As in many U.S. metro areas, the suburbs of the Twin Cities have enjoyed surging interest from home buyers as the global pandemic has upended how and where people work.
Amid rising crime and lingering unease following spring riots, many suburban buyers have relocated from the urban core of Minneapolis and St. Paul, where the number of homes for sale has swelled.
Yet, this doesn’t mean a new urban exodus is underway.
Also on the rise in the both of those cities: home sales, driven in part by record low mortgage rates that have enticed entry level buyers despite a grim economy.
“If there is an exodus,” says sales agent Pat Paulson of buyers exiting urban neighborhoods, “there’s an inflow as well.”
In Minneapolis, there’s been an 11% increase in listings through the first nine months of this year, buoyed in part by a recent rise in condos for sale. Pending sales, or signed purchase agreements, are also up 3%, according to an analysis from the Minneapolis Area Realtors. In the suburbs, where listings are off 2%, pending sales have increased 7%. In both areas, houses are selling at a record clip and median prices are at an all-time high.
The pandemic’s impact on the market has been particularly vexing for home buyers trying to plot their next move amid uncertainty — and competition, especially in the suburbs where there’s a larger imbalance between buyers and sellers than ever before.
That’s especially true in the suburbs, where workers no longer tethered to their offices are considering communities once deemed too far to drive. This summer, several suburbs, including Lakeville and Carver, saw a double-digit surge in new house listings and pending sales.
Lisa Pope loves the house and neighborhood in southwest Minneapolis where she’s lived for nearly two decades, but is now considering a move to the suburbs. She mulled a major remodeling project, but isn’t sure how well a three-level house will serve her as she ages. At the same time she’s worried about high property taxes and rising crime in a city that seems to be changing.
“It isn’t the same,” she said of Minneapolis, “but do I think it’ll come back? Yes. But I don’t know what that time span will be.”
Houses in her neighborhood are selling quickly, but she’s worried about selling hers before she’s found one to buy in the suburbs, where houses are luring multiple offers and the median sale price last month jumped more than 10%.
“It’s hard to make a decision this year in general about anything,” she said.
Uncertainty about life in the city is just one of many reasons why people have decided to leave, and for everyone who wants to sell a single-family house, there are buyers willing to take their place, Paulson said.
“There’s a lot of pent-up demand in the market,” he said.
Much of that demand is coming from millennials who have surpassed baby boomers as the largest generation. The youngest are now in their 30s, an age when homeownership is an expectation as many start families and now work from home.
In August, sales of single-family houses in Minneapolis surged 37% compared with just a 6% increase in sales of condos and townhouses. Buyers in Minneapolis also embraced larger properties as sales nearly doubled for homes with more than 2,000 square feet. “Millennials have growing families,” said David Arbit, director of research for the Minneapolis Realtors’ trade group MAR. “People are looking for two or even three home offices. And people are buying bigger homes to lock in these interest rates.”
Alex and Paige Maslyn are millennials who moved to a downtown Minneapolis apartment just this past spring. They loved being within walking distance to so many places, including Alex’s downtown office. Then the pandemic struck.
With both of them working from home, their apartment felt cramped. And with the flashy building amenities closed and their favorite downtown attractions shuttered, being downtown wasn’t as important as it once was. And with mortgage rates at record lows, they fast-tracked their plans to buy a house in the city.
Despite rising crime and the spring riots, leaving the city wasn’t an option they considered. “Watching the community come together makes me feel really good about living here,” Alex Maslyn said. The couple closed this month on a house in southwest Minneapolis.
After the police killing of George Floyd and subsequent unrest, MAR conducted an unprecedented analysis of the market amid rumors that a mass exit of homeowners would undermine the housing market in Minneapolis and other urban neighborhoods.
Rumors “can become a self-fulfilling prophecy,” said MAR CEO Carrie Chang. The group’s analysis showed that for everyone who decided to sell their house, there was one person or sometimes two people willing to buy.
Nate Pentz, an agent with Keller Williams, said that while he’s heard stories about people who have lost confidence in the city and are in a wait-and-see mode about selling, he’s yet to have a buyer cancel a deal in the city, and none of his clients said they were moving because they’re afraid of urban living.
“Every single one of our listings in Minneapolis since June has been in multiple offers,” he said.
Online listings giant Zillow, in a similar review of the major U.S. metros, found that in the weeks following Floyd’s death and subsequent protests and riots, sales in urban areas outpaced those in the suburbs.
While acknowledging that the housing market is in uncharted territory, the real estate community downplays the risk of an urban exodus akin to five decades ago, when racial tensions sent city homeowners to the newly developing suburbs.
Jeffrey Lin, vice president and economist at the Federal Reserve Bank of Philadelphia, said that despite big recent shocks, Minneapolis and a lot of U.S. central cities today are in a lot better shape than they were in the late 1960s.
“Right now the outlook is not bad for cities,” he said. “I think the big risks are in terms of the factors that are affecting cities and suburbs alike. Layoffs that are becoming permanent, business closures that are becoming permanent and the threat to state and local budgets.”
The topic remains top of mind for real estate agents, especially those who make their living selling downtown condominiums and townhouses that often appeal to more affluent buyers who have a multitude of choices about where to live.
That segment of the market has suffered. There’s now a more than six-month supply of condos on the market, which suggests a buyer’s market, a departure from last year when upscale condos often sold before they hit the market.
Barb Brin, who’s been selling downtown real estate through two previous recessions, says that urban real estate markets have always been cyclical and that after a spring lull, buyers are starting to re-emerge.
“This is the ebb and flow of what happens in the city,” she said. “People are just trying to be cautious; it’s just not the breakneck pace it was before.”