Higher Priced Home Market (Minneapolis, Eagan: for sale, real estate, 2015)

[Carbonx2man]

Trying to follow the real estate articles about homes selling for $500k+. Everyone says it's been sluggish these past few years except for places like Edina. Trying to learn more about homes at this price to potentially invest in and get ahead of the market.

Anyone have any inside information about the market for Sellers who want to sell their overpriced luxury homes? Is it picking up yet? Inventory is getting low for anything under $500k but how is inventory for over $500k and less than $1m?

Looking at Woodbury, Apple Valley, Eagan

[mr roboto]

Unfortunately homes in that price range in those communities are often McMansions with bad design, oversized faux luxury details and they are tremendously energy in efficient. That's why the faux lux cookie cutter customs are stale on the market.

[Citykid3785]

I can definitely comment on this one, as someone who grew up (and has parents in a $600K house) in Eagan, and have since lived in Apple Valley, where I recently moved from a $280K house to a $370K one. I can't speak for Woodbury, but I surmise it's the same.

I would not say the market is great, or will be great for houses in the $500K - $1M range for the following reasons that Mr. Roboto eluded too.

Millenials do not value 1980/90s McMansions with excessive square footage (4-5,000 sq ft) for the sake of square footage. These homes dominate Eagan and AV. These are the same millenials that will be competing for homes over the next 10 years. They would much rather buy a brand new, fully optimized 2,400 sq foot house for $350K, of which are being built in Apple Valley. Eagan doesn't have anymore buildable land and is closer to the city and many corporate HQ's than AV, thus the highend market will be much stronger there than AV. AV has lots of new construction going on south of CR-42, and as I mentioned, few of these crack $450K, and many are very efficient $350K homes.

I live in the planned community of Cobblestone Lake, which has $200K townhomes, up to $800K homes with lake views. And take it from me, the $500K+ homes linger (not in a historic sense, but long enough to make the homeowner have to drop the price several times).

In August I listed my previous house in AV (purchased for $208 in 2011) for $275K, and it sold in 1 day for $280K. In contrast, the home I purchased sat on the market for 4 months over the summer, with 4 price drops before I bought it.

Hope this helps.

[Carbonx2man]

Thanks. That's very helpful. I wonder if it will ever pick up. As millennials move up the income ladder and want to upgrade on their houses. I used to say the same thing when I was younger, "I liked utilitarian places to live. just simple life. would rather rent or buy a small condo in the city. Maybe live in a tiny home or RV" I now find myself owning a SFH in the burbs. But then again, I am a GenXer.

[gopherviking]

Citykid3785 is absolutely right. A lot of millenials also like living in the city, and are more willing to invest in smaller homes in/near the city, vs. being out in AV, Woodbury and Eagan. Homes in those areas, and areas like Shakopee and other outer suburbs in that price range have a longer market time.

[TheGrandViking]

Originally Posted by Carbonx2man

Thanks. That's very helpful. I wonder if it will ever pick up. As millennials move up the income ladder and want to upgrade on their houses. I used to say the same thing when I was younger, "I liked utilitarian places to live. just simple life. would rather rent or buy a small condo in the city. Maybe live in a tiny home or RV" I now find myself owning a SFH in the burbs. But then again, I am a GenXer.

Here is an article supporting your opinion. Young Americans: Yearning for the Suburbs, Stuck in the City - The Atlantic

I live in the western burbs and my neighborhood has shifted heavily to Millennials. When I first moved here close to 10 years ago we were the youngest surround by older couples. Now, many of them have moved out and we are now one of the "older couples". My backyard is is on the border of a little used park when we first moved here. Now, the park is heavily used during the warmer months.

Two houses within a stone's throw of my house sold in one day and for about 80k more than I thought it would (I thought they were both dreaming when they listed them). Both had multiple offers. They were in the 300k-500k range.

Low crime, great schools, parks, and bike paths are not a hard sell. Here is another article
Why More Millennials Are Buying Homes in the Suburbs | US News Real Estate

One thing you might want to do is look along the proposed SWLT rail and maybe see if their are some properties within 10 minutes of the stops. However, I doubt that is a novel idea.

[mr roboto]

It's not an argument about suburb vs city, it's an argument about oversized homes in car dependent suburbs versus reasonably sized homes in connected suburbs. Older millennials are buying homes in my neighborhood too, in Eden Prairie. But the homes they are buying are not 4000 square-foot semi custom homes built 10 years ago, rather 2000 square-foot homes built 30 or 40 years ago. In Eden Prairie itself has tons of corporate jobs and a rapid bus transit line into downtown Minneapolis.

I see these brand-new developments out in Chaska and Victoria and Chanhassen and most of those are being built by older GenXers. It's those neighborhoods 10 years from now I would be concerned about.

[ArcLyte]

The market seems to be about even in the Twin Cities in the 500k - 1M price range.

Using public data for the last 3 months, we can see the following:

1) Eagan: 16 homes sold, 52 days on the market
2) Woodbury: 25 homes sold, 36 days
3) Minneapolis: 117 homes sold, 48 days
4) Edina: 62 homes sold, 51 days

Woodbury has the shortest time-to-sell period of all the markets, but has a very low inventory of homes sold in the past 3 months. There also appear to be several homes sitting vacant/for-sale in Woodbury right now for sale with 100+ days on the market.

I personally wouldn't place my bet on a 500-1M house in suburbia, if you're looking for a long-term, strong returning, growth investment. It's still too early to determine if you'll be able to sell it when the time comes. I'd imagine that you don't want to be paying holding costs on a property for an extended period of time. The other thing to consider is the rental market -- the closer you get to Minneapolis, the faster the rentals tend to go (and the price increases as well -- even in high-end homes/condos.)... It's good to have options, if you cannot sell.


Data source: Redfin, https://www.redfin.com/city/4490/MN/...clude=sold-3mo

(^ you can tweak the above chart to see a bit of information about a given market)

[Thedosius]

The question isn't whether millenials will be more likely to want to move to the suburbs as they get older and have children, it's whether they will want to move to the suburbs in somewhat the same proportion as previous generations. The geographic dispersion of housing is currently based to fit boomer and Gen X preferences as they have been the buyers for the past couple decades. The supply of housing has been built to suit their tastes and I think millenial demand for suburban housing will increase from what it is now for that generation but will not match that of the previous generations.

If I were to consider investing in housing, I would try to leverage the preference shown for urban-like walkable communities in the suburbs. That probably means inner and older suburbs. Otherwise the supply will exceed the demand as millenials have consistently been less interested in suburban living than previous generations were at the same age. Couple that with downsizing by Gen Xers and boomers and you will need to pick locations in the suburbs very carefully.