They’re finally settling in. "It was a little bit stressful." For Lea and her husband, being a buyer in a hot market was a challenge. "One of the first houses that we found, that we actually really liked, we were one of 26 offers."
The Twin Cities housing market is hot right now. Homes are going off the market fast and with a higher price tag. Herb Tousley, the Director of the University of St. Thomas’s Real Estate Program says it's a great time to be a seller. "There's a lot more buyers out there than there are seller's right now. Interest rates are still relatively low. The perception is the economy and the job market is doing better, so people are feeling more secure about their job situations, and so there's a lot of people out there that are chasing a few homes."
Ryan Fischer, a Twin Cities realtor, says more first-time home buyers and young families are going after neighborhoods in cities like Richfield because of their proximity to downtown and urban amenities. "It's close to a lot of corporations and jobs around the Twin Cities and also the price point. The price point is still reasonable. You can have an affordable home, but still be accessible to the Twin Cities."
Some of the most demanded areas are the first ring suburbs, like Edina, St. Louis Park, Plymouth and Woodbury. Parts of Minneapolis and St. Paul are also gaining more and more popularity. "There's a lot of people, especially the younger people, the quote on quote millennials, who want to have that more urban lifestyle, so you're seeing them move into the cores cities, you know the North Loop, the East Bank in Minneapolis and even Downtown St. Paul. They like that experience where they can walk to the grocery market and you don't have to get into a car to do anything," says Tousley.
Although interest rates are low, so is inventory. Last time this year, there were 13,000 homes on the market. This year, only 10,000. "We've got good data that goes back to 2003, 2004 and this is the lowest that I have ever seen it since then," says Tousley. Before the housing market crashed almost a decade ago, there were more than 20,000 homes for sale at any given time.
With the trickling number of homes on the market across the metro today, buyers are facing obstacles, often times being outbid by other buyers. "It really puts more pressure on them to be ready to buy," explains Tousley. "If you're serious and you're going to go out and want to buy a home and get something under contract, you really have to have all your ducks lined up."
"This is unbelievable. People are struggling to buy a house and I've never seen that before where people can't get their hands on a property," says Fischer.
An unexpected neighborhood quickly becoming the most demanded for buyers
Just a drive outside of downtown Minneapolis, near the North Loop, is now the most demanded neighborhood in the metro. Today, North Minneapolis is the hottest housing market in the Twin Cities. "You can get a lot more for your money, but you can also get a really amazing house in North Minneapolis," explains Emily Green, who specializing in North Minneapolis real estate. She says buyers are desperately searching for affordable homes.
And that's exactly what their finding in the Northside. The average price of a home in the Northside averages in the mid to low $200,000 range, depending on the neighborhood. New construction can cost a buyer around $300,000 to $400,000. "There's still some deals to be found," says Green. She says demand has gone up recently because of lack of foreclosures. "Foreclosures just drag everything down."
In 2008, the housing market across the country crashed, forcing many homes into foreclosure. Historically, the housing market in North was one of the most unstable with the highest foreclosure rates in the city. Predatory lending and sublime loans during a declining economy led to many families being displaced after loosing their homes.
"We've gone so far away from protecting the home owner and putting the home owner's values first. Everyone is looking for a dollar and a dime. We've got to go back to the basics of it." When Melissa turned 26, she became a proud home owner in her community of North Minneapolis. "It's exciting just to be a home owner in general and to know that you have the capabilities of doing what you want as well as showing your children this is your home," says Melissa.
But the joy of owning her very first home quickly became a nightmare. For years, she has been what she calls 'upside down', where her mortgage is underwater. "My home values are completely in shambles, and it doesn't help that investors are just coming in and take over the property and slap some renters in. So we have a combination of 'upsidedowness' of my own loans and my own position and property and value and then we have where investors are coming in and inviting people who are not from Northside to come and rent. And there are a lot of slumlords involved in that and things of that nature. And it brings a lot of people who really, truly do not have the heart for the Northside."
The Northside is one of the most impoverished, crime ridden neighborhoods in Minneapolis, affecting the economy in every way possible. "My daughter's cannot go outside and play," says Melissa. "I've been in my house for almost 11 years and they don't go outside and play. You don't know what happens. If they do go, there's a certain time that we will allow. Usually when we we grew up, we were able to go outside and play until the street lights come on. It doesn't work like that anymore."
And because of the long list of problems riding over the Northside for years, construction was stalled. New homes being built were far and few in-between. But today, with nearly 400 open lots, the housing market in North Minneapolis looks very different. Investors and developers have been scouting North, what many dub as a gold mine, rebounding the market.
The city of Minneapolis recently introduced the Build-Buy-Rehab program to help home owners purchase, build or rehab city-owned vacant lots or buildings, offering developers up to $75,000 and individuals up to $25,000 to build a new home on a North Side empty lot. "You cannot sell a brand new home in a distressed neighborhood such as North Minneapolis, any other blocks, for $200,000 and the neighbor across the street's house is worth $115,000, the one up the block is worth $80,000, $60,000. We need to focus on the current home owners right now and rehab-ing those particular homes or offering the help to bring those values up on current homes."
So now Melissa is working to maintain Northside home owners who are being driven out by inflated prices. "I would like to see, you know, that there just honest about it and they put the home owners first because right now it seems like the investor is the priority. With the city of Minneapolis being less than a mile away, they need to hear from current homeowners that we're living this nightmare right now. We're not capable of doing things as another home owner would do and we're in a situation where we're forced as our only option is to foreclose. And we don't want to do that. We've wasted time, energy, money. Our kids are growing up in these homes and going to school in these neighborhoods. We want to be able to stabilize the neighborhood and stay here."
Although many cracks remain following the fallout of the recession and the 2011 tornado that ripped through the community, a lot has changed on the Northside and recovery has been evident. "North has definitely had a lot of investment," says Emily Green. "It has had incredible amounts of investment from the foreclosure crisis and it has a lot of investment from the tornado that came in. And so, when you look at what that investment comes out to be, it's into businesses and it's into restoring the housing stock."
Forecast of the Twin Cities Housing Market
In a hot, sellers market, buyers have to be ready to seal the deal faster than ever. "People should plan ahead," says Realtor Ryan Fischer. "They should talk to their real estate professional and make sure they have a good strategy to buy their next house."
Lea and her husband learned quickly how fast they had to jump to buy their home in Richfield. "We had a great agent. She fought for us. She was there with us. She knew if the house was a right fit for us or not."
Although it seems like we're inching closer to reliving the housing crash almost a decade ago, experts believe the current hot market will simmer down. "I think we've got plenty of time left before there's any kind of crash in the market. I think right now things are kind of plateauing a little bit where prices aren't sky rocketing quite as much as they did over the last 365 days," says Fischer.
So what’s the next year look like for the housing market? "I know that home builders are working as hard as they can to build homes that are in that price range and that's certainly going to help some and will add to the supply. But I see this continuing on into probably 2018, that there are just not going to be as many homes as there has been. And I think the problem or issue will start to correct itself as we go through 2018, but I think again, we are going to see way more buyers than sellers," says Tousley.