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Real Estate Market Update: Duplex sales in NE Minneapolis

Sale Price down 24% and Sales Volume down 49%

Northeast Minneapolis, February 2008

Northeast became one of the hottest markets in Minneapolis during the "boom" appreciating and average 62% since 2000. Given the relatively modest home vales and it's proximity to the two downtowns, the University, major industry and business centers, Northeast is a natural rental area. Since it's development in the first half of the 19th century, it's been a solid residential neighborhood, with strong ethnic, and working class, roots. It's storied reputation as a "pub crawl" destination has drawn attention to the area in ore recent decades. A plethora of neighborhood pubs have kept the local history and traditions alive and kicking.

Duplexes are a common "gateway" property into the investment real estate game. With it's wealth of duplexes Northeast, or Nord'east as it's affectionately referred to, could be considered a real estate investors play ground.

Buying duplexes is always a little tricky, and many investors make the mistake of associating the duplex with the single family home market. Duplexes, and other investment property needs to be valued by 1) it's cash flow, 2) appreciation potential, and 3) tax advantages, in that order. However, as property values rose in that past 5-10 years duplex prices rose as well. Duplexes had been selling for a lot more than their cash flow would dictate, assuming that the potential for high appreciation warranted the high price tag.

In 2006 buyers noticed that appreciation potential was weakening, and the prices sellers were asking were too high, in light of that. Sales volume dropped from 104 units in 2005 to just 58 units in 2006.

By 2007 sellers had come to the table and started being more realistic about the value of their duplexes. The average sales price in 2006 was a strong $250,707 in 2007 just $185,774.

Since 2004 the average sales prices has come down 24% and the number of sales has dropped 49%. Given the fact that these prices are just about at a "break even" price (assuming 75-80% financing) sales will continue to focus on the highest quality of the lowest priced properties.

Cash flow is king in the duplex market, as in any investment property type. If you can find a property that cash flows, it's almost a sure bet that it's going to sell.

* For more information on buying investment real estate, call me, Ben Kolkman, GreatMinneapolis mobile (612) 599-4161

Pending sales jumped up again for the 4^th straight week. New listings are popping up all over the place, Spring Market has arrived!

Keep an eye on the newly listed homes, the good ones (condition & price) are selling fast. And remember if you think it's a nice home, and a good deal, other buyers will too!

If you think you recognize some of these new listings, you're probably right! Roughly half of these are re-lists that have already been placed on the market at least once in the last 12 months.

The best thing about the current market is that you can find really high quality homes, and maybe even think about it over night before buying! Look for quality, think of resale, and don't settle. But when you find the home of your dreams...don't hesitate and don't haggle over the small stuff. You'll end up with a great home at a fair price, and you'll be happier with your decision with every passing year.

Minneapolis Real Estate - MARKET UPDATE

It's 14 degrees below zero - SPRING is HERE!

January 30th, 2008

by Ben Kolkman, REALTOR, Great Minneapolis Real Estate

In Minneapolis the spring season, in real estate at least, starts in January. Ironic, considering it's so cold right now, that keys sitting in frozen lock boxes on the front doors of homes, can cause instant frost bite! (And some say we don't earn our living ;-)

People are putting homes on the market at an alarming pace, but don't be scared, we won't know how heavy the flood of new listings will until February, and there is good news I'll get to soon! As you can see in the chart below, courtesy of MAAR the number of homes being put up for sale each week has spiked dramatically. But that's to be expected, it happens every year.

If we are going to see recovery in the market, and see good appreciation, we'll need to see fewer new listings than expected, and more sales than expected. By comparison to last year, the number of new listings in Dec. '07 was down 4.5% from Dec. '06 (GOOD NEWS). Unfortunately the number of pending sales is also down, by about 20% and that's not what I'm hoping hope.

Moral of The Story: Spring is here, but it's too early to tell what kind of spring it's going to be.

Remember: You are not buying or selling the market but rather a specific property. Using a good team of advisors (REALTOR, Lender, etc.) you can always take advantage of your local situation, and make the most of your unique transaction.

And the listings come flooding back. The number of new listings in Minneapolis soared up this week to 1544. Doubling the number from the week before.

These new listings are just adding to the already flooded market. Many of these "new" listings have previously been on the market, and were just taking some time off. I guess everyone thought spring would be a better time to try to sell.

As long as inventory continues to be added to the market like this, for most Sellers it's going to be a long slow spring.

Markets do improve in various areas of the city, and at different price ranges. The key to selling in a "flooded" market is to simply offer the best value on the market. Keep in mind Buyers are going to visit all the homes for sale, then buy the one they felt was the "best" over all.

The Minnehaha Apartments project, previously selected to be the recipient of NRP funds from LHiNC has secured full funding and is no longer in need of LHiNC's funds. The Housing Committee will be seeking new projects for consideration.

Planning was discussed for the upcoming "Foreclosure Crisis & Neighborhood Home Values" Town Hall Meeting, scheduled for March 4^th.

Getting the word out via the SW Journal and the other Neighborhoods will be researched by Ben Kolkman.

Craig Anderson will be researching and documenting the process for disputing property tax values.

NOTE: Views and opinions expressed in this blog are not those of the LHiNC (Linden Hills Neighborhood Council), nor does LHiNC endorse or support the content posted here. This is the personal blog of Ben Kolkman. Ben is a Realtor in Minneapolis, Minnesota he is also the Chair of the Linden Hills Housing Committee and an Officer on the LHiNC Board.