Qualified homebuyers are sitting on the sidelines because of perceived high prices, combined with low inventory. Are prices actually as high as we are led to believe? During the coming months, I’ll try to address this concern by using data relative to individual communities.
Let’s start by looking at sale data in Minnetonka, where I live. The first graph below reflects median sale prices of residential properties sold in Minnetonka during the past 10 years. Residential properties include single-family homes, townhouses, and condos. Today, the median sales price is $339,000, compared to a peak of $290,000 in 2008. That’s an increase of $49,000 in value over 10 years. Is the data used relative to Minnetonka? Yes, it is, when new-construction data is not included.
My concern—and the reason for the research I present here—is that I want buyers to be aware of the types of properties included in the data. The first set of data includes ALL residential properties. In a city that is pretty much fully developed, land in Minnetonka sells at a premium, and new-construction costs are high in this climate. Are these new-construction sale prices distorting the data? Yes.
What if your home is like the vast majority of Minnetonka’s properties and was not built during the past 10—or even 30—years? The second graph below includes previously owned, single-family homes sold in Minnetonka during the past 10 years—with a value of $285,000 and above. The peak in 2017 was $418,000. The peak in 2009 was $411,000.
An $8,000 increase in median sale prices over the pat 10 years could be considered a terrible investment. However, if we add townhomes and condos sold during that period, it’s not an increase in value—it’s a decrease of $9,500 from the 2009 peak.
By using data that is relative to the city of Minnetonka, we conclude that purchasing a home there now is probably a very good deal!
Next, I’ll take a look at Northeast Minneapolis, which has been in the news lately because of low inventory and rising prices—and where we soon will have a new listing!