There’s a lot to love about life in Minnesota. For starters, it is a state filled with natural beauty, with deep green forests and sparklingly blue lakes. It is also a place where the cost of living is mostly mild. The median price of a home in Minnesota falls below the national average, and much of the state is extremely affordable. Outside of the Twin Cities, you can find large and affordable properties throughout the state.
Minnesota winters are cold and snowy, and that does impact the market. Buyer activity lessens at a time when most prefer to hunker down in place. But it is time to start looking ahead to spring in Minnesota and the influx of buyer activity it is likely to bring. Let’s explore the current shape of the market in Minnesota, first analyzing the state of the Twin Cities and then other major areas of the state as we move towards the end of winter.
Twin Cities Trends
The Twin Cities Metro Area is where most of Minnesota’s population is concentrated, with nearly 4 million people in the area. The Twin Cities had long been one of the more affordable major metropolitan options in the United States, but this appears to be shifting. 2021 marked a crazy year for the Twin Cities market, with prices rising and affordability taking a turn for the worse.
According to Redfin, prices in the Twin Cities hit new highs throughout 2021, culminating in a peak median sales price of $340,000 in May of 2021. In December, the median sales price was down from that peak, at $321,250. This was still a 9% increase from December of 2020. While this is still affordable in comparison to most of the country, it represents a large increase from the norm. In early 2017, the median sales price in Minneapolis and St. Paul was $220,500.
There are several things driving prices up across the Twin Cities. The city’s increasing appeal is a large factor, as the economy of the Twin Cities has improved lately, with numerous tech companies and major employers opening offices. The other factor is the lack of supply in the area. According to Norada, the total active listings in the Twin Cities is down 16.2% year-over-year. The months’ supply of inventory has fallen from 1.7 to 1.4, leading to fewer sales and higher prices.
With fewer properties on the market, buyers must get more competitive. While home prices in the Twin Cities aren’t far above the state average and haven’t reached the level of other major metropolitan areas, they are still on a steady rise. This could spell problems for buyers down the road.
Other Key Areas
Minnesota is a state with many different areas that appeal to buyers. While the Twin Cities is where most of the state’s population is concentrated, it isn’t the only option if you want to live in a large city in the Land of 10,000 Lakes. Other markets in Minnesota also had a competitive year with significant growth and could be blossoming into significant new areas to keep an eye on.
One example of a Minnesota city that had a big year is Rochester. Rochester is one of the biggest cities in the state, and in 2021 and through the start of 2022, prices soared. According to Realtor.com, in January 2022, the median listing price in Rochester was $349,900. This was a massive 22.8% increase year over year. Homes in the area are getting more expensive very quickly, as less than two years ago, the price of a home in Rochester was roughly $250,000.
Just outside of the Twin Cities, Otsego is a rapidly growing market. Otsego is a highly desirable suburb of the Twin Cities, and in December 2021, the price of a home increased to $443,400, a 21.3% jump year-over-year. In Zimmerman, a suburb roughly 40 miles from the Twin Cities, the median sales price was $325,000 in December 2022, according to Realtor.com, an increase of $30,000 from December 2021.
Conclusion
Home prices are rising throughout Minnesota. While most markets remain largely affordable, increases are likely to continue. With winter and its restrained real estate market winding down, spring is likely to usher in another large wave of buyer activity across the state.
