Welcome to today’s roundup of real estate news, where we delve into the dynamics of the housing market across various regions. From the challenges of soaring construction costs in Minnesota to unique finds like a hobbit home and the pressing demand for apartments in the Twin Cities, our coverage spans a wide array of topics that affect both potential homeowners and renters. Whether you’re interested in the latest trends in luxury amenities or the impact of historical corporate developments on local housing, our articles provide insightful analysis and up-to-date information to help you stay informed in the ever-evolving world of real estate.
Average New Construction Value in Minnesota at $261K | State News | voiceofalexandria.com
Despite home price growth stabilizing, becoming a homeowner remains largely out of reach for many Americans. A recent Cato Institute housing affordability survey, conducted after the record-breaking rise in home prices during 2021 and early 2022, found that 87% of Americans are worried about housing costs. Additionally, 55% of homeowners indicated they couldn’t afford to buy their current home at today’s prices, and 69% are concerned that their children or grandchildren won’t be able to afford a home in the future.
Multiple factors have contributed to the difficulty of buying a home, but most stem from low inventory caused by an underinvestment in building new affordable housing. According to the National Association of Realtors, decades of low levels of residential construction have created a national shortage of at least 5.5 million homes. During the COVID-19 pandemic, increased demand combined with record-low mortgage rates caused a surge in home-buying, further increasing competition for the few available homes on the market. Now, with average mortgage rates around 7%, many homeowners with previously secured low rates are reluctant to sell, resulting in even fewer homes being listed on the market.
After a rapid rise during COVID, home sale prices have begun to stabilize. The shortage of available homes intensifies competition, driving up prices. Fortunately, after the rapid rise in home prices during the COVID-19 pandemic, the housing market has since cooled slightly. For context, between February 2020 and May 2022, the median home sale price surged from $303,000 to $415,000, a 37% increase in just over two years. Today, home prices are only about 40% higher than pre-pandemic levels, but with mortgage rates doubling, the monthly mortgage payment for a median-priced home has more than doubled since early 2020.
Residential construction spending has contracted after nearing its pre-Great Recession peak in 2022. To make matters worse for prospective buyers, despite a federal initiative aimed at increasing housing availability, there has been a sharp reduction in residential construction spending that’s poised to make the problem of limited housing inventory even worse. The seasonally-adjusted annual rate of residential construction spending rose by over $700 billion (adjusted for inflation) from its low in February 2012 to its peak in May 2022. However, since then, it has decreased by nearly $150 billion, which means that less money is being allocated towards new housing inventory.
While nationwide construction spending has declined, some states and cities are managing to build more affordable housing units. Delaware has the lowest average construction cost per new residential unit authorized at $143,579, followed by New Jersey and West Virginia at $157,141 and $189,464 per unit, respectively. These figures estimate the value of the physical structure, excluding land value. At the opposite end of the spectrum, Hawaii is building the most expensive new housing, at an astonishing $423,609 average per unit, or about 75% higher than the national average of $241,792. Other states with especially high new construction costs include Wyoming ($342,230) and Massachusetts ($334,280).
The list of major U.S. metropolitan areas building the most affordable new housing is diverse. Among the nation’s 55 largest metros with populations of one million or more, Richmond, VA reports the lowest average cost per new housing unit at $167,003, followed by Austin, TX ($176,303) and New York, NY ($177,044). Conversely, the San Francisco, CA metro has the highest average cost for new housing units at $327,619.
This analysis was conducted by Construction Coverage, a website that compares construction software and insurance, using data from the U.S. Census Bureau and Zillow. Researchers ranked locations by average construction value per new housing unit authorized in 2023.
For more information, a detailed methodology, and complete results, see U.S. Cities Investing in More Affordable Housing on Construction Coverage.
Hobbit Home For Sale In Pine Lake Township, Minnesota
Obsessed is an understatement! We all know the real estate market is hot in Minnesota right now, which means this gem won’t be on the market for much longer. I recently came across a real estate listing for a hobbit house right here in the Land Of 10,000 Lakes.
A ‘hobbit house’ is a ‘small home built into the ground’ and often in a hillside or a bank. Hobbit homes also have one large and round door and window. Hobbit homes are also eco-friendly and well-insulated for our long Minnesota winters. One just hit the market in Pine Lake Township.
It’s brand new construction and just $189,000, which is a steal for this unique home and the nearly five acres it sits on. It also comes with about 216 feet of lakeshore. This home has two bedrooms and one bathroom and sits at just about 468 square feet. So cute! There’s also a cedar sauna on the property for those cold winter months.
This would make a great cabin, tucked away peacefully with no neighbors in sight. I love unique homes and this one is certainly that. There’s also a ton of land for you to build on, explore, or just enjoy through the windows. Between the lake, the sauna, and the privacy, you would never have to leave!
Take a tour of the inside of this cool space – and let me visit if you buy it. Ha!
Gallery Credit: Lauren Wells
Gallery Credit: David Drew
Click here for more information and to see the photos.
As renters gobble up new Twin Cities apartments, developers aren’t keeping pace
At a time when home building is on the decline, renters in the Twin Cities have been signing leases for apartments faster than developers can construct them, putting the squeeze on apartment shoppers and boosting rents. During the first half of the year, renters signed on 4,800 apartments — the most in decades — when builders completed only 4,533 apartments in the same span, according to a second-quarter report from Marquette Advisors.
The rental market is evenly balanced between supply and demand when the vacancy rate is at 5%, but by the end of June, the average vacancy rate across the metro dipped to 3.9%, the report said.
Strong demand means higher rents, which on average increased 2.9% year-over-year. Those gains varied dramatically from one city to the next, with the biggest increase (4.2%) in the southeast suburbs. Rents declined slightly in the southwest metro where several new apartment projects opened recently. Rents were essentially flat in both Minneapolis and St. Paul, which both saw robust construction in recent years.
“With the exception of downtown Minneapolis and some micro-markets within the southwest metro area, the potential is there for more substantive rent growth in 2025 in many submarkets,” Brent Wittenberg, senior vice president for Marquette Advisors, said in the report.
Across the metro, however, there’s a shortage of housing of all sorts, causing home prices to rise to record highs. Still, developers are retreating because higher mortgage rates and a restrictive lending environment have made it difficult to finance new projects, including those for rent and for sale.
“Financial feasibility is the primary challenge for most within the current interest rate environment,” Wittenberg said.
Rental property owners across the metro said while there are fewer empty apartments across the metro, the economics of owning a rental property is still challenging. Landlords are facing higher costs of all sorts, including rising insurance premiums and property taxes.
For more information, read the full article on Star Tribune.
IBM announcement sparks housing boom in Rochester – Post Bulletin | Rochester Minnesota news, weather, sports
A shortage of housing is nothing new in Rochester. Quonset huts had to be erected to house returning veterans and their families after World War II. In that case, the local situation was part of a nationwide shortfall of housing following the war. But a decade later, Rochester faced another anticipated dire need for housing, and city officials tried their best to get ahead of it.
In 1956, with IBM having announced that it would open a plant in Rochester, city officials made some quick calculations and determined that what the city had on hand in housing stock was woefully inadequate to meet the needs of IBM employees moving here. At a meeting with local builders and real estate developers on Oct. 23, 1956, it was announced by Rochester officials that “construction of 600 homes will be needed in 1957 and the same number in 1958,” reported the Post-Bulletin.
Obviously, meeting this need for housing was going to be a major challenge. Nobody was complaining, though, about the coup of getting a major worldwide corporation like IBM to settle in Rochester. “IBM tells us they will be hiring 1,000 people in 1957 and 1,000 more in 1958,” Joseph Cotter, president of the Chamber of Commerce, told the meeting. Up to 80% of those workers would be hired from Rochester; the rest would be transferred in, he said.
By the end of the year, plans for new housing developments had already been released. On Dec. 3, 1956, it was announced that “several hundred” homes would be built on a 270-acre site west of the Rochester Country Club. The developers intended to seek annexation into the city, and pledged that despite the shortage of housing, “our houses will be priced as low as though the market were truly competitive.” And thus was born Country Club Manor, another attempt in another time and place to ease yet another Rochester housing shortage.
For more information, read the full article on Post Bulletin.
Oasis Central Minnesota moves to new location | Local News | hometownsource.com
Having “identified homelessness and housing insecurity as a growing community concern” since 2015, Oasis Central Minnesota continues to make an impact in the lives of many. So much so that the non-profit organization needed to move to a larger location, said Executive Director Rose Surma.
“We’ve just been growing and expanding what we’ve been doing,” she said. “We’re really excited to be in our new space here. Our landlords here have also been very generous and have discounted the rent for us significantly, so that was very kind of them to do that. That helps us stretch our funding into the program.”
As Oasis Central Minnesota continues to grow, a larger space was needed. That space was found on Haven Road in Little Falls, which is now the non-profit organization’s location. Pictured are Oasis Central Minnesota staff members (from left) Lisa LeBlanc, Nina Lange, and Executive Director Rose Surma.
For more information, read the full article on hometownsource.com.
Luxury Homes: High-End Amenities Rich Buyers Are Snagging | Kiplinger
The luxury housing market was thriving at the end of 2023. Even with limited inventory and fluctuating interest rates, deep-pocketed buyers remain resolute about what they want (and don’t want) in 2024. Amenities once considered ostentatious have become common, which has forced sellers and builders to take luxury to the next level.
Roughly 86% of luxury homebuyers rank double vanities as a must-have when searching for a home, according to a new survey of real estate agents from real estate brokerage Redfin. Next in line are kitchen islands and granite or quartz countertops, with 85% of luxury buyers requesting both, followed by 83% requiring walk-in pantries. What’s more, over half of luxury homebuyers would likely not make an offer on a home with an outdated kitchen.
Among the agents surveyed, other “very common” items most high-end buyers deemed essential included heated floors (17%), an integrated sound system (14%), a prep kitchen (13%), and a coffee station (12%).
Open-concept floor plans were desirable to luxury buyers, according to more than 80% of the agents surveyed. Granite countertops were also ranked as “very desirable” over past trends such as sliding barn doors and shiplap, the agents said, with just 8% ranking these features as “very desirable” for buyers.
Coldwell Banker’s most recent Global Luxury Report showed that luxury homebuyers want multifunctional homes that cram as many configurations as possible into their footprints, primarily because of how and where we now live, work, and play, often under one roof. High-end buyers are less interested in remodeling an older property to fit their needs and more likely to move into a modern space where even the furniture is picked out for them.
For more information, read the full article on Kiplinger.