What 2024 holds for Minneapolis/St. Paul residential real estate
49,000 homes still needed to bridge Twin Cities housing gap
What’s the Point?
The Twin Cities housing market, currently under resourced by roughly 50,000 units, presents obstacles for Minnesotan buyers and sellers. The next few years will reveal the overall health of the market, while certain new developments could reshape metro landscape.
Twin Cities housing shortage persists
America needs three million more housing units, a shortage that is pushing up the cost of both renting and buying. The housing shortage touches nearly every region and the Twin Cities is no exception. There, the market is short around 49,000 homes, according to data from Hines as quoted in Axios, a number that is approximately 3.4% of the 16-county Twin Cities metro's existing inventory as of 2022.
Real estate investment firm Norada Real Estate Investments notes that the Twin Cities inventory of homes for sale has decreased by 7.7% during the tail end of 2023. “A lower inventory could potentially drive competition among buyers and impact overall market dynamics,” the firm says. Compounding the issue, there has also been a slight decrease in new listings on the market.
According to Hines Managing Director Sargent Johnson, while some people might have believed higher mortgage rates would push prices down much more, making homes more affordable, that scenario just has not played out in the Minneapolis/St. Paul area. “The next few years – and the dynamics of mortgage rates, housing supply and consumer demand – will determine the health of the Twin Cities residential market over the long term.”
Upcoming building can help
Between 2017 and 2022, according to an analysis from Pew Charitable Trusts, Minneapolis permitted 21,000 new units of housing, about a 12% increase. Statewide, housing stock comparatively went up by 4%, the analysis said.
“Flexible building policies have definitely helped the Twin Cities expand its housing supply at a faster rate than other parts of the county and helped to keep rent growth low,” notes Bob Pfefferle, managing director at Hines. One example of a new neighborhood project that is helping to ease the housing shortage is Hines’ mixed-use development in the North Loop neighborhood of Minneapolis, which will feature 355,000 square feet of next-generation office space; 350 residential units; 100 hospitality units; and 10,000 square feet of premier food and retail offerings.
“North Loop Green will be an exciting and dynamic destination for businesses and residents, with tremendous synergies between residential, hospitality, office and retail. In addition to creating much needed housing options, North Loop Green will add significant dining, recreational and family friendly entertainment choices in the rapidly growing North Loop submarket,” says Pfefferle.
What lies ahead?
Predictions from housing experts in Twin Cities suggest the market is poised to become more dynamic in 2024, and poised to benefit from a drop in interest rates.
“While there will likely be more homes for sale, the tight Twin Cities market will continue to benefit sellers and if mortgage rates dip enough to get people moving, multiple offers and competitive bidding could drive up prices,” says Johnson.