Archive for September, 2013

Are Minneapolis Duplex Values About To Stabilize?

said on September 24th, 2013 categorized under: Twin Cities Real Est

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duplex prices stabilizeBy all accounts, the Minneapolis duplex market is recovering from the real estate crash nicely.

All year, here and elsewhere, there have been reports of increased sales activity and, more importantly, rising prices.

However, we’ve also read these rising prices have been driven largely by low interest rates and a lack of inventory.

Brace yourself: that may be about to change.

Countless duplex owners who have wanted to sell for years have been sitting on the sidelines, waiting for their chance. And many have begun to seize the opportunity.

For the week ending September 14, 2013, for example, there were 34 duplexes, triplexes and fourplexes that became available for sale in the Minneapolis/St Paul market. Most (70.6 percent) belong to traditional sellers.

Compare this to 2012, when there were just 20 new listings for the week, 60 percent of which were sold by owners with equity.

There were 12 small multifamily property owners who accepted offers the second week of September this year; up just one from 2012. However, 83.3 percent of this year’s happy sellers had equity in their properties. Traditional sellers usually translate into higher prices, and the average off market list price for the 2013 crew was $205,900.

Last year, just 27.3 percent of the sellers didn’t involve banks in their decision, and that resulted in an average sold price of $140,659.

The single family home market has also seen a bit of an influx of inventory, with new listings up 19.5 percent for the week. Pending sales were also up, rising 8.3 percent over last year. In all, inventory is still down 8 percent from where it stood one year ago.

As supply begins to rise to meet demand, keep an eye on stabilizing prices, and a subsequent slowing in property appreciation.

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Guess what? It’s still less expensive to buy a house or a duplex than rent one.

Last week, Trulia released their Summer 2013 Rent vs. Buy Report, which found that nationally, in spite of rising interest rates, owning is 35 percent cheaper than renting. Last year, that number was 45 percent.

If duplex and house prices stayed the same, interest rates would have to slip into double digits– about 10.5 percent- before it made more sense to rent.

Of course, numbers vary somewhat according to where you live. In Honolulu, for example, it is 10 percent cheaper to own than rent, and interest rates would have to rise to just 5.8 percent for that not to be true. In New York, that figure is 7 percent.

minneapolis vacancy ratesBuyers in Minneapolis find buying is 42 percent more affordable than renting, down from 52 percent one year ago. Interest rates would have to top 12.5 percent for it make more sense to be a tenant.

In cities like Detroit, on the other hand, it’s 65 percent less expensive to own than rent.  Interest rates would have to rise higher than credit cards– to a staggering 32.8 percent for it to make sense to rent in the Motor City.

Should lending standards relax, duplex owners and income property investors should be on the lookout for higher vacancy rates, as tenants look to not  only save money, but reap the rewards of home ownership as well.

Minneapolis Single Family Home Sales Decline

said on September 18th, 2013 categorized under: Twin Cities Real Est

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duplex for saleIf there’s news to report about the Minneapolis and St Paul duplex market for the week ending September 7, 2013, it actually isn’t about investment properties…

It’s about single family home sales.

And the news is, the number of pending home sales for the week dropped 4.5 percent, which represents the first drop in year-over-year sales in many, many months.

Whether this is a reaction to climbing interest rates, or simply an unusual blip on the radar is yet to be seen.

Minneapolis duplex sales, however, saw a year-over-year increase. There were 18 duplex, triplex and fourplex owners who received and accepted offers during the week; 72.2 percent of these have equity in their properties. On average, these listings left the market at a final list price of $207,978.

Last year during the first week of September, there were just 12 Twin Cities duplex sellers who accepted offers. Even though 83.3 percent of them were equity sellers, their properties averaged a final sales price of just $164,116.7.

However, this rise in average sales price continues to largely be a function of limited inventory. There were 31 new listings for the week in 2012, 48.4 of which belonged to equity sellers. This year, there were just 18 new duplex listings, with 72.2 percent coming from traditional sellers.

With the Federal Reserve’s announcement today of their intention to keep interest rates low, it will be interesting to see what the fall market brings.

Minneapolis Duplex Sellers Come Out Of Hiding

said on September 10th, 2013 categorized under: Twin Cities Real Est

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duplex sellers come out of hidingIf asked to name one thing that’s changing about the Minneapolis and St Paul duplex market, my answer would be inventory.

After a year of it being in short supply, sellers have begun to test the water, and slowly, we’re seeing the number of new listings rise.

For the week ending August 31, 2013, for example, there were 25 new listings, 64 percent of which were brought to the market by equity sellers. While this figure doesn’t blow away last year’s 19 new listings and 36.8 percent traditional sellers during the same time frame, it nonetheless represents roughly a 30 percent increase.

Pending sales for the week told a different tale. There were 16 Twin Cities duplex sellers who received and accepted offers. Most (56.3 percent) were equity sellers. While the average final list price of these properties was a whopping $181,481, it’s important to note the group including a listing at $750,000, which is a rarity. When I remove this transaction, the 15 other properties finished at an average list price of $143,580.

Last year, there were 18 properties that sold during the same week. Fifty percent of these belonged to equity sellers, and they finished at an average sold price of $136,431.

The big news on the single family home front is the Median Sales Price for the month of August was up 16.9 percent over last year to $208,000.

On average, properties are selling for 97 percent of their original list price, largely due to there being just a 3.6 month supply of inventory on the market.

In other words, it’s a sellers market…which may be exactly why we’re seeing more of them.

Are Minneapolis-St Paul Ripe For Rent Increases?

said on September 9th, 2013 categorized under: Twin Cities Real Est

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minneapolis duplex vacanciesIt isn’t often Minneapolis-St Paul ranks second for anything in national rankings. But according to a recent report from Reis, a company that tracks real estate information nationally, the Twin Cities is second only to New York for the lowest vacancy rate in the nation.

Reis studied 86 U.S. rental markets and found that while New York had a vacancy rate of just 2 percent, Minneapolis-St. Paul was right behind at just 2.1 percent. Syracuse, NY and New Haven, Conn. are tied with the Twin Cities for second.

When vacancy rates are low, rents usually rise accordingly. However, the study found that while rent rose 3.1 percent from June 2012 to June 2013, it was only the 15th highest increase in the country. Seattle, on the other hand, experienced an annual rent increase of 6.2 percent.

This means there may be room for bigger rent increases in the Minneapolis and St Paul rental markets.

Before duplex owners get too excited and raise rent to crazy, it’s important to remember that low vacancy rates often inspire new construction.  And, this is true in Minnesota as well, with Finance and Commercereporting an estimated 18,683 proposed new apartment units.

And they all get built, vacancy rates will rise. And when vacancy rates rise, landlords are faced with lowering rents and making concessions to attract tenants.

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Magic WandDuring the last full week of August, both Minneapolis buyers and sellers saw their wishes come true.

After all, prices are up, making sellers happy, as are sales.

As the number of new listings increased, buyers suddenly had more properties to chose from, making them happy too.

So it’s a pretty good time to be a Minneapolis or St Paul duplex seller or buyer.

During the week ending August 24, 2013, 23 Twin Cities duplex owners received and accepted a purchase agreement on their property. Of these, 69.6 percent had equity in their properties. On average, the final off-market list price for these was $215,861.

Last year over the same stretch of time, there were just 12 Minneapolis and St Paul multifamily property sellers who accepted offers.  Of these, 75 percent had equity in their properties. The average sold price for these investment properties was $191,162.

Buyers received some good news during the week as well, with 28 new listings coming on the market. The majority of these belonged to equity sellers (67.8 percent).

In 2012, there were 20 new listings for buyers to chose from. Just 8, or 40 percent, were owned by people who either did not have to consult with a bank to sell, or were not a bank.

As we drift more toward the traditional, established routines of fall, let’s hope everyone interested in buying or selling a duplex continues to get their wishes.