Note: Our market forecast includes Minneapolis data as well as data from its surroundings, including Saint Paul and Bloomington.
Why consider Minneapolis for real estate investing?
Situated on both banks of the Mississippi River, Minneapolis is the state of Minnesota's most populous city. Together with its neighboring cities, Saint Paul and Bloomington, it makes up a metropolitan statistical area of over 4 million people.
As the largest of those three cities, Minneapolis is home to strong music and performing arts scenes. It is especially known for its folk, funk, and alternative rock and has launched the careers of many well-known artists, including Bob Dylan, Prince, and more recently, Lizzo.
The state of the market
In a lot of respects, the real estate market in Minneapolis is doing fairly well. While the area does follow along with some national trends, such as having higher-than-usual unemployment and delinquency rates, many of those can be attributed directly to the pandemic and are now showing signs of recovery. In addition, many of the peak figures for these indices were much lower than the national average.
However, in order to give you a clear picture of what to expect from the real estate market in the Twin Cities, we've picked out three major trends for you and have expounded on them below.
Rentals are holding strong
While many major cities have experienced a surge in vacancies amid the pandemic, rental vacancies have actually fallen in the Minneapolis area, down 0.4% year over year. In addition, rental rates have increased in the past year as well, rising from an average of $1,522 to $1,538 in the last year.
Inventory is low, but rising
Minneapolis currently has 1.3 months of total housing supply as of January 2021. While this is certainly a low number and has caused housing prices to rise accordingly, investors should know that number is actually an improvement. It's up from a low of 0.9 months in December 2020. Plus, the number of housing permits for both single-family and multifamily properties have exceeded expectations in the last few months, which suggests the inventory shortage should be lessening in the near future.
Financial health indicators are better than average
It’s worth noting that, while delinquencies did peak in Minneapolis during the pandemic, their peak of 5.4% was much lower than the national average of 7.7%. In addition, the number has been trending downwards since July 2020. For its part, the delinquency rate is a mere 0.1%, which is lower than the national average of 0.3%.
Minneapolis housing demand indicators
All data and charts supplied by Housing Tides by EnergyLogic.
While unemployment is up as a result of the pandemic, all other housing indicators show that the real estate market in Minneapolis is holding strong.
Though unemployment in Minneapolis has had its ups and downs over the years, for the most part, it held fairly steady until March 2020 when the coronavirus pandemic hit. At that point, it proceeded to rise until it hit a high of 9.2% in May 2020. However, it’s worth noting that Minneapolis’s high point was actually much lower than the national average of 13.3%.
Since then, it appears to be making a strong recovery, which is good news for investors.