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Business Valuation, Development, Investment Real Estate

Do you need some leisure time?

Last week the Minnesota Business Journal reported, Lutsen Resort, a staple of Minnesota tourism for over 125 years, went on the market for just under 10 million dollars. However, it is not the first resort in the Great North to go on the market recently. The Star Tribune reports Gunflint Lodge sold for over 6 million dollars and Superior Shores and Resort, just south of Lutsen, in Two Harbors is also currently on the market.

Is this a trend? Why are resorts going on the market? Should consumers be worried about their options for North Shore leisure?

Herb Tousley, of the University of St. Thomas’ Shenehon Center for Real Estate, commented that these resorts often times require a “hands-on”  approach to management of the site. He also noted, “due to this approach, many owners see the opportunity to sell, in what they perceive to be, a high value market in order to exit the business.”

Statistics from the U.S. Travel Association show that domestic leisure travel is up from 2 billion trips in 2007 to 2.28 billion trips reported in 2016. More specifically, the Minnesota average household income has returned to pre-recession levels at $79,893. The private sector employment numbers (FRED) also seem to indicate the economy is in relatively good health. These indicators are great for resorts and the hospitality industry in general. Even with the ominous question of, “are we due for an economic adjustment?” It is not a predictable event. From general market signs, a resort may be an investment for some leisure.


Shenehon Center for Real Estate has been enabled Graduate level Business and an Undergraduate Major program in real estate for more than 15 years. The University of St. Thomas is dedicated to creating leaders who are morally responsible, think critically, act wisely, and work skillfully to advance the common good. 



Home Prices, Housing

4th of July Real Estate Matters

Last evening, I watched the Delano fireworks. The show was excellent and the lightning made it even more interesting. It got me thinking about the past, and how 10 years ago, my family would get there 5 or 6 hours early to get prime sitting/parking real estate to see fireworks up close. Whereas, now, as long as we can see the fireworks it is a good spot. To be honest, the effort to get a good spot doesn’t have the same value as before.

Although, my preferences have changed, finding a spot to park a car or a lawn chair seems like it is even harder to find than 10 years ago. Granted, Delano hosts one of the oldest annual 4th of July festivals in the state, the town has grown substantially, and they don’t seem to ever hold back on the fireworks. A couple years back at the 100th anniversary, the Delano fireworks show had a finale “end-of-show” firework which my friends and I felt from 10 miles away. I digress. Despite my own preferences, people want prime viewing real estate to watch the fireworks up close, but there isn’t enough. As the effort [price] to acquire the sitting space rises, people, like my family, have decided to locate farther away.

To the point, the fireworks show reminded me of the current housing market. Low housing inventories with high demand. From a simple economic standpoint, people should be entering the market as the price rises, but like the fireworks show there is an intangible element to housing. Individually, we all value these intangible attributes of living differently. For example, some people in a median priced house may value geography and education opportunities higher than the house alone, and they may not be able to find a home with similar geography and education. Therefore, they do not enter the market keeping inventory low.

FRED reports the average American family can afford a mortgage. So, why are we not seeing more sales? Can people not afford or not willing to pay current prices? Could it be trends changing social norms (Home ownership)? Whatever the reason, it will be interesting to see at what point housing inventories truly begin to climb.

Home Prices, Housing Trends, Minneapolis / St. Paul Housing, Residential Real Estate Index

Low Home Inventory Beginning to Affect Sales Volume: First Time Home Buyers Fueling Growth

MINNEAPOLIS, (June 21, 2017)— According to the First-Time Homebuyer Market Report recently released by Genworth Mortgage Insurance this segment of the market is having a big influence on the national housing market. The report found that this demographic accounted for 424,000 single-family home sales, or 38 percent of the total homes sold in Q1 of 2017. This amount is an 11 percent increase from Q1 2016, and the most since 2005. Their source data dates back to 1994 and analyzes over 20 million records. The survey tracks home sales for first-time homebuyers on a monthly basis, publishes quarterly, and compares the data against national housing market indicators.

“The first time home buyer segment is poised for additional growth in the Twin Cities. In fact, historically low interest rates and a strong local economy are all feeding demand in this market segment.” said Herb Tousley, director of real estate programs at the University of St. Thomas.

There are some head winds that are creating a drag on the willingness and ability of first time buyers to jump into home ownership. Student loan debt is a major factor making it very difficult to save for a down payment, qualify for a mortgage, and afford a mortgage payment. Additionally, the extreme shortage of moderately priced homes is making it difficult for first time buyers to find affordable homes in good locations.

The limited availability of homes to buy is creating upward pressure on sale prices. Home prices have been rising faster than wages for the last several years. This situation is starting to create affordability issues for first time buyers who typically do not have large down payments. The idea of home ownership is still very much alive among younger potential home buyers. However, due to the aforementioned factors many are needing to delay their first home purchase by several years.

 Setting New Records

The Twin Cities housing market continues to set new records in May. Record high median sales prices and historically low supply continue to dominate the market. The overall median sale price jumped from $245,500 in April to $250,000 in May.

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Affordable Housing, Development, Home Prices, Housing, Housing Trends, Industry News, Residential Real Estate

Ten Surprising Facts: State of the Nation’s Housing Report

Since the housing bubble burst in 2008, the market has seen an increase in demand for homes, but home inventories remain stagnant. Further, either from the bank restrictions or consumer caution new home growth has been at record lows for the last 10 years. Whether this is just a trend or due to socio-economic reasons can be debated, but statistics do show Millenials are living with their parents longer and seem to be putting off buying homes due to a different economic situation than previous generations at the same age (US Census).

Further a recent housing report by Joint Center for Housing Studies of Harvard University, posit similar statistics in the market strengthening the argument that Millenials and uncertainty are holding down the housing market.

1. For-sale inventories dropped even lower over the past year.

For the fourth year in a row, the inventory of homes for sale across the US not only failed to recover, but dropped yet again. At the end of 2016 there were an historically low 1.65 million homes for sale nationwide, which at the current sales rate was just 3.6 months of supply – almost half of the 6.0 months level that is considered a balanced market.

2. Fewer homes were built over the last 10 years than any 10-year period in recent history.

Even with the recent recovery in both single-family and multifamily construction, markets nationwide are still feeling the effects of the deep and extended decline in housing construction. Over the past 10 years, just 9 million new housing units were completed and added to the housing stock. This was the lowest 10-year period on records dating back to the 1970s, and far below the 14 and 15 million units averaged over the 1980s and 1990s.

Read more of the Full Article or go straight to the full Housing Report by Joint Center for Housing Studies of Harvard University


Architecture & Design, Commercial Real Estate, Development, Property Management

History of the Empire State Building: A Financial Flop for Nearly 20 years

By QuickLiquidity | Date: June 13, 2017 | Category: History

In the late-1920s, New York’s economy was booming and a competition to build the world’s tallest building was heating up. One man who was at the center of it all was Walter Chrysler of the Chrysler Corporation, who wanted to build the world’s tallest building as a monument to himself and American capitalism. Chrysler began construction of his monument, the Chrysler Building in 1928 at 405 Lexington Avenue. Despite the buildings name, the Chrysler Corporation did not pay for the construction of the building and never owned it. Instead Chrysler paid for it himself, with the hope of his children one day inheriting the world’s tallest building.

The architects of a competing building, 40 Wall Street, had devised a plan to prevent the Chrysler Building from ever becoming the world’s tallest building. Seeking the title for themselves, they planned 40 Wall Street to be 925 feet tall: 85 feet taller than the Chrysler Building had originally planned to be. When Chrysler found out about 40 Wall Street’s plans he decided to add a surprise 186-foot spire to his building. 40 Wall Street finished construction first in April of 1930, and held a celebration for being the tallest building in the world, without knowing that they were about to be surpassed. Less then two months later, the construction workers at the Chrysler Building hoisted 4 parts of the secret spire to the top and riveted them together in 90 minutes. At 1,046 feet high, the Chrysler Building became the world’s tallest building¹.

John J. Raskob of General Motors, a rival of Chryslers, also aspired to build the world’s tallest building. Raskob purchased 350 Fifth Avenue and began construction of the Empire State Building in March of 1930, only a few months before the Chrysler Building was completed. Raskob hired architect William F. Lamb, who finished the original drawings for the Empire State Building in only two weeks. In one of their first meetings Raskob had taken a jumbo pencil, stood it on its end and asked Lamb, “Bill, how high can you make it so that it won’t fall down?” Using over 3,400 laborers a day, the building went up in just over a year, well ahead of schedule and under budget at $40 million, which would be nearly $600 million today. During certain periods of construction, the frame grew a remarkable four-and-a-half stories a week. Not to be bested by the Chrysler Building, Raskob put the final cherry at the top of his building – a spire, making the Empire State Building a soaring 102 stories and 1,250 feet high. The Empire State Building was completed in May of 1931 and became the world’s tallest building, a title it would hold for nearly 40 years until the World Trade Center was completed in 1970. While successful in beating the Chrysler Building in height, the Empire State Building was far from being the success Raskob had hoped.


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Architecture & Design, Development, Twin Cities Real Estate, Urban Planning

Former Washburn-McReavy Funeral Home Development Remains Postponed

If you take a leisurely drive east over the 3rd Street bridge, you will see a familiar building. Familiar in the sense, the building is 90 years old. Your grandparents likely could have seen it as children. However, today unlike 90 years ago, fences surround the building with visible graffiti and construction equipment. It is the sight of one of many development projects in historic Northeast Minneapolis. 

The plan for the 90 year old building, previously occupied by Washburn-McReavy funeral home, was demolition to make way for a 40 story high rise. The project thus far is similar to the redevelopment efforts of Nye’s Polonaise which occupied the historic Harness shop and 112 Hennepin building. The Nye’s Polonaise project originally planned a high rise building, but in the end scrapped 24 of the original 30 floors to accommodate the neighborhood and Heritage Preservation Commission.

While it is not the same building as Nye’s, the project has been postponed now for almost a year. It will be interesting to see what happens, but recent history and potential project pressures may indicate serious alterations to the original plans.


Affordable Housing, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

University of St. Thomas Real Estate Analysis for April 2017: High Demand and Low Supply Continue to Put Upward Pressure on Sale Prices

Negative Equity – Continued Improvement in 2016 but Still an Issue

The number of homeowners with negative or near negative equity continues to decline but is still high by historical standards. Lack of equity is a reason that many homeowners are not willing or able to put their homes up for sale which is a contributing factor to the very low number of homes for sale in the Twin Cities. As can be seen in the table below about 1 in 5 homeowners in the metro area with a mortgage is in a negative or near negative situation.

% of Home Owners in the Twin Cities with Negative or Near Negative Equity

County Negative Equity* Near Negative Equity**   County Negative Equity* Near Negative Equity**
Hennepin 8.0% 20.4% Scott 6.1% 20.1%
Ramsey 6.6% 18.7% Carver 5.9% 21.3%
Dakota 6.6% 20.5% Chisago 8.5% 22.9%
Washington 6.6% 21.1% St. Croix (WI) 7.9% 23.0%
Anoka 7.0% 23.6% Pierce (WI) 11.3% 27.5%
Twin Cities 7.3% National 10.5%

     Source: Zillow

* Negative Equity – Owes more than the house is worth

** Near Negative Equity – Equity is less than 20% of value

“The problem with near negative equity is that home owners are not actually underwater, but in many cases they do not have enough equity after they sell their home to pay for the costs of buying a new home, including a down payment, commissions and taxes” said Herb Tousley, director of real estate programs at the University of St. Thomas. In 2017, home prices are expected to increase about 5% – 6% in the Twin Cities, which will free many more homeowners from negative equity Rising prices and loan repayments will also continue to improve the equity position for homeowners, but this will be a slow process and we should be prepared for higher than normal negative and near negative equity to be a part the housing market for a long time to come.

 High demand and low supply of homes for sale continue to put upward pressure on sale prices in April. The overall median sale price jumped from $237,300 in March to $246,000 in April. The traditional, non-distressed median sale price is at a new all-time high at $250,000, a 4.2% increase compared to April 2016. On the supply side in April there were 10,969 homes available for sale, 19.9% less than April 2016. Again, the shortage is most acute in the low to moderately priced homes. See the table below.

Homes For Sale vs. Closed Sales –  Where The Action Is

Price Range Number of Homes For Sale % of Total Homes For Sale Number of Closed Sales % of Total Sales Months Supply
0 – $200,000 1992 18.2% 1449 30.7% 1.2
$200,000 – $400,000 4554 41.5% 2484 52.5% 1.9
$400,000 – $600,000 2270 20.7% 563 11.9% 4.2
$600,000 + 2095 19.0% 230 4.9% 8.5
       Total 10969 4726

The number of homes sold in April was 4,726 compared to 4,348 in March and 5,252 in April 2016. That is 10% less than the number of sales recorded in the same period a year ago. We believe that this is a reflection that extreme the low supply of homes for sale is beginning to impact the number of homes sold in April. This this the first time since 2011 that the number of closed sales has declined on a year over year basis. The number of new listings was 7,747, which is 8.3% less than recorded in April 2016. That decrease is a sign that the short supply situation is likely to continue for at least the next several months. We believe that the changes observed in April are the beginning of an indication that the supply and demand sides of the market are becoming slightly less imbalanced.

 The St. Thomas Indexes

Here are the Shenehon Center’s monthly composite index scores for April 2017. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures) started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

At a level of 1172 the April UST Residential Real Estate Traditional Sale Composite Index is up significantly, registering a 3.1% monthly increase compared to the level of 1137 that was recorded in March.

The UST Residential Real Estate Short Sale Composite Market Health Index was 1045 in April, up 3.1% from the 1014 recorded in March.

The UST Residential Real Estate Foreclosure Composite Index was observed in April at 924 a significant increase over the 901 recorded in March.

For more information, visit the Shenehon Center’s complete report for March 2017 at report is also available for free via email from Tousley at


Commercial Real Estate, Development, Economics, Executive Insight Series, Housing, Industry News, Investment Real Estate, Real Estate Programs, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate, Upcoming UST Events

Real Estate Executive Insight Speaker Series Bob Lux – Inside the Mind of A Developer


Real Estate Executive Insight Series

Bob Lux – Inside the Mind of A Developer 

Event Details Tuesday, March 28th 2017 5:30 p.m. University of St. Thomas, Minneapolis Campus Schulze Hall, Room 127

A candid conversation with industry leader Bob Lux, Founder Alatus LLC

Quality real estate development requires innovative thinking. Bob Lux, founder of Alatus LLC, has been in the real estate development and investment business for over 30 years. His company’s mission is to provide innovative solutions and high quality projects by wisely using his team’s talents and strengths to achieve the client’s vision and form a better community.   Lux will discuss the challenges, opportunities and trends in developing residential and commercial real estate in the Twin Cities. Lux will also share his views on the condo market and as the largest private owner of parking facilities in Minnesota Bob will outline his expectations for future parking and infrastructure needs in the downtown area.

Agenda 5:30-6 p.m. Networking 6-7 p.m. Presentation by Bob Lux

Register Today
Economics, Home Prices, Housing, Housing Trends, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

Twin Cities Sets Records for Median Sale Price and Number of Homes Sold

Are we seeing another bubble in the Twin Cities housingMarket Report

market? Not this time, says St. Thomas’ monthly analysis  

With median sale prices hitting a record high in June, is the Twin Cities housing market experiencing the kind of bubble we saw back in June 2006? According to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business, the short answer is no. The median sale price of homes sold in the 13-county Twin Cities region reached $242,000 in June. That tops the previous high-water mark of $238,000 set in June 2006. On top of that, the 7,110 homes sold in June was another record high.

Each month the St. Thomas center tracks the median price for three types of sales: nondistressed or traditional; foreclosures; and short sales (when a home is sold for less than the outstanding mortgage balance). In addition, it looks for trends in the market and creates a monthly composite index score by tracking nine data elements for those three types of sales.

Herb Tousley, director of real estate programs at the university, said the reasons for the current run up in housing prices are much different than the conditions that led to the run up in values in the mid-2000s followed by the subsequent crash. “Before 2008, lending standards were very lax,” he said. “Little to no down payments were required since everyone believed that home prices would always keep going up. There were many low-documentation or ‘no-doc’ loans that were made to people who were not qualified, resulting in high numbers of foreclosures and short sales. “Additionally, overbuilding, speculation, and excessive flipping of homes were major contributors to the housing market crises of 2008. “Today, mortgages are only being made to qualified buyers, home flipping has returned to normal levels, and overbuilding is not a problem. The current run up in home prices can be attributed to market fundamentals. There is a shortage of homes for sale and a historically high level of demand fueled by low interest rates and an improving economy. “One concern is the affordability issue; that occurs when home prices rise faster than family income. When this occurs over an extended period of time it becomes more difficult for families to afford to purchase a home due to higher required down payments and higher monthly payments,” Tousley said.

It has taken 10 years for the median sale price of a Twin Cities home to recover to its previous peak level. Where do we go from here?

Number of sales: In 2015 there were just over 56,000 homes sold in the Twin Cities. Tousley predicts that the second half of 2016 should continue to see a high sales volume. Look for a total of about 58,000 homes sold in 2016.

 Median sale price: In most years, the peak median sale price occurs in June. Maybe not this year. With the low number of homes for sale and continued low interest rates, Tousley feels that median sales prices should be at or above record levels in July and possibly August before tapering off in September. At the end of the year, look for an annual increase in the median sale price of 5 percent to 6 percent, with the median sale price settling in the low $230,000 range.

One reason for the higher median selling price recently is because the percentage of distressed sales – foreclosures and short sales – has finally returned to pre-crash levels. In June, only 5 percent of home sales were distressed. Before 2007, the level of distressed sales was in the 3 percent to five percent range. But during the recession, and especially from 2008 to 2013, the level of distressed sales was in the 40 percent to 60 percent range. Since the median price of distressed homes is considerably lower than nondistressed homes, when there are fewer distressed homes sold the overall median selling price goes up.

In addition to robust home sales, the Twin Cities is seeing more remodeling and more new homes being built. In 2015, the Twin Cities saw the construction of 4,680 new single-family homes. So far this year single-family “starts” are up about 15 percent. “Look for a 2016 year-end total of 5,300 to 5,500,” Tousley said. That would make 2016 the best year for new-home construction since before the recession.

Meanwhile, the Leading Indicator of Remodeling Activity, calculated by the Harvard Joint Center for Housing Studies, estimates that this year the growth in home improvement and repair spending will reach 8 percent, well above the average of 4.9 percent. Tousley said there are two main reasons for the increase.

First, because of the shortage of homes for sale, many potential homeowners are opting to stay where they are and enlarge or remodel their existing homes.

Second, rising home prices and the current “seller’s market” is encouraging some homeowners to upgrade or remodel their home in anticipation of listing it for sale.

“In either case,” Tousley said, “it is good news for remodeling contractors in our area. Many are booked ahead with work well into the fall.”

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for June 2016. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

The June 2016 index score for traditional sales was 1,188, up 2.1 percent from May 2016 and up 6.3 percent from June 2015.

The June 2016 index score for short sales was 1,010, up 2.8 percent from May 2016 and up 4.2 percent from June 2015.

The June 2016 index score for foreclosures was 875, up 1.86 from May 2016 and up 7.86 from June 2015.

The score for traditional sales hit record highs in May and June. “It is a result of a continuing tight supply situation and high sales activity indicating the ongoing health a resurgence of the Twin Cities housing market,” Tousley said in Shenehon Center’s June report.

Index Chart June 2016

Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

Economy is Good, Interest Rates are Low, but Where are the Homes to Buy?

St. Thomas real estate analysisHomes for Sale Inventory

There are about half as many homes available to buy in the Twin Cities compared to pre-crash days. Things should improve, but slowly.

The chronic shortage of homes available to buy in the 13-county Twin Cities region — especially moderately priced homes — is expected to improve but not overnight, according to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.

How bad is the home shortage?

According to Herb Tousley, director of real estate programs at the university, there were 12,179 homes on the market in March. That compares to 14,983 homes in March of 2015, and compares to the 25,000 to 30,000 homes that typically were on the market back in the pre-crash years of 2005 to 2007. Tousley’s report for March lists three reasons for the current home drought:


  • Homeowner’s equity still has not completely recovered from the Great Recession and crash in housing values. Despite three years of steady price increases, some homeowners still owe more than their house is worth.
  • A somewhat greater number of homeowners, meanwhile, have “near negative equity,” which means that while they are not technically underwater, if they sold their home they would not have enough equity to move up to their next home.
  • And then there are some homeowners who know they could easily sell their current home, but are concerned about finding their next home under current market conditions.

The shortage is most acute for lower- to moderately priced homes. In a normally balanced market there typically is a six-month supply of homes. Right now there is less than a two-month supply of homes being sold for less than $200,000 and between $200,000 and $300,000.

Home Shortage

Will this change, and when?

“As median sale prices continue to increase, the equity position for all homeowners will improve,” Tousley said. “That should encourage more homeowners to list their homes for sale, improving the supply situation. “The short-supply situation will take time to correct itself and our expectation is that it will slowly improve through the end of 2016. In the meantime, continued low interest rates and improving economic conditions will keep buyers active in the market,” he said. The Shenehon Center updated its graph that illustrates the historical relationship in the Twin Cities between the number of homes for sale, the number of homes sold and the median sale prices. The chart shows that when the market gets tighter – or in other words when buyers increasingly outnumber sellers – the median sale price of homes increases.

To see the chart, visit the Shenehon Center’s online report for March at: The entire monthly report also is available free via email from Tousley at

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for March 2016. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

The March 2016 index score for traditional sales was 1,091, up 1.9 percent from February 2016 and up 4.6 percent from March 2015.

The March 2016 index score for short sales was 973, down 2 percent from February 2016 but up 10 percent from March 2015.

The March 2016 index score for foreclosures was 808, up 2.9 percent from February 2016 and up 5.8 percent from March 2015.

There are far fewer distressed sales now than there were during the height of the Great Recession. In March, the 96 short sales represented 2.5 percent of total sales and the 427 foreclosure sales represented 10.9 percent of total sales.

Read the Entire Report at:

UST Indexes