Predictions for the local real estate market

In the March 3 Connector, I talked about becoming a realtor, and I’d planned this week to offer predictions on what to expect in local real estate over the next weeks, months, and even years. I know it’s a risk, but a “prediction” is so much more compelling than a “report,” right? Or a “Real Estate Round-up?” (ugh.) A writer needs to grab the reader’s attention, so why not go out on a limb and make a claim. ...
And then the war broke out in Ukraine.
A sick feeling descended upon us, and it seems the only thing that’s predictable now is that a lot of people are going to suffer and die, and that we’re going to be witnessing trauma and tragedy for months to come....
We bow our heads. Some of us pray. Soon we’ll be sending relief money to desperate and displaced families.
In the meantime, life will go on for us, protected as we are here in sunny Minneapolis. We’ll feel the heaviness in our hearts, but our lives will go on, as they always do. People marry, people divorce, people are born, people die. We are always moving.
And so, here in our own little bubble.... If you are actually thinking about moving – what kind of market are you heading into? How will the war affect interest rates? Who knows? How will the sanctions affect housing? Who knows? But we know this – life doesn’t stop. And so, this much I can say:

Prediction #1 – Single family home prices will continue to rise. The value of land, and for single famly homes, is still increasing, and despite 10 years of significant appreciation, prices have not even come close to peaking in Minneapolis. Meanwhile, every year, Time-on-Market gets shorter and shorter.
With the 2040 plan, Minneapolis City has encouraged a lot of housing construction, but mostly this construction is taking the form of tall rental buildings. More people will move into the tall rentals, and eventually many of them will want a yard. Thus, demand will increase for single-family homes, and so will their price and value. Consider the last 10 years of pricing history in the graphs above, and note these two forecasts for the next 30 years:
• The Twin Cities metro population will hit 4 million by 2050. The Twin Cities region will gain 818,000 residents between 2020 and 2050.*
• 96% of state population growth from 2016 to 2050 is projected to occur within the seven-county metropolitan area. Hennepin County is expected to lead the state in terms of total population growth, adding a projected 339,000 people by 2050*
There is no doubt – demand for Minneapolis single family homes is on the rise, and it will continue to rise for a long time.

Prediction #2 – Multiple offers will be the norm in Southwest from now until June. For the last five years, late winter and spring have been highly competitive, and by June, things were slowing down. This seasonality in the Twin Cities market is largely created by seller timing. Note in the graphs below that December has for five years in a row been the month with the lowest number of new listings, and consequently, January and February have been the months with the lowest number of homes on the market.
As this pattern repeats, we see demand far exceeding supply in the months from February to June, and after that, the supply catches up and the market slows. Note to sellers: It’s far better to enter the market in May than in July.

Prediction #3 – Okay so, I’ll say it here, in my opinion, those first two predictions are sure bets. Slam dunks. So here is something more risky: I predict a 9% increase in pricing this year. Southwest Minneapolis experienced a 9% increase in prices last year, and I predict this year’s advance will be just as hefty. Why? Because we have record low inventory right now, as you can see in the graph above. And coming out of COVID-19, demand is going to be as high as ever. Prices are going up a lot this year… again.
Here’s my commitment to you, readers. I’ll revisit this column a year from now, and we’ll see if I was right about any of these predictions. Thanks for reading, and good luck out there!