This morning we had our weekly exceptional properties meeting at a nice two story home in Plymouth. It is similar to the Tuesday morning meeting realtors have with their sales offices in that there is networking of the inventory coming to market, and buyer needs. There is also conversation around what agents are seeing in the market.
The brisk activity has driven prices to new heights at all price points. Normally the entry levels homes are pushed up fastest as more buyers can afford these, and the momentum ricochets upwards stalling out in the higher price bracket. The discussion this morning centered around the numbers that indicate the luxury market surge is outpacing the entry level homes.
Here is the most recent data from the Minneapolis Area Association of Realtors comparing the Twin Cities’ Average home price increase to that of the Lake Minnetonka Area.
Lake Minnetonka is a twenty-two square mile nautical playground for wealthier Minnesotans. The story goes that these folks have benefited from swelling stock portfolios over the last fourteen months and are not shy about showing up with cash offers for lakeshore dwellings in the $1-2-3 million range. Hence the price increases here are up 21.9% over last year, almost double the increase over the whole metro.
But here’s the kicker- one agent complained that the last few homes her clients bid on in multiple offers, have all gone to Californians. Then another agent quipped that prices here are nothing to them (which is true!). And another confirmed such fact findings.
It reminded me of an article I read a few years ago in the South China Morning Post: Chinese buyers abandon Australia’s housing market, still get blame for rising prices. Even when foreign buyers had fallen by 80%, the public was still blaming rising prices on the outsiders.
Gentrification sums up these same negative impulses. Someone from the outside, who has more money (or is willing to spend more money) than me on real estate in my back yard is creating a cost burden. In most cases, when the analysis is done, the one event– a few Californians purchasing Lake Minnetonka shoreline- isn’t enough to drive the prices. The discomfort might have more to do with stranger danger than statistical facts.