The Mullins Group

Real Estate Consulting & Sales | Residential + Commercial

Twin Cities New Construction Among Highest in the U.S.

The Mullins Group is often asked, “why is new construction so expensive” compared to other Metro Areas?  There isn’t one reason; but a multitude of reasons why housing is so pricey in the Metro Area.  A few  of the reasons include:  land costs, Met Council MUSA line, over-the-top building code changes, impact fees from local governments, minimum lot size requirements, labor costs, etc.  Today’s article in the Pioneer Press covers this topic extensively and does an excellent job providing an overview of what is driving affordability out of the reach of many householders.

As I travel the country working on real estate development projects in other markets, it’s evident costs in the Twin Cities are higher than most Metro Areas I provide real estate consulting in.  This Easter Sunday I am in beautiful Fort Myers, Florida and am renting  a VRBO in a gated master planned community.  As I talk to home owners and the Realtors, housing is priced much lower and PSF costs. For example, a new three bedroom townhome has about 2,500 square feet and will sell for about $260k, or just over $100 PSF.  A similar priced townhome in the Twin Cities would be at least $160 PSF.  The Mullins Group supports smaller lots sizes as one way to increase density which results in lower land costs to the end consumer.  We hope local governments can revise zoning and building codes so housing can be more affordable for not only the affluent.

Why do Twin Cities homes cost so much? We went to find out.

New housing construction continues on Garden Drive in Woodbury on Wednesday, April 12, 2017. The Twin Cities was No. 1 in housing costs among the nation's 20 largest metro areas, according to 2014 U.S. Census data. (Jean Pieri / Pioneer Press)
New housing construction continues on Garden Drive in Woodbury on Wednesday, April 12, 2017. The Twin Cities was No. 1 in housing costs among the nation’s 20 largest metro areas, according to 2014 U.S. Census data. (Jean Pieri / Pioneer Press)

Continue reading “Twin Cities New Construction Among Highest in the U.S.”

Townhomes are back!

After being dormant for years, new townhome construction is once again gaining ground.  Prior to the recession, about 50% of all new construction was in the condominium and townhome sector.  However, the recession and economic slowdown resulted in new multifamily construction to come to a halt.  Single-familily homes dominated at buiders purchased bank-owned lots and ate up the distressed inventory.  However, once the distressed lot inventory was gone builders were once again developing land, which has increased significantly resulting in higher costs to the consumer.  As a result, nearly all new single-family construction caters to the move-up and executive buyer as builders can’t meet the demand for entry-level new homes.

Townhomes and other attached product allows builders to constructed higher densities; which in turn lower the overall costs to develop resulting in lower cost housing units for the end consumer.  The Mullins Group welcomes new townhome construction as we see strong demand from Millennialls, empty-nesters, and others for association-maintained housing.  Look for more of this product type in the coming years and builders adjust their business model to more modestly priced housing.



Call it a comeback for Twin Cities town homes

With supply of single-family homes low, town home sales are climbing steadily

At age 70, Doug Croucher is no longer physically able to maintain his home like he used to.

Recent health issues have forced him and his wife, Mariann, to scale back grooming their yard and taking care of other property needs.

So when the couple decided to move from Oregon to Minnesota to be closer to their grandchildren, they began searching for a house that would require less maintenance, but also allow them to still own a home.

They found what they were looking for in a moderately sized, one-level town home in Waconia, where landscaping and snow removal are maintained by a homeowners association.

As more retirees, empty nesters and baby boomers like the Crouchers elect to downsize, town homes will become the next stage in home ownership for many of them. And with median prices for homes continuing to rise across the Twin Cities due to low inventory, new buyers are starting to realize town homes can give them the benefits of home ownership.

More town homes on the way

Permits for town home construction through the first two months of 2017 were nearly double the amount of permits pulled during the same period year ago, with 27 town home communities underway this year, according to the Builders Association of the Twin Cities.

Meanwhile, new listings and total available town homes in the Twin Cities have continued to increase. In February, developers added 115 newly constructed town homes to the 13-county metro-area market, a 45.6 percent increase from the same month in 2015.

The Twin Cities hasn’t experienced this kind of surge in town home construction since the late 1980s, said Herb Tousley, director of the real estate degree program and Shenehon Real Estate Center at the University of St. Thomas.

A number of national builders are pitching in on that trend. Some of the projects in progress include a 143-unit town home and villa community in Victoria by M/I Homes Inc. of Columbus, Ohio, and two 50-plus-unit town home communities in Chaska and Plymouth by Atlanta, Ga.-based Pulte Homes.

Pulte Homes is planning to sell 500 total new homes in Minnesota this year. A quarter of that will be town houses — all three-story units equipped with attic space and some rooftop terraces, said Jamie Tharp, vice president of sales and marketing for Pulte’s Minnesota division. That commitment to town homes in 2017 is a 20 percent increase from 2016.

Miami-based Lennar Corp., the largest builder in the Twin Cities over the past decade in terms of volume, is preparing to build a 122-unit town home community in Prior Lake.

In a recent interview with the Business Journal, John Rask, vice president of land development for Hans Hagen, a division of M/I Homes, said the company is reinvesting in town homes to meet market demands.

“We look at town homes as being a viable option for many people who not only want a home at a more affordable price point, but who still want home ownership,” Rask said.

A slight recession in the early 1990s slowed town home building, and developers opted to build condominiums instead of town homes. When builders tried to invest in town homes again, the terrorist attacks on Sept. 11, 2001, led to another downturn in the economy, Tousley said.

The product has now become a more economical choice for builders.

“We’ve had such a shortage for existing homes for sale, and that’s been that way for several years now, so homebuilders are looking for ways to add to the housing stock,” he said. “The price of land has gone up along with fees and everything else they have to pay, so it’s really hard to build a single-family home in that moderate price range. [Town homes enable] them to get more housing units on a piece of land. They can get the [prices] down into a more moderate price range. They’re finding the demand is there.”

In 2016, there were 10,541 town home sales in the 13-county metro-area, a 26 percent increase over 2014.

“I think it’s a direct reaction to what we’ve been talking about,” said David Siegel, executive director of the Builders Association. “We need a more affordable product.

A product for an aging population

Roughly 285,000 Minnesotans will turn 65 at some point this decade, which is more than in the past four decades combined, according to the Minnesota State Demographic Center. By 2035, Minnesota’s 65-and-older population will eclipse the 18-and-under age group for the first time in state history.

In 10 years, people over 65 will account for 43 percent of the state’s population.

“There are downsizers who want to get rid of their big house,” said Cotty Lowry, president of the Minneapolis Area Association of Realtors. “With town homes, especially if they’re single-level or not many levels, you can get your main bedroom on the level so you can move in and not worry about stairs. You can go to Florida or Arizona, lock it up, and somebody will take care of the [landscaping] for you.”

While some builders focused solely on single-family homes at the turn of the century, Dave Kenneth read the signs of an aging population and decided to give himself a head start in the town home market.

After spending years with now-defunct Hopkins-based Rottlund Homes, Kenneth started WoodRidge Homes in 2005 and focused on semi-custom, detached town homes that are maintained by homeowner associations.

“All of these periodicals and information I was gathering was talking about impending baby boomers and how many were going to retire per day,” Kenneth said. “It was a combination of that, doing a niche product, and not being able to compete with the nationals on the single-family level. I didn’t want to bump heads with them every single time I built a house.”

Over the past decade, Kenneth has developed three town home communities in Waconia — Somerwood Cottages, Interlaken East and West, totaling 101 lots, including a new home for the Crouchers, who plan to move in by June.

In Waconia, the Crouchers’ feel they’ll have the space they need without the hassle of landscaping and upkeep. The town home they chose comes with a finished basement.

“In Waconia, you can live 100 percent on the main level,” Doug Croucher said. “You can do without the stairs if that becomes necessary. With a downstairs, however, it gives us a little more room for entertaining grandkids. The stairs are a straight shot.”

Once a pioneer for building town homes in Waconia, Kenneth’s new developments compete with new town homes being built by CalAtlantic and Toronto-based Mattamy Homes.

“We’re surrounded by all the nationals,” Kenneth said. “When we started in 2005, they didn’t have a presence in town.”

An option for those looking to buy

Demand for town homes has spiked in the past two years. This past February, there were 77 pending sales for town homes in the Twin Cities, a 60.4 percent increase when compared to the same month in 2016 and a 71.1 percent increase when compared to February 2015.

Tousley said town homes are attractive to people looking to buy their first home, especially millennials.

“There are a lot of people in that first move-up situation. I think that is going to drive a lot of demand [for town homes],” he said. “Interest rates are still low enough that home ownership in the Twin Cities is pretty affordable compared to most other places.”

Prior to the housing collapse, Kenneth said families bypassed buying town homes and went straight to single-family units. Now, town homes seems like the best option.

“Rents are going up and people are renting apartments. If they’re renting, they might as well buy a town home to get the benefits of ownership,” Kenneth said.

While some may argue town homes will decrease the value of surrounding single-family homes, Tousley believes the contrary.

“The cities like it because it increases the tax base,” he said. “There are requirements in terms of how they look. If you’re building a town home in Eden Prairie, when you get the permit, the city is going to make sure they maintain the character of Eden Prairie. They won’t let you come in and build a piece of junk. If anything, if it’s done well, it might increase values in some areas.

Continue reading “Townhomes are back!”

Record-low supply driving bidder wars

As we have previously stated in other recent posts, the supply of homes for-sale is at all time-lows; here in the Twin Cities and across many markets in the U.S.  This lack of inventory has driven up housing costs as buyers have fewer options and homes are selling with multiple offers.  This past week alone; the Mullins Group was planning on bringing buyers through new listings that sold within a day as offers were submitted instantly on listings and sold within hours of going active.  As a result, buyers have to be ready to move quickly and ready to offer full asking price or even more than the list price to secure the property.


Homebuyers thwarted by record-low supply

The winning bidder of a Grand Rapids, Michigan, house has been offered almost $20,000 to hand his purchase contract to another buyer. An agent in Nashville, Tennessee, got a property for his client by cold-calling local homeowners. Near Columbus, Ohio, it took a teacher five tries to secure a deal.

It’s the 2017 U.S. spring home-selling season, and listings are scarcer than they’ve ever been. Bidding wars common in perennially hot markets like the San Francisco Bay area, Denver and Boston are now also prevalent in the once slow-and-steady heartland, sending prices higher and sparking desperation among buyers across the country.

“Homebuyers are going to find this spring that, in a lot of markets, the inventory of homes priced and sized at price levels they were hoping for will be very limited,” said Thomas Lawler, a former Fannie Mae economist who’s now a housing consultant in Leesburg, Virginia. “Unlikely places are getting significantly tighter.”

Buyers are clamoring as an improved job market and growing confidence in the economy collide with rising mortgage rates — yet there’s little new inventory for them to purchase. Housing starts remain well below levels before the last recession, and builders have focused on higher-end properties out of reach for many people. Homeowners have become even more reluctant to sell because, after all, where are they going to move?

The three months through January had the fewest homes on the market on record, according to an analysis by Trulia. Prices jumped 6.9 percent in January from a year earlier, the biggest increase for any month since May 2014, data from CoreLogic Inc. show. And homes sold faster in the first two months of 2017 — spending an average 58 days on the market — than at the start of any year since at least 2010, according to brokerage Redfin.

Homes are moving fastest in Denver, Seattle and Oakland, California — areas where heated competition have become status quo in recent years because of soaring job growth, particularly in the technology industry. But fourth on Redfin’s list is Grand Rapids, Michigan’s second-largest city, in a reflection of strengthening employment across even the slower-growing center of the country. Buyers are also struggling in cities such as Boise, Idaho; Madison, Wisconsin; and Omaha, Nebraska.

Cash offer

Grand Rapids — a diverse economy underpinned by health care, technology and manufacturing companies, with a 3 percent unemployment rate — has seen a 27 percent drop in homes for sale in the past year. One listing recently attracted 40 bids.

Competition is so extreme that real estate agent Tanya Craig, working with an out-of-town couple six months into a search for a home near their grandchildren, had to get creative. She called an agent representing a buyer who just signed a contract for a $350,000 house and offered about $18,000 in cash if her clients could purchase it instead. Craig, an associate broker with the Katie K team at Keller Williams, is waiting to hear back.

“People need to get their houses on the market, but they’re gun-shy,” Craig said. “Unless they know where they want to go, everyone is hesitant.”

While sellers are losing their nerve, buyer confidence has climbed since the November election, hitting a new high in February, according to Fannie Mae, which began its sentiment index in 2011. The unemployment rate is at 4.7 percent and business confidence has soared amid President Donald Trump’s vows to lower taxes, increase infrastructure spending and trim regulations. Rents are also at a record, making ownership more attractive.

Rising costs

Would-be purchasers have a reason to rush as rising borrowing costs — and prices — close off opportunities. The 30-year fixed mortgage rate has jumped by more than half a percentage point since the election. The Federal Reserve this week increased its benchmark interest rate by a quarter point and signaled it will do so two more times this year, boosting borrowing costs from low levels that have been in place for almost a decade.

The average 30-year rate probably will climb to 4.7 percent by the end of 2017, from 4.3 percent this week, and could reach 5.5 percent next year, said Lawrence Yun, chief economist of the National Association of Realtors.

Higher mortgage costs could eventually shrink the pool of buyers able to qualify, but it may also discourage homeowners from selling because they might have to take out a more expensive loan to purchase something else.

“In today’s market, many buyers think the trough in rates is over,” said Sam Khater, deputy chief economist at CoreLogic. “If you don’t get in now, it’s just going to be worse later. Rates will be higher, prices will be higher and maybe inventory selection will be lower.”

Older people who may typically move are choosing to stay where they are, Chris Herbert, managing director for Harvard University’s Joint Center for Housing Studies, said in an interview Friday.

“One factor is that you have the baby boom generation on its way to being 65-plus,” Herbert said. “They’re moving less so you have fewer homes on the market. That could be part of the glue keeping the market stuck.”

Price gains

There are pockets of the country, such as Miami and Manhattan, where inventory has climbed amid new construction and less interest from foreigners, and some regions have yet to experience the job gains that fuel housing demand. Yet other cities that haven’t had strong price gains in recent years are now seeing a big jump.

In Philadelphia, prices for single-family houses jumped 11 percent in the fourth quarter from a year earlier, compared with a gain of less than 5 percent at the end of 2015, according to Kevin Gillen, a senior research fellow at Drexel University.

Buyers are making full-price offers before properties have even been listed, said Mike McCann, associate broker with Berkshire Hathaway HomeServices Fox & Roach.

“We might end up with fewer transactions in 2017 because we don’t have inventory,” McCann said. “Thirty-five percent of my properties are selling within the first week or two of hitting the market.”

Calling owners

Rich Ramsey, an agent with the Helton Group at Keller Williams in Nashville, has been knocking on doors and working the phones. When he heard from a family frustrated after losing out on two homes they liked in a townhouse development in the city’s Midtown neighborhood, Ramsey started calling owners in the area.

“I found someone who had considered selling,” Ramsey said. “I asked if they had a price in mind and we started negotiating.”

The family purchased the three-bedroom property in January for a price in the low $400,000s, Ramsey said.

For some buyers, patience and persistence can pay off. Jessica Streit, a 42-year-old teacher and mother of two, has been searching for months for a home in Sunbury, Ohio, north of Columbus. She lost three bidding wars and even went into contract on a home, only to back out after an inspection revealed some expensive problems. Last week, her fortunes changed — she signed a $136,000 deal for a two-bedroom condominium with a finished basement.

“We were absolutely shocked to get this one,” she said. “We had an appointment to see a rental house Saturday because we thought that would be our next direction.”

Continue reading “Record-low supply driving bidder wars”

Fed Increases rates while buyer demand remains strong

The number of homes for sale in the Twin Cities remains at historically low levels as inventory remains extremely low, especially for first-time home buyers seeking homes under $250,000.   At present, there is only a 1.8 month supply of homes for sale in the marketplace whereas market equilibrium is generally considered six months of inventory.  As a result, home buyers are paying more than asking price as they try to beat interest rate hikes.  The Federal Reserve raised rates for just the 3rd time since the recession today as the economy continues to improve and consumer confidence has increased.   The Mullins Group recommends locking interest rates if you are buying a home as rates are poised to increase.


With fewer homes coming on the market, sales leveled out in Twin Cities last month

Investor-owned rentals are having an impact.

Slim pickings put a lid on home sales in the Twin Cities metro last month, the Minneapolis Area Association of Realtors said Wednesday.

In February, 3,969 home buyers signed purchase agreements, just a half-percent gain from a year ago. Closings were flat and the median price of those closings jumped 7.6 percent to $223,000.

The situation is creating significant competition among buyers, mostly first-time buyers who are shopping for a house in Minneapolis and St. Paul neighborhoods and in inner-ring suburbs where listings have been scarce and there’s been virtually no new construction because of a scarcity of developable land.

Cotty Lowry, president of the Realtors group, said that sales activity was off to a healthy start for 2017, but he added, “We need more sellers.”

There were 5,418 new listings in February, 7.5 percent fewer than a year ago. At the end of February, there were only 8,820 listings on the market, a 25 percent decline and the lowest level in 14 years.

Sellers market

In many communities sellers are receiving nearly, or more than, their asking price, and houses are selling in less than a month.

“Diminishing gains on the demand side could already reflect the dramatic supply shortages that today’s home buyers are experiencing,” Lowry said. “It’s critical to aim for balance — where neither buyers nor sellers have a clear advantage.”

On average, houses sold in 82 days, 14.6 percent faster than last year. And at the current sales pace, there are enough houses on the market to last only 1.8 months, according to the association’s latest data. That was the second lowest figure on record for any month since January 2003. A five- to six-month supply is considered balanced.

Home sales across the country are on the rise, according to the National Association of Realtors, which reported recently that home sales during January had increased 4 percent compared with last year to a seasonally adjusted annual rate of approximately 5.69 million homes, up 3.3 percent from December.

Many buyers are getting into the market earlier than normal this year in order to beat higher mortgage rates and rising apartment rents. Interest rates have risen slightly in recent months. The Mortgage Bankers Association’s weekly mortgage survey released Wednesday showed that the average 30-year interest rate for an FHA-backed mortgage rose to 4.29 percent — the highest since January 2014.

Apartments rents are on the rise, as well, creating a situation for some in which the gap between the cost of owning and renting is narrowing. Former renters are coming into the market at a tough time to be a first-time buyer.

Rentals cut supply for sale

A new report from the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business puts some of the blame for the tight inventory situation on a dramatic increase in the number of Twin Cities homes that were bought out of foreclosure by institutional investors and are being held for rent, meaning that fewer are available to purchase.

Citing data from the Metropolitan Council, Herb Tousley, director of real estate programs at St. Thomas, said in 2000 there were 12,000 single-family homes being rented in suburban neighborhoods. By 2013, that figure had increased to more than 28,000 and of the 93 cities tracked by the group, all but 32 saw their single-family rentals grow by at least 100 percent between 2000 and 2013.

Minneapolis had 10,278 single-family rentals in 2013, up from 5,864 in 2000, contributing to a significant decline in the number of houses for sale that are priced between $150,000 and $350,000.

Tousley said that houses purchased by institutional investors are entry-level houses that are likely to be held long term as rentals, effectively taking them off the market.

“The institutional ownership of large numbers of homes as single-family rentals is a relatively new development in the housing market, and it is one more factor that is contributing to the chronically low number of homes available for sale,” he said in a statement. “The concern is that if this continues over a long period of time, where median sale prices are increasing faster than wages and income, it will begin to create affordability issues especially if interest rates begin to rise.”

Continue reading “Fed Increases rates while buyer demand remains strong”

Twin Cities Home Inventory at 15-year Low

As we have discussed in other recent posts; the supply of homes for sale has been extremely tight in the Twin Cities Metro Area.  Based on the current sales volume, the supply of homes for sale would only last 1.9-months, whereas a balanced market would have a supply of six months of homes for sale.   The supply is tightest for entry-level homes; or those homes priced under $250,000 where competition has been fierce as sellers have seen multiple offers.  Because of the rising stock market; mortgage rates have recently risen and many buyers are trying to purchase before rates rise higher.  However, the Mullins Group does not believe mortgage rates will rise until summer 2017 as the Federal Reserve has hinted they will hold-off on increases in the short-term.  2017 looks to be a good year in the local housing market as mortgage rates are very favorable and consumer confidence is up.


New listings up in January, but Twin Cities housing market still tight

Despite an uptick in listings, inventory is near a 15-year low, driving up prices

Jeff Wheeler – Star TribuneSales agent Luke Kleckner showed Blair Madsen some finishing options in an 8th floor unit at Portland Towers Wednesday afternoon. Though he is buying a unit under construction near the Guthrie, the available features will be similar.

The trade group’s monthly market update showed 4,304 new property listings in the Twin Cities metro, 3.1 percent more than last year. At the same time, buyers signed 3,130 purchase agreements, a 4.3 percent increase. Still, there’s not enough options for buyers, mostly first-timers, and that’s putting upward pressure on prices, dampening sales. During January, 8,212 properties were on the market, 25.4 percent fewer than the same period a year ago and the fewest in 14 years.

Noting that the uptick in new listings during January was the second biggest monthly gain in nearly a year, MAAR President Cotty Lowry said that 2017 is off to a strong start.

“If that is sustained,” he said. “We should be able to achieve the balancing act of steady price gains while maintaining our affordability.”

With a swelling number of first-time buyers driving the market, the vast majority of buyers are hunting for houses priced from $190,000 to $250,000. As those entry-level properties find buyers, the number of move-up buyers is rising. During January, the largest percent gain in sales was in the $350,000 to $500,000 range.

Move-up buyers have been scarce in some parts of the metro largely because so many owners of entry-level houses still haven’t recovered enough equity to justify selling. The situation is changing rapidly as rising prices reduce the number of people who have a mortgage that exceeds the value of their house.

Continue reading “Twin Cities Home Inventory at 15-year Low”

2017 Twin Cities Real Estate Outlook: Sellers in the driver seat

The Twin Cities real estate market has witnessed a fundamental shift over the past few years from a buyers to sellers market.  Inventory (i.e. the supply of homes) continues to remain very low which has resulted in price appreciation and few days on market.  In 2016 the median days on market was only 33 days, compared to 100 days in 2011.  Market time also happens be lower for entry-level homes (sub $250,000 price points) where fierce competition exists among buyers.  Because of the supply of homes for sale, many would be sellers who want to trade-up have remained on the side-lines given there are few homes to purchase.  Demand continues to outpace supply today with the tight inventory which means 2017 resale volume will remain in check.  Our advice to buyers…act fast if you find the right property!

Continue reading “2017 Twin Cities Real Estate Outlook: Sellers in the driver seat”

Few Entry-Level New Homes Under Construction in Twin Cities

Like most areas across the country, the Twin Cities real estate market as drastically impacted by last decade’s housing downturn and the ensuing Great Recession.  After peaking in 2005 and 2006, the median sales price of a home in the Twin Cities is finally back up to the pre-recessionary levels.  However, the new construction market is drastically different today than last decade.

Prior the recession, builders were constructing entry-level new homes priced under $250,000.  Although many of these homes were condo’s or townhomes, builders delivered a number of starter homes that were either split-levels or two-story homes.   Nearly half of homes built prior the downturn were priced under $250,000; today that percentage is a fraction at about 15%.  Builders have been catering to the move-up and executive-level buyers for a variety of reasons, including:  increased labor and material costs, lack of choice lots available, increased regulation (i.e. platting lots, permit fees, etc.), increased infrastructure costs, etc.  As a result, builders are unable to deliver an affordable product unless lot sizes are compressed (i.e. increased density) and buyers choose more efficient floor plans.

The Mullins Group recently updated all the new construction trends in Hennepin County and found the median price of a new single-family home in Hennepin County is nearly $600,000 in 2016.  This trend is not sustainable as there are not enough high-income householders to continue at this price point.  As a result, some builders are again focusing on townhome product to offer a more economically priced home with features and amenities today’s buyers seek in a more affordable price-point.  The Mullins group projects builders in 2017 will being to diversify there price points to remain competitive.

New Urban Downtowns Carmel



Continue reading “Few Entry-Level New Homes Under Construction in Twin Cities”

Twin Cities Condo Market is Red Hot

The Twin Cities condo market, in particular Downtown Minneapolis, is red hot as the inventory is nearly non-existent.  A  review of all condo listings in the Downtown Minneapolis area shoes there are only 76 active listings in Downtown and in the surrounding neighborhoods such as the North Loop, Loring Park, northwest Minneapolis, etc.  These listings have a median list price of $300,000 and an average price per square foot of just under $300 PSF.  Due to the lack of listings, pricing is up and days on market is down due to the pent-up demand for condos.

The lack of supply is in part driven by the lack of new construction.  As developers have sought luxury apartment projects due to growth in Millennials and favorable lender financing, condo construction has remained slow even though demand is high.  The lack of construction is mostly due to the State of Minnesota construction defects law that basically says a new building must be free of “major construction defects” for up to 10 years after the building has been completed.  This law has kept projects at bay since architects, developers, builders, engineers, etc. are all “on the hook” for any future problem.  Until this state law can be overturned by the Minnesota legislature, it is unlikely we will substantial condo development in the short-term.  The Mullins Group believes the legislature and/or governor needs to take action on this issue as the current state law is in need of amendments.

Shamrock Development is nearing completion of the 17-story, 112-unit Portland Tower at 516 Eighth St. S., four blocks from the new U.S. Bank Stadium. (Staff photo: Bill Klotz)

Shamrock Development is nearing completion of the 17-story, 112-unit Portland Tower at 516 Eighth St. S., four blocks from the new U.S. Bank Stadium. (Staff photo: Bill Klotz)

Downtown Minneapolis ready for ‘condo comeback’

Panelists at Wednesday’s MNCREW panel on “The Condo Comeback” included real estate attorney Kristin Rowell of Anthony Ostlund; Joe Grunnet (center), founder of Downtown Resource Group, and Jim Stanton, principal of Shamrock Development. (Staff photo: Bill Klotz)

Panelists at Wednesday’s MNCREW panel on “The Condo Comeback” included real estate attorney Kristin Rowell of Anthony Ostlund; Joe Grunnet (center), founder of Downtown Resource Group, and Jim Stanton, principal of Shamrock Development. (Staff photo: Bill Klotz)

The downtown Minneapolis condominium market may have set a record in July for the amount of time it took to sell a unit, pointing up the intense demand from buyers.

Though Jim Stanton is the only developer actively building condos in or near downtown, Alatus LLC is expected to break ground soon on a big tower near St. Anthony Main.

But as pent-up demand escalates, others will likely step up despite the rising cost of land and construction materials and the liability entanglements that come with condo development, Stanton and two other market insiders said Wednesday at an event.

They spoke at “The Condo Comeback” panel hosted by the Minnesota Commercial Real Estate Women organization at the Millennium Hotel in downtown Minneapolis.

“The market is great,” Stanton told about 100 attendees. “I really don’t care if anybody else gets in, but I think the biggest hurdle is the various laws, and rules, and so forth, that are taking place right now.”

The principal for Coon Rapids-based Shamrock Development is nearing completion of the 17-story, 112-unit Portland Tower at 516 Eighth St. S., four blocks from the new U.S. Bank Stadium. Shamrock also has started on its latest Mill District project – the 374-unit Legacy condos at the former Cenveo printing site near Gold Medal Park.

Minneapolis-based Alatus is planning to break ground before the year is out on its 40-story, 207-unit condo tower in northeast Minneapolis.

Last month the downtown Minneapolis condo market recorded its fastest market time in history, when it took just 34 days for a condo to sell after it was listed, said panelist Joe Grunnet, founder and president of Downtown Resource Group.

“When the consumer comes to us or works with anybody that focuses on the downtown market, a lot of them are shocked” to learn that there are few if any listings available, said Grunnet, whose brokerage firm specializes in the condo market. “They’ve been seeing all of this building in the last three to five years,” most of which has been market-rate and luxury apartments.

“So a lot of them are literally floored when they learn they have no options to go see,” he added.

For perspective, just before the recession and after the condo construction boom, the typical condo sold after 55 days on the market in January 2007, Grunnet said. During the recession, days on the market climbed to its peak of 154 days in February 2009.

With the price per square foot for condo sales back to near pre-recession levels, the market is begging for more construction, Stanton said. But there’s one major deterrent – construction defect claims from condo associations.

Minnesota construction law currently allows a condo owner or association to sue project partners for “major construction defects” for up to 10 years after the unit or building was completed.

In 2010, the law was amended to add commercial contractors to the list of liable partners. That has deterred developers from starting new projects, said panelist Kristin Rowell, a Minneapolis-based real estate litigation attorney with Anthony Ostlund who often represents condo builders and contractors.

“The statute of limitations period for lawsuits that involve construction defect claims in this state is longer than most in the country, and, frankly, it’s longer than most other claims,” Rowell said. “So this has really been a problem for developers, construction managers, engineers, architects, everyone associated with these condominium developments.”

Rowell said she is among a group of advocates pushing to change the law that would require two-thirds of condo owners in an association to vote to file a defect claim. The bill was introduced at the Minnesota Legislature in spring, but stalled out as the session ended, she said. She believes it has the momentum to pass both chambers in 2017 or 2018.

Meanwhile, Stanton, who has built six condo projects in or near downtown Minneapolis since 2002, said the condo market is about as strong as it has been in the last 15 years. The only mistake he made with his Portland Tower project is its size.

“We can all screw up once in a while – I bought a site that was too small,” Stanton said.

Judging from the demand from Portland buyers, he wished he had picked a larger site to build more units.

“The most desirable area (for condos) now seems to be over by the Guthrie Theater by the river, and we are trying to address that demand now” with the new Legacy condos project, Stanton said.

Continue reading “Twin Cities Condo Market is Red Hot”

Twin Cities first-ring burbs showing strong gains in home prices

Home pricing in the Twin Cities has recovered from the recession as the median sale price has once again reached the peak back in 2005 and 2006.  However, in many communities within the 494 core and specifically first-ring suburban communities; housing pricing has appreciated faster than communities on the fringe.  This is in part due to proximity to jobs corridors, shorter commute times, retail, and recreational and cultural amenities.  Generally, although homes in the inner-ring are older and smaller..they sell for a higher sales price per square foot than larger homes in 3rd and 4th tier suburban areas.

Because of the demand to locate closer in is high, the demand for tear downs and flips has been high and investors have sought out neighborhoods in Edina, St. Louis Park, and Golden Valley.  The Mullins Group expects this trend will continue in the near term.  Continue reading “Twin Cities first-ring burbs showing strong gains in home prices”

Twin Cities Home Prices Reach Post Recession High

Ten years after the peak of the real estate boom last decade, home prices in the Twin Cities have peaked exactly 10 years later.  2006 was generally the peak year in the real estate boom for most Twin Cities communities and the overall median sales price for 2006 was around $232,000.  This past month the median sales price hit a new high at $238,000; indicating the housing market has finally fully recovered.  Due to the lack of supply in the marketplace today, the Mullins Group projects continued appreciation given low interest rates and lack of turn-key product for-sale today.

Continue reading “Twin Cities Home Prices Reach Post Recession High”