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State of the Luxury Home Market – Twin Cities

State of the Twin Cities Luxury Home Market

I thought it would be interesting to compare the current Spring real estate market for luxury homes in the Twin Cities to the last couple of years, and see if things have improved at all. The news is constantly stating that the Minnesota real estate market is roaring back to life, what with our shortage of inventory and less buyer fear, but can the same be said about the luxury market?

Days on the Market

Back in 2010, the rug was pulled out from under the luxury real estate market and it seemed to take forever for a home to sell. The average Days on the Market, what we real estate agents call DOM, was 212 – meaning that is took on average 212 days for a luxury home to sell.

Days on the Market 2010 Twin Cities Luxury Homes Days on the Market 2010

Now, look at March 2012 and the numbers get better. The average number of days drops to 170!

Day on Market Luxury Homes Twin Cities Spring 2012 Days on the Market 2012

For April 2013, the number drops to 148!

Luxury Home Days on the Market 2013 Twin Cities Days on the Market 2013

Inventory

Inventory is often one of the deciding factors on how a real estate market will perform. Too much inventory and few buyers makes for a terrible market. In 2010, sellers were scared and wanted to get out of their expensive homes. Buyers however were very worried and became hesitant if not completely shut off from buying a new home. No other inventory in the Twin Cities felt this more than the luxury home market, starting at about 685 homes for sale in Spring 2010 and roaring to 925 in the Fall.

Minneapolis St Paul Luxury Home Market Inventory 2010 Inventory 2010

Spring 2011 started off with 653 homes on the market and increased to around 836 by September, however when Spring 2012 hit, less homes were being offered for sale – coming in at around 620.

Twin Cities Luxury Home Inventory Spring 2012 Inventory 2012

Once Fall 2012 came around, only 708  homes were for sale. That’s a 15.3% decrease from 2011!  Of course now that Spring 2013 is here, I know the market inventory is low simply by trying to find homes my clients might like. We can’t find any! That’s because there are only currently about 430 luxury homes on the market. When compared to 2010, we quickly see that the Twin Cities Spring luxury inventory has decreased by 37%!

Twin Cities Luxury Real Estate Inventory Spring2013 Inventory 2013

Average Price

Starting in late 2009, the luxury home market started to be affected by the economy, and prices started a slow decline over the next year. By August 2010, average prices began a rapid decline making 2011 a terrible year to sell an upper bracket home in the Twin Cities. Homes that once held a value well over $1 Million, were now selling for $700-800K. Foreclosures and short sales became more prevalent, as home owners found themselves underwater and unable to afford their castles.

Twin Cities Luxury Home Average Price 2010 Average Price 2010

By Spring 2012, home values were at their lowest, only bringing in an average of around $675,000, but every cloud has a silver lining. Over the last year, the average price of a luxury home has been steadily increasing, and we are now back at 2009 pricing.

Twin Cities Luxury Homes Average Price 2013

What Does It All Mean?

Wow, what a difference a few years make! While the numbers look to tell a great story, it is still a cautious time. Home owners are not listing as many homes, thus giving buyers less choices. This helps prop up the market with homes selling quicker, but buyers are still afraid of paying too much for a home. Most of the buyers I encounter refuse to pay list price, and they also want to see the price of similar homes that have sold in the area in order to justify their offers.

The most interesting information in the report, in my opinion, is not the average price number, but the graph direction in general. Looking at 2010, the graph line is going down. But take a look at what has been happening since May 2012. The graph direction is going up, as if it is trying to claw its way out of the abyss. Let’s pray it keeps going up!

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Cressview Estates in Credit River Township

 Credit River Township Homes for Sale
One of my favorite luxury neighborhoods is located in Credit River Township, just south of the Twin Cities. I came across Cressview Estates years ago when two of the homes were on the Parade of Homes. Since then, even more luxurious homes have been built in the development, with every home having its own unique style. Home sites range from 2.5 – 13 acres, allowing you all the privacy you could desire. The Legends Golf Course is just down the road, as is the Cleary Lake Golf Course.

Cressview Estate Credit River Township homes for sale

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Upper Bracket Homes for Sale in Minneapolis

If you are searching for a lovely home in Minneapolis to purchase in 2013, I am pretty sure you will be able to find something that fits your budget. Prices of high end homes range greatly depending on location and style. Homes on Lowry Hill fetch more than those along Lake Harriet, and sometimes the style of a home is just as much a factor.

Take a look at the newest homes to hit the market in Minneapolis.

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Mansions fit for a Kid…or a Dog

These are the homes we dream of owning, or at the least the homes our kids dream of playing in. I had a childhood friend who had an architect for a father. He built her a real house, sized down to fit us kids, and it was larger than the little mansion pictured above built by the Little Cottage Company. It was so much fun to play in, my favorite part being the grocery store with real cash registers. I will always remember that house, as it gave way to imagination and dreaming. Today, with the blessing of technology and easier building techniques, playhouses can be enjoyed by many more people/kids. Of course, building a playhouse mansion will set you back around $10,000-30,000, you can pick up less luxurious ones for$1000-2000. Boys don’t have to be left out for a playhouse – build them an awesome firehouse or old fashioned red school house.

Now, if you don’t have kids, don’t feel left out. Your pets can have their own puppy mansion too. Check out some of the custom built doghouses from La Petite Maison.

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Fall Home Tours Abound in the Twin Cities

You may not be in the market for a new home, but that doesn’t mean you can’t enjoy looking at other people’s homes and possibly finding your “dream” home. Of course your dream home will most likely be out of your price range, but hey, that’s why it’s called a dream home!

  • Fall Parade of Homes – while I personally feel there should only be one Parade Tour each year, instead of two, for the next couple of weekends you can peruse through the model homes of local builders. The Tour runs from September 8th-30th and is open Thursday-Sunday from Noon-6pm. The last weekend also features the Remodelers Showcase which is open Friday 1-7pm and Sat-Sun from Noon-6pm.
  • Homes by Architects Tour – The AIA Minnesota is putting on its 5th Architects Home Tour featuring 16 new and remodeled homes located throughout the Twin Cities, greater Minnesota and western Wisconsin, all designed by registered architect members of the American Institute of Architects Minnesota. Some of these homes are not in the Metro, so if you want to see a specific home, expect a drive and plan your day accordingly. The tour runs September 22-23,  10am-5pm.
  • Summit Hill Association House Tour – if you love historic homes, than don’t miss this tour in St. Paul. It always has amazing homes featured that you just don’t get to see very often and is only on for one day, September 9th, Noon-6pm.

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Pillsbury Mansion Back on the Market

In case you missed it, the Pillsbury Mansion “Southways” was quietly put back on the market in October 2011 for $24 Million, a far cry from its previous listing price a few years back of $54 Million. Located at 1400 Bracketts Point Road in Orono the home sits on some of the best real estate on Lake Minnetonka.

[idx-listings city=”Orono” minprice=”20000000″ propertytypes=”773″ orderby=”DateAdded” orderdir=”DESC” count=”5″ showlargerphotos=”true”]

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Turning Down a Listing

Contrary to what most might think, many real estate agents aren’t desperate for listings. Yes, there are those out there that will take a listing because they really need it, no matter how overpriced the home will be, but I am not one of those agents.

Recently I turned down an expensive home simply because the home owner and I could not agree on a price. He saw it as a million dollar home, but I knew it was not worth anywhere near his dream number. I did my research, showing him what similar homes in the area had sold for. I even went so far as to take him out into the local marketplace and show him active listings, comparing those million dollar homes to his, hoping the information would sink in that his home in no way compared to those high-end homes. But alas, he still felt his unluxurious home was superior to them. We parted ways that day with a handshake, and I wished him all the best in the sale of his home.

He seemed surprised that I was turning down the listing. “Wouldn’t you like this home to be showcased on your website?”, he asked. I would have liked to have plainly said “Yes, but only if it is priced correctly”, but I was nicer than that.  Here are some reasons why I don’t take overpriced listings:

  • I was asked how much marketing it would take to get his home sold and I flat out told him that no amount of money thrown into marketing the home would make it sell if it was overpriced. See, agents don’t get paid unless a home sells, so we have to put thousands of dollars into photos, brochures, marketing, etc before we see a dime in commission. If the home doesn’t sell, then we are out all those costs. Taking an extremely overpriced listing means that the odds of that home selling are so rare that it is just not worth wasting my hard earned money. Buyers are pretty savvy in today’s tech world and know when a home is overpriced. Looking at it is just a waste of their time.
  • Telling a home owner that their home is worth more than it actual is is a Realtor Code of Ethics violation. Standard of Practice 1-3 of the Code states that “Realtors, in attempting to secure a listing, shall not deliberately mislead the owner as to market value”. I don’t know about you, but I really don’t want to ever be accused of an ethical violation.
  • I believe in being completely honest with home owners, even if I know they are not going to like what I tell them. They might throw me out of the house (never have had it happen), but at least I walk away knowing I gave them legitimate information and that it is truly their problem if they don’t like the data.
  • Beating up a home seller every couple of weeks for a price reduction is not something I like to do. Instead, I choose to educate sellers that pricing their listing correctly from the beginning ensures them that I won’t be calling them and getting on their nerves. While markets do change during a listing period and price reductions do happen, I would rather be able to back my advice up with real market data, then make up some random number just to make a seller happy.
  • When selling a home, many times a home owners number one “enemy” is the real estate appraiser. If he can’t find evidence to support a contract purchase price, then you won’t be selling your home anytime soon. And waiting for a cash buyer isn’t the best strategy.  While many won’t order an appraisal since no lender is involved, million dollar cash buyers are pretty smart and know when a home is overpriced. Don’t pray for a stupid cash buyer – they don’t exist.

Getting back to my recent experience. Another agent ended up taking the listing, which doesn’t surprise me. What does surprise me is the listing price, which is extremely overpriced. Not only will the home never sell at that price, I can’t imagine how the agent justifies wasting everyone’s time. At least I can sit back knowing that I made the right decision in walking away. Let that listing be someone else’s headache. I won’t take part in overpriced listings.

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Historic House Mount Curve Minneapolis

Most Expensive Homes in Minneapolis

In Minneapolis, the most expensive single family homes are situated around the beautiful area known as the Chain of Lakes just southwest of downtown. Lake of the Isles and Lowry Hill, settled by some of the wealthiest in the city, are home to many of the grandest properties in all the Twin Cities. Currently the most expensive home comes in at $6.5 Million!

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The Homestead Market Value Exclusion Explained

I have been getting a lot of questions from Minnesota home owners and future buyers about the homestead credit previously available on Minnesota properties. The Minnesota Association of Realtors has recently put forth a helpful explanation about the new Homestead Market Value Exclusion (HMVE) that was created in the 2011 legislative session.

The new HMVE is a recent change to how homestead property taxes are calculated. It replaces the Homestead Market Value Credit (HMVC). Under the old credit system, the credit lowered a homeowner’s property tax burden based on the value of their home. The state then reimbursed local governments for the lost amount of their levy (revenues) due to the credit. However, due to the state’s budget problems, it was rare that local governments were fully reimbursed by the state. Eliminating the credit and creating an exclusion removes the possibility of the state withholding funds and creates more stability for local governments.

The new program excludes a portion of the homeowner’s market value from the property tax calculation. The amount of value excluded is directly proportional to the credit the home received under the old law. The actual tax burden on homesteads could be lesser or greater depending upon the mix of properties in the taxing jurisdiction and the levy decisions made by local governments (for more information on the technical calculations, please see further below).

Technical Calculations

Description: Under the old credit system, the credit amount would rapidly increase as a home value approached $76,000 with the maximum credit amount of $304. After $76,000 the credit would decrease until it was completely phased out with a home value of over $414,000. The new exclusion mimics this same scale as homes approaching $76,000 would have a rapidly increasing exclusion of value, with a home valued at $76,000 receiving a maximum exclusion of 40% of their home value from property tax calculations. The percentage then decreases and is phased out at homes valued over $414,000.

Calculations

Old Law with Credit New Law with HMVE
Market Value (MV) determined by Assessor Market Value (MV) determined by Assessor
N/A Calculate exclusion (HMVE):MV < $76K: Exclusion = 0.4 x MV

MV $76K – $414K: Exclusion=$30,400 –
((MV – $76K) x.09)

MV > $414K: Exclusion = $0
N/A Taxable MV = MV – Exclusion
Homes < $500K: MV x .1% = Tax Capacity (TC)Homes > $500K: $5,000 + ((MV – $500K) x 1.25%) = TC Homes < $500K: Taxable MV x .1% = Tax Capacity (TC)Homes > $500K: $5,000 + ((Taxable MV – $500K) x 1.25%) = TC
Gross Tax = TC x total tax rate (county + city + special district rate) N/A
HMVC = MV < $76K: MV x .004MV $76K – $414K: $304 – ((MV – $76K) x .0009)

MV > $414K: $0

 N/A
Net Tax = Gross Tax – HMVC Net Tax = TC x total tax rate (county + city + special district rate)

(Referendum taxes are not covered here)

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The Most Expensive Home For Sale in St. Paul

It’s always fun to know what’s for sale, especially when we’re talking about multi-million dollar homes. In St. Paul, the most expensive homes sit on or around Summit Avenue, one of the most famous streets in the Nation for historic homes, so it should come as no surprise that the following home sits just a few blocks away.

Luxury Historc Mansion Frederick Weyerhauser

Known as the Frederick Weyerhaeuser Mansion, it is currently listed for sale at $2.75 Million. It sits on the bluff overlooking St. Paul and has quite a large yard at 1.3 acres.

Learn more about this historic home, please visit Historic Homes of Minnesota.

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