accountant, said civil unrest and rising crime didn’t make him question their decision.
Friends who live in his new neighborhood say they haven’t felt threatened or unsafe, and he’s accustomed to seeing boarded-up storefronts in Madison, which is dealing with some of the same racial equity and public safety issues as Minneapolis.
“There’s an excitement about coming to a place that’s wrestling with a long-standing problem that a lot of towns and cities haven’t had to confront yet. We would like to find a way to be part of a solution,” he said.
“This is an opportunity for Minneapolis to make some serious progress, and I’d like to be part of it.”