Minneapolis, Minnesota Real Estate Market Profile 2011

By Author: Chuck Harris
Total Articles: 81
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Across the country most real estate markets are struggling and the Minneapolis, Minnesota real estate market is no different. As the economy continues to falter, unemployment levels remain high and markets are plagued by above average foreclosure rates real estate markets have struggled to adapt. Minneapolis, MN has been impacted as much as any other region by the prevailing market conditions and 2011 will show some sign of a stabilizing market however consistent growth is not expected until sometime during 2012.

The optimism of Minneapolis homebuyers outweighs that of home sellers. The week of January 24th, 2011 marks the third consecutive week of year-over-year decline in seller activity. Sellers realize that they are not going to make any money on the sale of their homes and are trying to hold on longer. Those that have listed their houses for sale are waiting longer for offers and are faced with pressure to reduce the price in order to compete with the influx of houses already on the market.

There were 1,286 new properties listed on the Twin Cities residential real estate market, as of January 24, 2011, ...
... this is down 22.9 % compared to the same period last year. In total there are 21,744 houses currently listed for sale on the Minneapolis Area Real Estate Board. This is a modest increase of only 6.3% over the same period last year.

As home sellers react to the market condition in Minneapolis buyers have access to fewer homes. This could result in moderate increases in home value later this year. This improvement should not be confused with a real estate market rebound but rather a reaction of buyers to a decreased regional housing inventory. Above average foreclosure rates may counteract the impact of sellers waiting for signs of improving market conditions and keep home prices depressed for the foreseeable future. Trends in foreclosure rates and seller reaction to market conditions should result in modest improvement in the real estate values.

The houses that are listed for sale are taking longer to sell. The average market time is 139 days. This is partially due to the rate of price reductions that are required in order to sell the house within the average market time. The year-end figures provided by the Minneapolis Real Estate Board show that sellers are only receiving 89% of their original asking price. Compare this to the year-end figures for 2009, when sellers were getting nearly 94% of their asking price in a shorter time frame, and you can see why sellers are reluctant.

Minneapolis is still in the midst of a strong buyer's market. A large housing inventory combined with high foreclosure levels has allowed buyers to educate themselves about real estate markets and the sale prices. Savvy homebuyers are willing to aggressively negotiate incentives and lower prices in this type of real estate market.

With the reluctant sellers and the eager buyers the supply and demand ratio is projected to increase by nearly 17% for 2011. There is an influx of houses on the market and reluctant sellers don't want to lose money by adding their house to the pile. According to the Minneapolis Real Estate Board, almost half of the houses on the market right now are foreclosures.

Buyer activity on the other hand only fell 2.3%. According to a report generated by the Minneapolis Area Association of Realtors® for the week of January 24th, 2011 there were 558 pending sales and that is said to be the smallest decline in purchase demand in six weeks.

Buyers are taking advantage of the aforementioned price reductions as not only does this make housing more affordable but the scales for supply and demand are also tipped in the favour of the buyer as well. The average price for a re-sale house in the area is $155,000 (down by nearly 14%). Similarly, the average price for a foreclosed house is also in the $150,000 range. Buyers can pretty much take their pick of the 21, 744 houses currently on the local market.

Nationally prices are projected by many experts to stabilize in 2011. There is a strong possibility that market conditions in Minneapolis will result in dropping home values throughout 2011 before pricing finally begins to stabilize late this year or in 2012. Home sellers will likely find little solace in the real estate market recovery as they struggle to cope with present conditions.

High unemployment rates continue to plague the nation and Minneapolis is struggling in this area as well. Investors are trying to insulate themselves against potential losses by reducing work forces and streamlining their operations. This has depressed the employment prospects in Minneapolis. Businesses will look to grow in the future as the economy struggles to get back on track in the next few years. In the meantime though this will keep the number of active homebuyers low in comparison to the number of homes available for sale.

Commercial investment in Minneapolis will continue to lag as well as investors look to minimize their exposure to volatile markets. Impacts on vacancy rates due to the trend for renters and homeowners to double up in order to save money will continue to be felt throughout 2011. Doubling up is a trend that has people taking on roommates, children choosing to live with their parents longer or taking in lodgers to offset expenses. This trend has led to higher than expected vacancy rates in this real estate market. Initially it was expected that vacancy rates would drop as foreclosure rates rose but with tighter finances and unstable markets renters and homeowners alike are attempting to stretch their finances as far as possible.

Minneapolis real estate will continue to be a buyer's market throughout 2011 and likely well into 2012. Unemployment levels will continue to impact buyer activity and high foreclosure rates will keep property values depressed for the foreseeable future. Moderate price increases may be seen later this year however it is more likely that home values will continue to drop or remain flat as we move into the future. Homebuyers looking to get into the real estate market will continue to benefit from below average home values and high foreclosure rates as we move through the year. You can know more at http://agentsranking.com

Works Cited
Minneapolis Association of Realtors®, Inc. (2011). The Skinny: Weekly Market Activity Report: Week of January 24, 2011. Minneapolis: Royal Credit Union.
Walsh, K. (2011). Minnealopis - St. Paul Real Estate Market Update: January 3, 2011. Menneapolis: Kate Walsh.
Yahoo! Real Estate. (2011, January). Minneapolis, MN Real Estate. Retrieved January 29, 2011, from Yahoo! Real Estate.

About Author:

Chuck Harris is the founder of Agents Ranking; a Minnesota company that helps home buyers & sellers throughout Minnesota connect with the best real estate agent for their particular needs. It provides a unique free consulting service to those who want the best Minnesota REALTOR® possible. Know more about Minnesota real estate agents at http://agentsranking.com