Why now is a good time to buy a $1M house in the Twin Cities - Bring Me The News

Why now is a good time to buy a $1M house in the Twin Cities

Median prices are going up, but not among higher-valued homes.
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Ever dreamt of living in a million-dollar home? Well, this is the time to strike.

Don't get us wrong, we're perfectly aware that such a home is out of reach for most (ourselves certainly included), but anyone who is in the ballpark right now has a chance of getting one at a cut-price.

But wait, aren't house prices rising in the Twin Cities, I hear you say? 

That's true, they are, but these increasing prices are being predominantly driven by houses selling at the lower-end (ie. sub $250,000) of the market. Homes in the mid-to-upper range? They're struggling to sell.

What we're seeing is a housing market that's "compressing," Twin Cities Realtors' Association's David Arbit tells BMTN.

The chart below shows that last month, houses in the range of up to $500,000 sold for at least 100 percent of their last listing price, while $1 million-plus homes are only getting 95.6 percent of their last listing price.

The upshot? If you can afford a $1 million house right now, offer well below asking.

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Even more dramatic is the reduction in the average number of days a sub-$250,000 house is on the market compared to a $1 million-plus house.

While time on the market is still dropping for upper bracket homes, it fell by only 2.6 percent in November compared to Nov. 2017.

Meanwhile, it fell by a whopping 20 percent for homes priced under $250,000, and 14.3 percent for homes in the $250,000-$499,999 range.

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Anecdotal evidence from local realtors really puts the pressure on upper bracket sellers into context, as some homes are seeing discounts in the hundreds of thousands of dollars.

Sure, if you have the perfect combination of land size, location, and property quality, you probably won't have trouble shifting your house for asking price. But if you can only offer one or two of those, it's a different matter altogether.

"One high-producing colleague has sent me six individual 'price reduction notices' in the last three months – every reduction was at least $300K, two were more than $500K. Quarter and even half million dollar reductions – in one swoop!” said Larry LaVercombe, of Lakes Area Realty.

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"People think the market was hot this year – but that’s really only true in the entry-level ranges.

"And it’s not just million dollar properties that are going unsold. Once you get above $400,000, market time increases dramatically."

"Last March I sold a home on Linden Hills Boulevard," he adds. "The list price was $999,000; it sold for $845,000.

"This was beginning of a trend."

There remains incredible demand for houses that are priced at $250,000 or below, many of which are changing hands for prices in excess of asking.

This in turn has seen houses priced above $300,000 plateau across the metro, while the inventory for houses valued below that has dwindled.

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The median sales price in the Twin Cities in November was $266,000, down only slightly from the $271,000 peak reached in May this year.

Marcy Libby, a realtor with the Kim Pease Group at Coldwell Banker Burnet, describes the phenomenon as "a tale of two markets in the Twin Cities."

While the sub-$250,000 market has been hot throughout the year, things have been decidedly lukewarm in the upper bracket even during the busy spring period.

"The inventory continued to increase and the sellers in the upper bracket weren’t experiencing the frenzy those were in the low price points," she said.

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Anyone selling a $1 million-plus house that also requires a bit of work are getting "double dinged," she adds, because upper bracket buyers are turning their noses up at "project houses."

"This is due to competing new construction and homes that have been heavily remodeled being more compelling.

"Market time has increased substantially for these sellers and condition has never been more important.

"We are currently in a market place where we are seeing upper bracket sellers needing to do price reductions and/or re-position their homes. Showing activity has been extremely slow."

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