Median home prices in greater Minneapolis broke $400,000 for the first time, driven by strong movement in the luxury market.
In June, a median home in the metropolitan area sold for $12,850 more than last year, according to Homes.com data, outpacing the national annual increase of $5,000. That stat covers all types of housing: single-family, townhouses and condominiums.
Unmet demand is generally the main reason for increasing prices across all markets, according to David Arbit, research director for Minnesota Realtors, but there’s another factor at play.
The inventory of homes for sale in Minneapolis sits at about 5,300, according to the trade association, a supply enough to feed just 2.4 months of homebuying. Supply is measured as healthy if it’s at least five months. Sales are ramping up, with a 9.2% in June compared to this time last year, but most are happening in a specific bracket, said Arbit.
Home sales for Minneapolis’ luxury market — homes priced $1 million and above — have outpaced lower-priced sales in the past 12 months, according to Minnesota Realtors data. June sales rose 18.8% for high-priced homes but just 0.8% for homes under $1 million.
“I call that the PME: the product mix effect. When you have more $1 million homes selling, even if supply is rising and demand is falling, if you have bigger homes and newer homes selling, that usually brings prices higher,” said Arbit. “It keeps prices buoyant and sometimes skews them upwards if there’s enough of that luxury market activity.”
It’s something happening in other markets, too, such as Cincinnati, where agent Amanda Pertuset of Coldwell Banker Realty has noticed activity in affordable homes has dropped off while the luxury market thrives. Median home prices in Cincinnati climbed 6.7% on an annual basis in June, Homes.com data shows.
Luxury homes are selling more because the wealthy portion of the population can afford to buy today, noted Arbit. First-time homebuyers are more sensitive to mortgage rates, which help determine a monthly payment on a home. With those rates remaining around 7% the past 12 months, it’s keeping buyers of low-priced homes out of the market.
According to Oxford Economics, Minneapolis's median household income is $98,826, compared to the national average of $81,004.
The economy has also helped bolster higher earners making these luxury purchases, noted Brian Anderson, a director of market analytics in Minneapolis for Homes.com and CoStar.
“Underlying demand remains firm on the back of a resilient economy, which boasts a still-tight unemployment rate of 3.1% that has sustained wage growth above the local inflation rate, boosting household purchasing power,” he said.
June marked Minneapolis’ seventh consecutive month of home price growth that exceeds the national rate. To Arbit, price growth remains stable, and unless mortgage rates drop, growth will remain stable.
The priciest home to sell in Minneapolis this year closed July 23: a $4.5 million four-bedroom, four-and-a-half-bathroom condominium in The Whitney Landmark Residences, according to Homes.com. In the past 12 months, 241 listings sold for $1 million or more. Currently, there are about 118 luxury-priced homes for sale on the public Multiple Listing Service in Minneapolis.
