This series is brought to you by Josh Zuehlke + Co., a real estate group and Southwest Voices sponsor. Josh will be answering questions you have about buying a house, the real estate market, and more. This conversation was taken from the transcript of a phone conversation.
If you have a question for him that isn’t covered here, submit it in the “Add Context” box below.
How are you feeling about the real estate market in Minneapolis right now?
The big story is that inventory is really, really low. At the end of January, there were 50 houses for sale in all of Southwest Minneapolis. A year ago, there were 100.
Across the whole city at the end of February, there were 872 homes available. That’s a 12% decrease from last year.
How new is that phenomenon?
While it’s gotten worse lately, we’ve had an inventory problem for over a decade, especially if you consider the affordability crisis in the Twin Cities. Since we fully recovered around 2012, the market has been very efficient.
In 2015, inventory peaked. It hit 1,218 homes for sale in January of 2015. Then, it bottomed out in May of 2018. Inventory grew since then, and in June 2020 inventory hits another high point, but still doesn’t come close to the 2015 peak. Since 2020, it’s been a steady decline to this moment.
This month we are at 73 homes away from the lowest numbers in the last ten years and it’s tracking downwards. If you’re considering a sale in the next 2-5 years, this may be your best opportunity.
What about affordability?
There’s an affordability index that people use to track home prices. In these numbers, an index of 120 means the median household income is 120% of what is necessary to qualify, so a higher number means more affordability.
The Affordability Index in Minneapolis hit 186 in 2021. Today, 135 because interest rates have doubled and prices have stayed stable. We’re back at 2004 affordability rates. Important to keep in mind, although rates have doubled, they are at or very near their historical average.
What are some neighborhood levels trends you’re seeing?
From 2022 to 2023, inventory in Linden Hills is down 11%, in Lowry Hill is down 42%, and in Kenny is down 22%. From 2021 to 2022, it’s the same story. Inventory in Linden Hills was down 37%, in Lowry Hill it was down 27%, and in Kenny it was down 10%.
Over the past year, we’re still seeing big price increases. Cedar-Isles-Dean, Lowry Hill East, Fulton, Lynnhurst, and East Harriet all saw double digit percentage price increases from 2022 to 2023. We’re just not seeing a lot out there to buy.
Here’s a look at some price trends across two sections of Southwest Minneapolis – note that the statistics split these between the south and the north half of the area.
What will change the picture?
The only thing that can change this is if people “thinking of selling” realize how low the inventory is and how well they could do if they sold. The fact that it’s so low will drive buyers to take action and there are plenty of buyers out there. Here’s the catch - sellers can hit their number but will need time to find their next place. This can be negotiated and a part of the strategy sellers develop with their realtor.
