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The Minneapolis Housing Market Conundrum: There Are Plenty Of Buyers But Where Are The Sellers?

How to describe the Minneapolis housing market in 2017? Chaotic. Confusing. Frustrating. Challenging. That's how buyers would describe it. For most sellers, things are great.

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The number of available homes is at an historic low, which has fueled bidding wars and steadily increasing housing prices.

Via greenberg-art.com

Year-over-year pricing increased 4 percent in 2016, and experts expected to see 5 percent increases for 2017. Of course, June alone saw a 7 percent increase in Twin Cities' home prices compared to the previous year.

It isn't all roses for people looking to resell their homes, though.

Via reeladventures.tv

The hottest markets are those with inexpensive houses, particularly those that are closer to urban areas and all of the amenities you find there. Homes in more expensive markets, such as North Oaks, are taking much longer to sell (nearly four months compared to around three weeks).

So, what's happening? Why is the Minneapolis area such a hot seller's market?

Fewer Homes on the Market

There is a shortage of available homes throughout the Twin Cities area. This is due in large part to the housing crash in 2008 and the resultant recession. For one thing, new home builders stopped building. And, although building has resumed in the area they aren't building at anywhere near the rate they did pre-recession.

The housing crash also sent many homeowners into negative equity territory and those owners are reluctant to sell, even though the market has rebounded considerably since 2008. Finally, some people hesitate to sell their homes due to the fact that they are then faced with trying to buy a home, something that presents a real challenge in the current Minneapolis real estate market.

What's Going On with Twin Cities Home Prices?

In Minneapolis, St. Paul, and the surrounding suburbs, home prices have risen every month for the past five years. Since the market over-corrected after 2008's crash, this isn't necessarily a bad thing. However, the rate of increase has itself increased sharply over the past two years. For example, housing prices in December 2016 rose 4 percent over December 2015, whereas June 2017 prices rose 7 percent over June 2016, bringing the median home price to $259,000 (it was only $250,000 in May 2017).

Even so, prices still have not rebounded to their pre-recession levels, which is why so many homeowners are reluctant to sell their homes.

This is particularly true in the more affluent areas, due mostly to the fact that the majority of homebuyers are looking for homes in more urban neighborhoods. Many first-time buyers are less interested in oversized lots and larger floorplans.

Instead, they want easy access to amenities such as transportation, shopping, and employment. With so few pre-owned listings to choose from, these buyers regularly offer the full asking price (and sometimes more), resulting in bidding wars and homes in hot areas (such as Crystal, Richfield, Bottineau, and Holland) being snapped up in days rather than months. Of course, high demand and low supply equals price increases.

What Happens Next?

Industry experts predict Twin Cities housing prices will continue to climb through at least 2018, since they don't foresee a sudden flood of homes on the market happening anytime soon.

As prices rise, more and more homeowners whose mortgages were underwater will finally find themselves able to sell their homes and turn a profit. These sellers are more likely to jump on the chance to buy a home in one of those new communities builders are developing at the outskirts of the metro area, a convenient distance for commuters who are looking for the quiet of the suburbs and the proximity of a city.

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