I'd like to remind everyone to be cost-sensitive when looking for housing. (Minneapolis: real estate, apartment)

[Squeamish]

Housing is perhaps the biggest share of one's budget.

Rents appear to be increasing quickly in MSP. Yet last I checked average incomes (at least for the US as a whole) are going down.

Sounds like house prices are going up again too, which is great for existing homeowners but horrible for buyers. If incomes continue to go down, which it sounds like they will, the housing market almost has to correct itself over time which means the long-term trend for house prices will be to go down. That said, I'm reasonably confident that owning a house from this point forward is a bad investment compared to other investments like stocks or mutual funds. Don't buy more house than you need to be comfortable, if that. We may be in the second of a series of housing bubbles that will continue. I can't comprehend why the general opinion seems to be that high house prices is a good thing.

New housing over the past couple decades, and possibly even since the 80s, has been solely high-end. Not to mention construction since the 70s has been a lot lower-quality, so the houses won't last nearly as long as older homes. Don't get sucked into buying or renting something new unless you're certain that what it offers justifies the cost given your needs and budget. Also, it seems that folks who want suburban houses most frequently want something pretty much brand new; it seems that the houses lose their value relatively quickly as they age and suburban buyers prefer something newer. This does not happen in the city nor as much in most inner-ring suburbs.

I started this thread because I've been noticing a disturbing trend in well-off cities like MSP that the housing market seems to be set up to pressure if not force people to pay a lot more than they want to for something they don't need. Too much high-end housing and not enough middle-of-the-road and low-end housing. There are some older buildings down the street, but hey if you live here you get to live with all the cool kids that are into the latest fashions and amenities. Ask yourself, do you really want that badly enough to pay the cost premium? Life is a lot happier when you have more disposable income or the ability to pay off your student loans faster. Most younger people these days are overwhelmed with student debt. Millennials really should not be pushed towards this high-end housing.

Don't follow the crowd. Find a place to live that makes the most sense with cost being a prime factor. Zillow is a great resource for comparing values of every house in the metro area. Compare different neighborhoods within commuting range. Padmapper allows you to select a rent ceiling. Pick a low ceiling and see if you find anything that meets your needs, if not, increase your ceiling until you do. Cost, cost, cost. Don't go for the obvious choice. Geographically about 95% of MSP metro neighborhoods are safe by national standards. MSP is an insanely nice, clean city and metro area. You don't need to live in the most-often-recommended places. But the housing market here is overwhelmed by high-end stuff. I know that everyone has different needs and budgets, but most of you probably don't want the common and easy-to-find high end house or apartment that MSP has far too many of. Saving money will make you happier in the long-term!

I'm going to start reminding people posting about finding housing, encouraging them to focus on cost as a primary factor and noting that there are relatively safe lower-cost neighborhoods available, hopefully with some neighborhood recommendations. It would further help the cause if others were to spread the word as well.

[TimtheGuy]

The biggest problem with your argument is comparing MPLS/St Paul metro salaries with the rest of the U.S. I would venture to bet that salaries here are and have been on the increase. We have a much stronger, higher average pay, diverse economy that most of the U.S.

[Dennis Schroeder]

Not sure this is very good advice. Old homes have a tendency to be a money pit, and homes in undesirable neighborhoods are difficult to sell, should you decide to move. A combination of the two leaves you with a depreciating asset, something your house should not be.

I was just house hunting in the Twin Cities. There are a lot of bargain homes, but on further look they tend to be a combination of being very old, small, and in a not great area, or under a loud flight path.

[MidwestRedux]

While the OP appears to be giving advice with good intentions, I disagree with just about everything that was said.

Minneapolis has almost nothing in common with other high income cities in the US - reasonable zoning, no physical barriers to growth etc.

There is no conspiracy to push high end housing. Developers build homes that they think people will buy.

Finally, there is a school of thought that a home purchase is the one thing you should stretch your budget for. Because you are able to finance (leverage) most of the purchase price of what should be an asset that increases in value, this is one of the best opportunities for middle class familes to build wealth. Overtime, people who buy homes at the edge of their means will usually have increasing incomes overtime while the majority of their housing expense is fixed.

[StPaulGal]

It always makes me raise an eyebrow when someone compares real estate to the stock market with the sentiment that stocks "perform" better. Umm...I can't live inside of my stock portfolio. Everyone needs housing, and for most people who do not have to move often buying real estate is the the most economically sound way to meet that need. Even if I sell my house 30 years from now for the exact amount I put into it, that still means that I essentially got very cheap "rent" all those years, essentially only paying interest and inflation.

It is certainly a poor financial decision to buy a massive new house that you neither need nor can afford. But that is not a phenomenon limited to houses.

[uptown_urbanist]

We have a lot of housing affordable to the middle class here, certainly more so than most bigger cities. I assume that's been one reason so many people do own homes here, including young people. I don't think anyone should be in a big rush to buy, but around here, assuming one is planning on staying put for long enough, buying can be a smart option. There is clearly a need for more housing for low-income individuals and families, but the middle class is amply served. Most people aren't getting pushed into buying mansions in Kenwood when all they can really afford is a modest rambler in New Hope.

But yes, absolutely buy or rent within your means.

[BryaninMSP]

It's worth pointing out as well that what are now considered old, outdated homes were once moderate- to high-end, brand new homes a lot nicer than what else was available at the time. The harvest gold appliances of the '70s were the stainless steel of their day. Linoleum was once a "space age" luxury (because it was maintenance-free). Having more than one bathroom was extravagant. A two-car garage? My God, who would ever need TWO cars? Or off-street parking, for that matter.

As another poster pointed out, builders build what the market wants. From everything I see, the mix of affordable and luxury new construction is fairly balanced.

[Squeamish]

My guess is that most of the posters who disagree with me make six figures and don't have student debt, in which case their budget is very different than the emerging majority of Americans that my post is targeted towards. For a six-figure income with no student debt, the advice of the other posters probably is somewhat accurate. But people in that category may not be as aware as they should be that the younger generation ("millenials") are almost all overwhelmed with student debt. Incomes for relatively new positions are much lower than they used to be. Benefits are worse with things like high-deductible health insurance: I pay my high deductible and more every year just in Jan and Feb alone for my prescriptions. Add to that overwhelming student debt that takes most of a career to pay off and I'd imagine it's a rarity for a young worker to have positive cash flow (savings). This is the generation that my post is largely meant for. I'm 35 and I got my bachelor's from Iowa State in 2002. The year before I graduated was the very first year that tuition, at least in Iowa, started skyrocketing to be unaffordable and overwhelm all students younger than me with debt. I recall that there was one student regent on the Iowa State board of regents who tried her best to stand up for the students and keep tuition lower, but she was out-voted by the rest of the regents who were all members of what we now call the 1%. They were only interested in profit. This happened the very year that I graduated. And from everything I've read, it was the first of many years of skyrocketing tuition increases. I've started telling people that I feel like the last graduate of the privileged generation who graduate from college and go on to buy a house and get a job in their field with solid benefits. Pretty much anybody younger than me will be overwhelmed with debt for a really long time and really shouldn't be buying a median-cost house even if they qualify for the mortgage. So many millenials are living in their parents' basements. This is well-documented in plenty of news sources.

House prices will correct themselves over time as the privileged generation moves into nursing homes and such and the millenials grow to be a bigger segment of the working population. I just can't see the economics possibly working out to keep pushing house prices higher when fewer and fewer people can afford them. That's not the way the market works. If you disagree, let's bookmark and revisit this thread in ten years and see for a fact how things have changed.

I don't know where all this new "affordable" housing is that you speak of. At least I don't know anybody living in it, even though all my friends are mostly dead broke millenials.

Developers will build the homes that they make the most money selling. Evidently there's far more money to be made building high-end housing than low-end. Doesn't mean there's no demand for low-end housing.

[Dennis Schroeder]

Minneapolis is filled with affordable housing. The average home price is $165K, which is easily doable on the average local salary of $49K. It is a shame that nobody builds new 'starter' homes like post WW2 (ala the Bungalow Belt in Chicago) but there are plenty of inexpensive older options in Minneapolis.

[uptown_urbanist]

why should someone and just out of school with lots of debt expect to buy a brand-new house? Sure, many Millenials are saddled with debt right now, but eventually they'll either pay it off or pay it down to a reasonable level and be able to easily handle a payment on a 200k house while also meeting their other financial goals. Housing is getting more expensive here, but it's still within reach for the middle class.