Slow Minnesota Housing Market Extends North
The slowing of the Minnesota housing market in and around the Twin Cities is having a ripple effect extending all the way to the shore of Lake Superior.
Homes that were once flying off the market in the metro area are staying for sale much longer these days, and investment properties and other real estate on Minnesota’s prized North Shore are starting to feel it, too.
With Minnesota mortgage demand so low, some developers have stopped plans to build and other companies that deal with real estate are feeling the pinch.
“The froth is off and the foam has subsided,” said Scott Harrison, a developer.
“It’s been sobering for people to realize that real estate can’t grow 20 percent on an annual basis.”
Sales agents and developers say the slowdown is the result of the downturn in the Twin Cities market and of North Shore property getting out of reach for many first-time home mortgage applicants.
“A lot of people that buy here are professionals; we have lots of doctors, attorneys and people with substantial resources, but the average working-class person, they’re not being driven to buy,” said Grand Marais sales agent David Parsons. “It’s very much a discretionary market.”
Investors like Jerry Loh are taking a hit.
He sold property he owned along the Gunflint Trail several years ago and used the profits to buy a condo in Florida and two pieces of land along the North Shore.
He was banking on selling the Minnesota land to finance his retirement. But three years later, he hasn’t been able to move them despite dropping the listing price on one parcel by $110,000 and cutting the other one by $35,000.
“Four years ago you could have sold this no matter what,” Loh said of his 11- and 19-acre hillside parcels. “There’s definitely been a pullback.”
Especially in new construction. Cook County issued 241 building permits in 2004, but only 36 during the first five months of 2007, according to the Cook County Assessor’s office.
Home resales are down 13 percent in the county and 41 percent on year-round houses from 2004, when a record 115 sales took place in Cook County.
In adjacent Lake County, residential sales peaked in 2003 at 261 and dipped to 231 last year — an 11 percent decline.
That said, Minnesota home prices have not followed suit as sellers have been unwilling to drop their asking prices substantially in most cases.
And with a little patience, many haven’t had to settle for much less.
The boom on the North Shore followed a similar spike in the area that allowed homeowners to cash in skyrocketing equity and take out a Minnesota mortgage to put toward a summer place up north.
“It wasn’t their money, but they were spending it and now the market has caught up with that,” said Tim Melby of Lake Superior Realty.
Melby’s business has plummeted considerably.
He has gone from selling 20 to 30 properties a year to an average of 10 to 20, but thinks the market will pick up again.
Some see the slide as good news, especially given the abundance of bad credit mortgage loans that will no longer be issued to the next generation of home buyers.
Many longtime residents of the area worried when large parcels of land were carved up to be sold in smaller pieces as part of a subdivision. But those concerns have decreased with the sales.
Most aren’t treating the recent trend as doomsday. For those who are in it for the long haul, like Maple Grove’s Michael Miller, who rents out one house on the North Shore and uses another as a family getaway and future retirement home, there is comfort in the time-honored adage, “God isn’t making any more land.”
“Lakeshore is gold,” Miller said. ‘Real estate is always a great investment. I look at it as a retirement nest egg.”
SOURCE: The International Falls Daily Journal