‘Something Will Have To Give’ In The Twin Cities
The Twin Cities realtors have some numbers out. “Home sales in the Twin Cities, Minn., area fell by double digits in April, according to three metro Twin Cities Realtor associations. Realtors reported 3,919 closed home sales last month, down 15.6 percent from a year ago when 4,645 sales were recorded.”
“New listings set an April record at 10,864 units, marking the ninth consecutive month of record new-listing activity, according to the Minneapolis Area Association of Realtors. However, new listing growth was only 4 percent higher than last April after several consecutive months of 20 percent annual growth or more.”
“‘All indicators point toward a more balanced market representing a shift in the buyer’s favor as compared to the past five years,’ said Todd Shipman, president of MAAR. ‘This is the best market for buyers we’ve seen in five years,’ said Jeff Green, President of the North Metro Realtors Association. ‘There are so many options of housing choices available right now. Size, price, location, buyers can pretty much take their picks.’”
“At the end of April there were more than 28,000 single-family units on the market, 45 percent more than a year ago.”
“For the past (bad link warning) several years, the stars have been aligned for Downtown development. ‘Records were consistently smashed,’ states a report on the Twin Cities real estate market for 2005 by the MAAR. But what goes up must come down. ‘The extreme nature of this market was unsustainable,’ the report continued.”
“Most real estate insiders admit that the Downtown market is slowing (and) that a few of the larger projects still years from construction will fall off of the pipeline, and while some say there is danger for the Downtown and greater housing market.”
“Is the market slowing? ‘Yes,’ answered Tom Melchior, a member of the Downtown Minneapolis Neighborhood Association. Melchior said the market began to slow for higher-priced condos priced more than $500,000 about a year ago. Now, the cool-down has spread to all price ranges, he said.”
“As for luxury units, Frank said Schafer Richardson understood from the start that its Phoenix on the River, priced from $400,000 to more than $3 million, would compete for a thinner market of buyers. ‘How many can afford a million-dollar unit?,’ he asked.”
“He said he also believes that big condo projects will fall off the pipeline, but said he’s not concerned. Other developers are bullish, as well, Hines Interests plans as many as 1,250 units (albeit fewer than the original 3,000-5,000 plan) at its Twinsville development.”
“Melchior said such a surplus of unsold condos could bring the market down. ‘My fear is that a number of these projects will move ahead without a high proportion of presales,’ he said. ‘The project will get built and sit there for years with a lot of vacant units,’ Melchior said. ‘The developer will have to slash prices in order to [sell] the units. Then the whole market gets hurt.’”
“Susan Bollweg, who owns a condo at Centre Village, says it appears to already be happening. She cited the MAAR report, which shows a 7.7 percent drop in Central Minneapolis (Downtown) housing prices from 2004 to 2005. Couple that with the more than 7,000 units either planned or under construction, and Bollweg fears for the value of her condo in the 30-year-old Centre Village.”
“The frenzied pace of the gold rush may be over, but most real estate observers say that Downtown will continue to attract new residents. But still there is the sheer number of units in the pipeline. According to Maxfield Research, since 2001, 3,662 units have been sold or reserved Downtown, but the number of units actually built since then has not caught up. By the end of this year, Maxfield’s Bujold projects only 2,752 units will have been completed.”
“With sales slowing, neither Melchior nor Bujold expect Downtown’s absorption rate to sustain its peak rate of more than 1,000 units per year. Bujold expects it to ‘hover around 1,000′ units per year in the near future; Melchior said a balanced market could level off at around 500 in the long run.”
“Compare that to the more than 7,000 units planned for Downtown over the next five years, and it seems something will have to give. Already, one developer, Ryan Cos., has backed off of its proposed 600-unit Superior Plating development. Tony Phelps, director of development for Ryan, cited a lack of interest by development partners due to a glutted market. ‘It will be interesting to see what happens in the next year or two,’ he said.”
“Stanton, the sage developer, agreed that the market is far from dead. ‘I’ve been in biz 44 years. I’ve seen it slow down and speed up,’ Stanton said. ‘The only way building is going to stop is if people quit having sex. Will it slow down for six months or a year sometimes? Yes. Will it stay down? It can’t.’”
‘Couple that with the more than 7,000 units either planned or under construction, and Bollweg fears for the value of her condo.’
It shouldn’t be too long now that the illusion of incentives will give way to a realization for recent buyers that developers are destroying the comps. When people start to get mad about it and go public, new home buying should all but cease.
“…Now, with a record number of condos on the market, the latest twist in the condo craze pairs homeownership with the perks of a luxury hotel, including maid service, a concierge and room service to satisfy those late-night cravings.
At least five new hotel/condo developments are planned for the Twin Cities area and Duluth in the coming months.”
http://www.startribune.com/417/story/422682.html
They’re killing themselves with the condo glut here. The Mississippi River winds through downtown St. Paul and Minneapolis, so they’re building tons of condos on the riverfront. Stillwater is only abou 15 miles from downtown St. Paul and the St. Croix river winds through that - result - still more condos built, and now the citizens are angry because the developers didn’t disclose ugly additions to the structures that make the buildings’ rooftops (and the view) look tacky.
And the condo cancer is spreading into the inner-ring suburbs, too. One of my city’s councilmen (who owns a construction firm) admitted that a developer told him last year that anyone breaking ground on a condo project at that time was “digging his own grave”. Even so, the councilman is pushing for yet another proposed mega condo/townhome development in our city, since of course he hopes to profit by it.
I say: “Twin Cities and Duluth condos for everyone!”
Ben;…OT…Just received the latest Whiskey & Gunpowder….The ICE just arrested 76 illegals on a job site of the biggest home builder in Kentucky (Fischer Homes)…I have not read mish’s comments yet…
April sales data for Northern NJ is in, and it isn’t pretty.
April sales volume saw a YOY decline of almost 24%.
April sales actually came in lower than March this year. There was no spring boom.
Northern New Jersey April Residential Sales
April
Average Sales (2003-2005): 2322
2005 Sales: 2383
2006 Sales: 1817
(Down 23.8% Year Over Year)
Wow, I’m so hoping results for the Westchester market are similar!
“‘There are so many options of housing choices available right now. Size, price, location, buyers can pretty much take their picks.’”
Wow, all those ridiculously overpriced listings to choose from. Decisions, decisions….
“Stanton, the sage developer, agreed that the market is far from dead. ‘I’ve been in biz 44 years. I’ve seen it slow down and speed up,’ Stanton said. ‘The only way building is going to stop is if people quit having sex. Will it slow down for six months or a year sometimes? Yes. Will it stay down? It can’t.’”
I hope the current crop of new condo owners are willing to consider the ass-pounding they are in store for as “sex”. They are all about to become some banks “bubble bitch” as prices drop back 30% or so in the next year.
All these proclamations along the lines of “the housing market can’t stay down, it never has” are bogus because we’ve never seen anything like the lending insanity of the past few years (at least, not since the 1920’s). We’re in uncharted waters. In fact, foreclosures are rising rapidly at a time when corporate earnings, consumer spending, and employment are all up — when was the last time that happened?
‘The only way building is going to stop is if people quit having sex. Will it slow down for six months or a year sometimes? Yes. Will it stay down? It can’t.’”
Nothing quite kills the urge for sex like job loss, bankruptcy, foreclosure, and divorce due to money problems.
The distortion of inflation, most folks can’t see through it. Everything eventually goes up compared to the new paper dollar. It’s just an illusion, though, it’s really just the dollar going down.
I’ll do my part. No more sex. Everyone else going to work to make this bubble burst sooner?
I’ll do my part. No more sex. Everyone else going to work to make this bubble burst sooner?
Downtown TWIN CITIES condos for everybody. Complete with the ‘partner’ of your choice. LOL (in plastic version only).
Oof Da, our house won’t sell, eh?
ya you bet. here, have a little lunch. we’re having ludefisk and sauerkraut. OK then. gas masks are over dere. so, ya goin up nort dis weekend fer da walleye? ya? real good den.
I lived in the Twins for five years. overall I liked it except for the six months of winter, but dang I’m glad I sold my downtown (St Paul not Mpls) loft last summer. great place, I miss it, but I don’t miss the bloated HOA fees and taxes and mortgage and alla that.
oh and some people really do talk like Marge Gunderson and Mr/Mrs Lundegaard in Fargo. I thought the Coens were just making shit up, til I got there.
The only way building is going to stop is if people quit having sex.
I say;….Twin cities condo’s for everyone with a free case of Viagra at close of escrow…
The Twin Cities really have been relatively silent about our housing boom. (it’s kind of like that with everything, sort of a nondescript way of being!)
Because we are “land locked” (sarcasm) like so many other places, the developers can just build out further and further and further and further. This keeps overall median TC home prices low, but among certain areas (like mine, around the lakes in Mpls proper) we’ve seen doubling and even tripling of home prices in the last 7 years.
Add to that the condo mania, and it’s shocking.
These articles always focus on the downtown condo boom (which is mainly the warehouse district). But don’t forget the uptown area, which rivals downtown development (there are 4 or 5 condo TOWERS going up there including the Loop, the Edgewater, the Lagoon Project, the 3 square blocks of Midtown Lofts, and the new tower going up by Arby’s) as well as along the river (the ENTIRE river, which is mile after mile after mile from the Suburbs of st. Paul all the way to the suburbs of Mpls). These are HUGE developments, and always ‘luxury’.
They’re even building huge condo complexes in the suburbs (why exactly?)
they often start in the $500k range, and go skyrocketing from there. The condos often cost way more than SFHs do.
This will first sink the condo market. It will then pull the SFH’s soon afterwards IMO, once the condos become a bargain alternative to the SFHs.
it will be terrifying.
The problem: they only build 3 types of housing here now:
1) luxury condos centrally, that start at $500k plus
2) luxury SFHs way out in the middle of nowhere.
3) super crappy entry level condos/rowhomes way in the middle of nowhere.
why?
‘The project will get built and sit there for years with a lot of vacant units,’ Melchior said.
Not if they take what they think they should get, multiply it by .6 and start there…..
that said,
I’ve been noticing a LOT of “sold” signs driving around over the last 2.5 weeks. And 2 of the several homes on my block that sat all winter have just sold. (but there are still even more “for sale” signs)
I sometimes wonder if we’ll be ok from *large* drops, ONLY because:
1) our incomes are relatively high compared to the nation, and even compared to many bubble zones
2) I haven’t seen that the toxic mortgages are as rampant here. Minnesotans are relatively low-frills types, and you don’t see the rampant materialism/overconsumption in general here that I saw living in CA or in places like TX, so HOPEFULLY people didn’t overbuy on housing.
3) overall we didn’t boom TOO much. You can still get a nice USED home in an ok area for under $350,000.
4) our winter season really means something. I doubt a little rain/fog will keep many people from buying the American Dream. But 15 below zero with a blizzard sure will!
5) our rent/mortgage ratios aren’t that out of wack (except on any new construction). In many neighborhoods, rent would be $1000-1600 for a 2-3BR place, and you could buy that place for $250,000… still cashflow negative for an investor, but not like in CA either where $1,000 rent compares to a $500,000 home…
Don’t get me wrong, I’m trying to avoid the “it’s different here” mentality… we’ll drop for sure, but hopefully not like the mega-boom markets.
but I might be wrong about the amount of toxic mortgages here… I just haven’t seen that data yet.
clouseau
They build them in the middle of nowhere because that is where everybody wants to live. LOL - and they didn’t pay anything for the land.
“The extreme nature of this market was unsustainable”
Hmmm, woulda been helpful to J6P if you woulda said that about two years ago. Its a little late now, isn’t it Mr. Realtor?
I just love how the same realtors who last year were saying “there is no better time to buy” and “appreciation is guaranteed for the next ten years” are suddenly saying “yeah, we all knew this couldn’t go on.”
What jerks!
Why are they building all those condos? What is the incentive? Isn’t Minn. population flat? Why wouldn’t people just buy a house? It’d be cheaper.
Or are these sold as some kind of investment?
When the ice caps melt, only the condos will be above water.
Isn’t Minn. population flat?
Nope. We’re growing. Not as fast as like Phoenix, but we have steady growth. (the metro area mainly, especially the second 2 rings of suburbs… the 2 cities themselves are also growing, but slower)
We have net population growth of about 32,000 people per year, and this is accelorating (the 32k/year was from 2000 to 2004)
http://www.metrocouncil.org/about/facts/TwinCitiesPopulationFacts.pdf
We are losing population in other parts of Minnesota, so therefore the state population is declining overall. We are actually going to lose a seat in the House because of the population decline in 2010.
http://www.duluthsuperior.com/mld/duluthsuperior/news/local/14023508.htm