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Economics, Government Policy, Home Prices, Housing, Housing Trends, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

Is the Twin Cities Housing Market Really Beginning to Change?

What really drives the need for housing?    

Since the June and July housing numbers have been published there seems to be much more uncertainty about the current state of the housing market. People are beginning to ask questions about the housing market. Is the decrease in sales volume a warning sign? Are we in a bubble? Will there be another housing market correction? One or two months data by themselves doesn’t signal a major change in the direction of the housing market. We will need to look at several more months data to understand more about where the market is headed.

 The number of closed sales were down 12.5% between June and July of this year. However, number of home sales in the Twin Cities was essentially unchanged in July 2018 compared to July 2017. If you look at the overall seasonal pattern for the number of homes sold is following a very similar pattern compared to previous years. Looking at the data for the median sale price, the number of closed sales, and the number of homes available for sale you will notice that the pattern for 2018 is very similar to 2016 and 2017. People have expressed

             Homes Sold YTD 2018 vs. YTD 2017
Jan 2017 2018       +/-
Feb 2805 2787 -18
Mar 2744 2671 -73
Apr 4304 4033 -271
May 4726 4688 -38
Jun 6265 5775 -490
Jul 7527 7160 -367
Aug 6046 6278 232
Total 34417 33392 -1025

concern that the number of sales is declining. When you look at 2018 year to date sales there have been just over 1,000 fewer homes sold this year compared to last year. About half of this amount occurred in May. I think that we are going to need to see a few more months data to understand if this is a long-term change in the market. At this point much of the decrease in the number of homes sold seems to be a result of the continued decrease in the number of homes available for sale. The number of homes available for sale was 12.3% less than last July. Median sale prices continue to increase, up 6.6% year over year compared to July 2017.

What really drives the need for housing?

Many people correctly point to increasing population and job growth as the primary reason. Job growth doesn’t drive housing demand, housing demand responds to job growth. Few people are against job growth, it is considered by many as sign of “progress”. There are many local economic development groups trying to attract new jobs by offering incentives for potential employers. Almost all communities are in favor of job growth but what about the housing needs that are created by this job growth? In many of the communities where people want to live creating more housing translates to more density. The truth be told, many people are in favor of more housing and more affordable housing as long as it not near them. According to recent DEED statistics employment in the Twin Cities metro area in the last 12 months has increased by 30,800 jobs. We have not been creating enough new housing units to keep up with that growth rate. As a result, we have a chronic shortage of homes available for sale, median sale prices are increasing faster than wage growth, a very low vacancy rate for rental housing, and rents that continue rise faster than the cost of living. It’s becoming increasing difficult and expensive to develop and create any type of for sale or rental housing. If we are going to continue to have strong economic growth, then we are going to have to figure out a way to create enough new housing units at all price levels to keep up with the increasing employment growth.

 What about new housing? Why does it take so long? Why is it so expensive?

  •      Lack of entitled land
  •      Difficulty and length of the entitlement process
  •      Excessive impact and local fees
  •      Zoning and bias against density
  •      Inclusionary zoning
  •      Rapidly increasing construction costs
  •      Rapidly increasing land costs

As long as our local economy continues to grow and is creating more jobs these are some of the issues that need to be addressed if we are going to come up with meaningful solutions to our housing market issues.

For more information, visit the Shenehon Center’s complete report for July 2018 at http://www.stthomas.edu/business/centers/shenehon/research/. The report is also available for free via email from Tousley at hwtousley1@stthomas.edu

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

Rising Home Prices Are Creating Wealth For Twin Cities Homeowners

Traditional Median Sale Price Up $82,300 (43.8%) From Low Point in Feb 2012.

Rapidly rising median home sale prices have been a major source of wealth creation for homeowners since the low point in median home sale prices that occurred in February 2012. Since then median home sale prices in the Twin Cities have increased by $82,300, a gain of 43.8%. In April the median home sale price was $266,500 eclipsing the prerecession high water mark of $238,000 observed in July 2007. As has been noted before this rapid rate of increase has been fueled by the historically low availability of homes for sale coupled with improving economic conditions and relatively low mortgage rates. Another positive development is that in February 2012, 61.5% of all the sales in the metro area were distressed sales compared to the 3.3% that was observed this April. The percentage of distressed sales has since returned to pre-crash levels at less than 5%. The wealth creation effect of continued increases in home values will ripple throughout the economy as homeowners will be able use this newly created equity for investments or purchases.









How long will this trend continue?

In the near term a rapid rise in interest/mortgage rates and/or an increase in inflation would begin to make homes in all price ranges less affordable for many potential homebuyers. A decrease in the number of qualified buyers would put a damper on the demand for homes, reducing the upward pressure on home prices. In the short term it appears that neither one of those scenarios is likely to occur. Until that happens expect to see the supply of homes for sale remain very low and annual price increases in the 6% to 8% range. As in the past the current shortage of homes for sale has been most acute in lower to moderately priced homes (See the table below)

                   At What Price Range is the Shortage of Homes for Sale the Greatest?
Price Range % of Homes Available For Sale in April 2018 % of Closed Sales in April 2018 Months Supply
Less than $200,000 13.6% 22.7% 0.9
$200,000 – $399,999 42.4% 57.0% 1.5
$400,000 – $599,999 23.6% 14.0% 3.5
More than $600,000 20.3% 6.1% 6.6
  Median Sale Price $266,500  

Market Summary

 Median sale prices increased 3.3% between March and April ($258,000 to $266,500 respectively). The Twin Cities housing market continues to a show strong year over year gains in sale prices, marking an 8.8% percent annual increase in April 2018. While this is great news for sellers, a continuation of this rate of increase is going to create affordability issues for some potential buyers since this rate of increase is much higher than the growth rate of area income. On the supply side in April 2018 there were only 9,100 homes available for sale, 24% less than the 11,964 that were available in April 2017. A high annual growth rate in median sale prices and historically low supply will continue to dominate the market.

The number of homes sold in April 2018 was 4,664 an increase of 15.5% compared to last month and a decrease of 4.6% compared to April 2017. At the end of April there was a 1.8 months supply of homes available for sale, In comparison in a normal, balanced market there is a 6-month supply. Distressed sales accounted for only 3.3% the recorded home sales in April, similar to percentages observed before the housing market crash in 2007. New listings in April were 7,325, a decrease from the 7,890 recorded in April 2017. The decrease in new listings indicates that the supply of home of homes for sale situation will continue to tight in the near future.

For more information, visit the Shenehon Center’s complete report for April 2018 at http://www.stthomas.edu/business/centers/shenehon/research/. The report is also available for free via email at hwtousley1@stthomas.edu.

Affordable Housing, Architecture & Design, Housing, Minneapolis / St. Paul Housing

Not just a building… But a home

A story of the Dorothy Day Center

In the beginning the Dorothy Day Center was meant as a training center, but because of a need in St. Paul seen by community members, Catholic Charities decided to help. It became a consistent resource for many homeless year round and soon had to turn people away due to space limitations.

Early last year, Catholic Charities of Saint Paul and Minneapolis announced the largest public-private partnership of its kind. Backed by broad support and funding from both public and private sources, the vision was for a new Dorothy Day Center – two buildings with temporary and permanent residence plus support structures to empower and dignify those in need.

In January 2017, Higher Ground St Paul opened its doors to a community in need. The 5 story building across from the Xcel Energy Center in downtown St Paul contains 193 single room and apartment style units. Already, these units are filled and assisted 473 people of all backgrounds from the elderly, veterans and young adults struggling to make ends meet.

Catholic Charities wanted to bring more dignity to their services in this renovation of the Dorothy Day Center. The new buildings include showers, storage lockers, and light meals. Some residents have said,

“Catholic charities is my backbone, they’re there to pick me up, they rescued me in a time when I needed them…”

– Markeus from room #327

“Catholic Charities is a blessing for everybody in need.”

– Camille Pasha

Phase 2 of the project is underway in St. Paul. The building will contain the Opportunity Center and Dorothy Day Residence, and the goal is to be up and running in the next 12 months. This building will serve for more daily services such as emergency housing, transition housing, a health clinic, mental health services center, education guidance, veteran services, and employment services ranging from training to job placement. Truly a place for the benefit of all community members.

In Minnesota, the Dorothy Day Place project is the largest public-private social services collaboration in history. Funded with the support of local and state government and private sector leaders, the Dorothy Day Place project is a unique real estate development helping those in need.

The Shenehon Center for Real Estate of the University of St. Thomas is dedicated to advancing public and private interest in real estate issues as a resource and platform to the commercial, residential and corporate real estate segments. To learn more, please visit the Shenehon Center site at www.stthomas.edu/centers/shenehon or email us at realestate@stthomas.edu


For more information:







Home Prices, Housing, Housing Trends, Residential Real Estate Index

UST Housing Index – Housing shortages continue

The latest report, just published today by the Shenehon Center for Real Estate is not a significant shocker. Current trends of single family housing supply shortages continue. Herb Tousley, Director of the University of St. Thomas’ Shenehon Center for Real Estate, gave interesting insights this month. Many people have attributed the shortages to simple reasons such as increased demand due to millennials and generation X’ers beginning to settle down which are true, but Mr. Tousley brings up a point seemingly looked over, the recent actions of investment vehicles.

“Nationally, over the past five years, the single family rental home has become its own institutional asset class with over $50B invested Continue Reading

Commercial Real Estate, Executive Insight Series, Industry News, Twin Cities Real Estate

Executive Insight Series: Mike Ohmes

Discussion Topics

The CRE Cycle – Are we headed over the top?

Working in the new consolidated CRE environment

Mike Ohmes, Cushman & Wakefield

Executive Vice President, Brokerage

Earning an undergraduate Bachelor of Arts degree in economics and speech communications from Macalester College in St. Paul and an MBA from the Carlson School of Business at the University of Minnesota, Mike Ohmes has a wealth of commercial real estate experience from a broker to a manager.

Today as Executive Vice President Mike Ohmes is responsible for leading Cushman & Wakefield’s Transaction and Advisory Services business. This group includes the company’s Brokerage, Capital Markets and Real Estate Advisory.

Since joining the Cushman & Wakefield in 1991 as a broker in the office division, Ohmes consistently was among the top producers. He has received the company’s Offshore Club designation for his performance a total of 7 times (each year from 1993-1999). In 2000, Ohmes earned the company’s President’s Award for his outstanding contributions to the company, and in 2003, he was recognized by The Minneapolis/St. Paul Business Journal as one of their “40 Under Forty.”

The Shenehon Center for Real Estate is proud to present this opportunity to gain insights into the commercial real estate industry. Founded in 2000, the Shenehon Center for Real Estate looks to provide both resources and a public forum for real estate industry professionals and the public.

Executive Insight Series - Shenehon Center for Real Estate


Tuesday, November 28th, 5:30PM


University of St Thomas, Minneapolis Campus

Shulze Hall, Room 127





Minneapolis / St. Paul Housing, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

UST Housing Index: “It’s Not Your Father’s Housing Market Anymore”

The September Residential Index report from the Shenehon Center for Real Estate came out last week. Mr. Tousley, director of the Shenehon Center, was not surprised by the continuation of the supply glut, but in this latest report, he pointed out that the housing market is now being driven by the Millennial generation and Generation Z. Some key takeaways,

  • Over half of home sales this year have been to people 36 years old or younger
  • Home price appreciation continues to outpace income growth
  • Inventory remains significantly below demand
  • Price and inventory are affecting the “typical” renter

As seen in Minneapolis, many major cities are being pressed by a combination of decreased household sizes, sociocultural trends for “more” space, and an influx of people coming to live in the cities not seen since the 1940’s. The report states, Millenials and Generation Z’ers while interested in buying Continue Reading

Affordable Housing, Development, Housing, Housing Trends, Minneapolis / St. Paul Housing

Affordable Housing (Part 2)

According to Minnesota Compass, 48.4 percent of Minneapolis households are overburdened by housing costs. To explain, these households pay more than 30% of their gross income towards housing. Just for reference, a house in Minneapolis is averaging around $200,000 which for a first time home buyer with 10 percent down payment amounts to a monthly mortgage around $1,400 including an estimates for coverages and taxes.

There are many factors affecting this overburdened number. According to a Minneapolis City Council housing report, the city’s current population [approx. 412,000] has not been this high since the 1970’s which is still lower than the peak seen in 1950 [reported 521,718]. Further exacerbating the issue is the fact that there are about the same amount of units today as in 1950 in conjunction with a decrease in average household size. In 1950, it was roughly 3.3 persons per household compared to today’s 2.3 persons per household.

The most recent residential housing report from the University of St. Thomas and the 2017 Housing Market Comprehensive Analysis by HUD, give evidence that the cost burden is a result of the simple economic principle of supply and demand. The influx of demand for housing within Minneapolis has increased the risk of displacement. Housing prices are up year over year and there remains record low vacancy levels of 4 percent. Talks with a political liaison, Mark Stenglein, and local developer and founder Bob Lux of Atalus, LLC, reinforced the challenges to affordable housing Continue Reading

Minnesota Real Estate Hall of Fame

Minnesota Hall of Fame Inductees Announced!!!

The time has come, the 2017 Hall of Fame inductees have been announced. Congratulations to Ralph Burnet, Jack Rice, and Howard Shenehon!

Join in the recognition of the accomplishments Burnet, Rice and Shenehon have done for Minnesota real estate. Members of the Minnesota Real Estate Hall of Fame are chosen for their outstanding business performance, high standards of ethics and community activities. The three new members are:


Register Today

Ralph Burnet

Ralph began his real estate career at Bermel Smaby Realtors. After leaving Bermel Smaby Realtors, he started his own realty company, Burnet Gagner Realty and built it to the largest in the Twin Cities. In 1983, Burnet merged his company with Merrill Lynch and for the next 7 years Burnet served as its Eastern Regional President. But when Merrill Lynch Real Estate was sold to Prudential in 1990, Burnet and his partner Dar Reedy bought back the Minnesota-based company. In 1996, Burnet expanded into the Chicago market, merging with Prudential Preferred Properties of Chicago. By 1998, Burnet Realty had grown to the 4th largest residential brokerage in the United States, and expanded though merging with the Coldwell Banker name. Today, Coldwell Banker Burnet is one of Continue Reading

Affordable Housing, Development, Economics, Home Prices, Housing, Minneapolis / St. Paul Housing, Residential Real Estate

Affordable Housing: Misconceptions (Part 1)

Affordable housing is and has been a buzzword in the real estate industry for years. It carries many misconceptions. Let’s clear up these misconceptions before going further.

  • First, affordable housing is not typically affordable to everyone. It is affordable in that rent or sale value is reduced from market rates in order to allow individuals and families below the median income level to not be “overburdened” by rent or mortgage payments.
  • Second, the majority of people assisted HAVE jobs and ARE productive members of their communities in which they reside. The idea that affordable housing induces crime and the lowering of community home values, to name a few, is false.
  • Third, affordable housing is just like any other rental or purchase agreement with the addition of a historical income check. Owners and tenants undergo credit checks and asked of employment. Just in case you weren’t convinced when I stated earlier that a majority of affordable housing owners and tenants are employed.


So, why is this topic being brought up? Of almost 116 million households surveyed by the 2013 American Housing Survey, 36 percent are by definition overburdened by housing costs. To be overburdened by Federal government definition, a household must pay more than 30 percent of their yearly income. There are multiple perspectives to even this number, but before “Part 2” of this discussion, we ask the reader to do some research.

Do you think more affordable housing is needed? Is it a policy issue? Is it a supply and demand issue?


Our reason to talk about affordable housing is simple. With more than a third of the United States overburdened by housing costs and as a part of the University of St. Thomas, the Shenehon Center for Real Estate serves as a resource to the commercial, industrial, residential and corporate segments of real estate industry and the community to advance the public interest in real estate issues and to advance the common good.

Economics, Home Prices, Housing, Housing Trends, Minneapolis / St. Paul Housing, Real Estate Trends, Twin Cities Real Estate

University of St. Thomas Real Estate Analysis for June 2017

Could You, Would You, Buy a House Sight Unseen?

First Half of 2017 – 3 Major Home Price Trends

 The extreme shortage of homes available for sales is resulting in a new phenomenon of buyers who are purchasing homes sight unseen. Twenty years ago, virtual tours and 3D graphics were mainly science fiction in movies like The Fifth Element, and a “sight-unseen” purchase literally meant a buyer had no experience of the property other than static photographs. Buyers were in essence blindfolded. Today, 3D and virtual technologies have become a reality. They are able to bring a property experience to the “sight-unseen” purchase. A number of local real estate brokers have noted this ingress of technology into the real estate industry and how it has given them a new tool to present properties. One Minneapolis based broker who has personally sold 3 properties sight-unseen in the last year, said the Minneapolis market has recently seen buyers more willing to at least offer sight-unseen. All of our conversations with Minneapolis realtors shared the opinion that technology is impacting the industry. They stated that listing price and anticipated time on the market are main factors on whether a virtual tour is created. The description of the Minneapolis “sight-unseen” buyer was someone looking to relocate from out of state or internationally and has experience in home buying (i.e. not a first time home buyer). An interesting point, technology can actually be a drawback for certain listings. We were told technology removes the interactive sales process; buyers experiencing a virtual tour may never visit the property in isolation from the neighborhood experience.

 Twin Cities Home Price Trends Through the First Half of 2017

 Price Appreciation is Outstripping Income Growth 

    • Median sale prices continue to increase at record rates. Between May and June the median sale price increased 3.6%. For the first ½ of 2017 through June median sale prices increased at the red hot pace of 15.1%. The year over year increase for homes sold between June 2016 and June 2017 was 7.0%. These rates of increase are far exceeding wage and income growth and will begin to cause affordability issues for homebuyers if these trends continue
  • Market Still Lacks Adequate Inventory 
    • While the availability of homes for sale has improved slightly the number of homes for sale has been consistently running 15% – 20% less than a year ago and 20% – 25% less than 2 years ago. While the construction of new homes has picked up notably this year we are still not building enough new homes to build our way out of the current short supply situation. It will take many more new listings to get the housing market more balanced in terms of supply and demand.
  • Tight Inventory Also Impacting Rental Markets
    • The lack of homes available to purchase is creating a situation where potential home buyers are unable to find a home to buy causing them to remain in rental housing for a longer period of time. Even though there were over 4,000 new apartment units delivered in 2016 and given that 2017 is expected to be another record year for new units delivered, the market is expected to absorb all of the new construction. Vacancy rates may increase slightly in the short run in some areas as new developments come on line, but overall occupancy will remain high through the end of this year. Minneapolis / St. Paul is one of the tightest rental markets in the country. Rent growth was 4.8% in 2016 and is expected to be at least that much in 2017. That rate of increase is higher than the expected wage and income growth of 2% – 3%. Continuation of this trend over time will continue to create an affordability gap resulting in renters having to pay an increasingly larger percentage of their income for housing.