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Old 01-24-2016, 05:20 PM
 
Location: Minneapolis, MN
8,572 posts, read 13,884,604 times
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Quote:
Originally Posted by Glenfield View Post
Yes, my point was simply these benefits do not come without a cost and that cost is borne largely by the poor. We should at least acknowledge that.
Yes, I'm guessing a few of the current residents will get jobs at the Starbucks, co-ops and microbreweries that will open in the neighborhood when gentrification hits. The remaining residents that don't want to stay will probably end up moving to places like Brooklyn Center, Brooklyn Park, Crystal, New Hope, Columbia Heights, Fridley and Coon Rapids.
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Old 01-24-2016, 06:29 PM
 
Location: MSP
442 posts, read 483,450 times
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The article is mostly focused on empty lots, which take longer to sell no matter where you are in the metro. Last year the average lot took a median of 108 days on market, vs. less than 40 for a single-family home.

Part of the problem is that even if the lot is cheap, the cost to build a house will exceed what it will be worth almost immediately after you take possession (just like when you drive a new car off a lot). Most people who build single houses on lots are speculators (who can sell homes faster and for a better margin in the growing suburbs) or owner occupants who build for themselves. But if you want to live in north or northeast Minneapolis, why would you want something new when there are great older homes to choose from and that will cost less than building new?

IMHO, the city's strategy of demolishing vacant homes rather than making them available to rehabbers is counter-intuitive if you want to keep an area vibrant or allow it to come back from the brink. The number of people who are ready willing and able to buy and rehab homes greatly outnumbers the number of people who will build spec homes. If you want to see the long-term impact of demolishing homes, look at Detroit, where there are blocks and blocks of empty lots that will likely never be redeveloped. The lower population in those areas (because there's no place for them to live) means businesses move to areas of greater population density, schools get consolidated and soon enough there's nothing in those neighborhoods keeping people there. And the downward spiral continues.

FYI, on the north side of Minneapolis, every neighborhood except the following saw an INCREASE in the median sales price in 2015: Holland, Northeast Park, St. Anthony West and East, Nicollet Island and Marcy Holmes. 22 others north of downtown saw increases last year. So there's hope.
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Old 01-26-2016, 09:40 AM
 
180 posts, read 150,696 times
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And yet in neighborhoods like MacGroveland in St. Paul (and other areas as well) they tear down perfectly good homes to build these spec homes. It is hard to see how tearing down a $200,000 house and building a new house can actually be profitable.
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Old 01-26-2016, 10:35 AM
 
Location: Twin Cities
5,806 posts, read 6,399,720 times
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Quote:
Originally Posted by cathedralhill1 View Post
And yet in neighborhoods like MacGroveland in St. Paul (and other areas as well) they tear down perfectly good homes to build these spec homes. It is hard to see how tearing down a $200,000 house and building a new house can actually be profitable.
I know what you're saying yet it must be profitable or the developers wouldn't be doing it. It suggests that it costs less to build a house than perhaps you and I think. Maybe one of the real estate agents here can put some numbers on this for us.
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Old 01-26-2016, 11:30 AM
 
Location: MSP
442 posts, read 483,450 times
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Quote:
Originally Posted by cathedralhill1 View Post
And yet in neighborhoods like MacGroveland in St. Paul (and other areas as well) they tear down perfectly good homes to build these spec homes. It is hard to see how tearing down a $200,000 house and building a new house can actually be profitable.
You're talking about far more desirable neighborhoods with higher median sales prices and higher $/sqft. It's the same reason developers are doing teardowns in Edina and not in Crystal (OK, they're doing some in Crystal, but not nearly as many). And it's only profitable when you acquire the land cheaply enough.

The cost to build a house is more or less the same anywhere, but the demand is far greater in certain neighborhoods versus others. In most urban neighborhoods it makes far more sense to renovate an existing home than tear down and start over (plus, who would want to buy a Blaine-style Lennar home with builder-grade finishes on Grand or Highland?).

Here's a specific example: 2179 Palace Ave in Mac-Groveland. 4 bed/3 bath, 2,028 square feet. Listed for $499,900 and is new construction over a teardown (the original property/land was acquired for $225,000, by the way, so your example of $200k was spot on). Very nicely done, granite, stainless, the works. Compare that to 8282 Arrowwood Lane N in Maple Grove — which is actually 400 square feet bigger but with comparable finishes — and listed at $375,000.

Developers could do the same thing theoretically in other neighborhoods, but there's not as much of a market for $300k+ homes in a lot of north Minneapolis and northeast.
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Old 01-26-2016, 12:24 PM
 
264 posts, read 249,229 times
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Quote:
Originally Posted by cathedralhill1 View Post
And yet in neighborhoods like MacGroveland in St. Paul (and other areas as well) they tear down perfectly good homes to build these spec homes. It is hard to see how tearing down a $200,000 house and building a new house can actually be profitable.
Likely, it is not a $200,000 house; it is a $100,000 (or less) house on a $100,000 (or more) city lot. Build a house for $300,000 builder cost, sell for $500,000+ -> PROFIT! (not that there is anything wrong with that.)
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Old 01-26-2016, 12:49 PM
 
180 posts, read 150,696 times
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No, some really are $200,000+. And most of the new construction costs more than $499,900. Use a real estate mapper that can distinguish new construction and you can readily see how many of these there are accumulating in the SW quadrant of St. Paul and the prices are sky high (more like $600,000-$800,000).

The builder's cost to build must be much lower than the general public. There was a lot behind us that sold for $100,000, but the buyers found they couldn't keep within their budget to build new, so they found a house in the neighborhood and re-sold the lot for $150,000. A builder ended up buying it and building a lavish house that they did manage to sell.
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Old 01-26-2016, 01:40 PM
 
Location: MSP
442 posts, read 483,450 times
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Quote:
Originally Posted by cathedralhill1 View Post
No, some really are $200,000+. And most of the new construction costs more than $499,900. Use a real estate mapper that can distinguish new construction and you can readily see how many of these there are accumulating in the SW quadrant of St. Paul and the prices are sky high (more like $600,000-$800,000).

The builder's cost to build must be much lower than the general public. There was a lot behind us that sold for $100,000, but the buyers found they couldn't keep within their budget to build new, so they found a house in the neighborhood and re-sold the lot for $150,000. A builder ended up buying it and building a lavish house that they did manage to sell.
Yes, it costs them less to build a spec home than it would cost you to build a custom home through them, though they profit in either scenario. I don't work with builders so I'm not an expert on how they operate, but I've been my own GC so I have a pretty good idea of what profit they expect from a custom build compared to what it actually costs to do.

I've sold newer homes in the suburbs, and older homes in the city. For me personally I prefer a home with some character rather than Floorplan B from 2012 in Development XYZ, and a high-quality rehabilitation of a mature home (not a cheap flip) does a lot more for a neighborhood than knocking them down and throwing up a cube with vinyl siding.
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Old 01-26-2016, 08:16 PM
 
1,453 posts, read 1,394,927 times
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Of course North Minneapolis stays stagnant. Officers try to go in there, charter schools try to cater, services are poured into the area and it is clear many do not want the "help". So I really don't foresee anything happening in the near future until some major cultural shifts begin to happen, beginning with the youth.
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