Why two neighborhoods hold most of the city's teardowns

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April 4, 2014 // UPDATED 5:03 pm - April 8, 2014
By: Michelle Bruch
New construction at 49th & Washburn.
Images submitted by Sustainable 9 Design + Build.
Michelle Bruch

For the past two years in Linden Hills, new construction has sold about 25-50 days faster than previously-occupied homes, according to data from the Minneapolis Area Association of Realtors. New construction in Linden Hills also sold at median prices $400,000 higher than other homes.

Teardowns represent a growing number of the listings in Southwest Minneapolis, but the phenomenon is primarily found in the Linden Hills and Fulton neighborhoods.

Builders and real estate agents said there are a few basic reasons why teardowns are concentrated in the area west of the lakes between 54th Street, Penn Avenue, 36th Street and France Avenue.

1) Schools.

Buyers always want to know whether a home falls within Southwest High School boundaries, said Chad Hanson, chief green officer of Sustainable 9 Design + Build. Even people without kids care about the school boundaries, he said, because they link them to a home’s long-term value.

“The values do drop off,” he said. “I would guess it’s 20 percent the second you cross over that border.”

2) Lake access and neighborhood shops.

Agents said buyers want to be close to destinations like 50th & France, 50th & Xerxes, and 43rd & Upton.

"The France Avenue corridor tends to have much more business than does the Lyndale Avenue corridor," said Realtor Zeb Haney of Edina Realty. "Lyndale has much more residential."

3) Land price.

It’s harder to build new construction north of 36th Street because the land acquisition price is too high, said Ben Ganje, a realtor at the Lakes office of Sobethy's International Realty.

Haney said typical costs for land and construction can bring prices up to $850,000-$900,000.

"With new construction, you have to be able to sell your house at a higher price point," Haney said. "You can't do that in Kenny, Armatage or Nokomis."

Kenny might have a hidden version of the teardown trend, however. Ganje estimates about one in four listings in Kenny are home flips with interior remodels.

According to data provided by the city of Minneapolis, Ward 13 permits for new single-family construction started increasing gradually about 10 years ago, dropped off during the recession, and climbed sharply in 2012 and 2013. The number of teardowns last year in the ward was more than double that of any year prior.

"The recent resurgence has more to do with a sea change in demand that started before the downturn," said Pat Clemens, managing partner at Crimson Design & Build. He said the demand is linked to the nationwide de-emphasis on sprawl (helped by $4 gas prices), and re-emphasis on the urban core.

Minneapolis schools project a 10 percent increase in enrollment by 2017, and the School Board is expanding Southwest High School and reshuffling students at Washburn to handle 1,000 more high school students. 

"A new generation of folks want to raise their families in the city," Clemens said. "There is a resistance to wanting to be in suburbia. Unfortunately, the housing stock doesn't compete with suburbia.”

Agents said they have noticed increasing interest in modern floor plans.

Haney said buyers want walk-in closets, nine-foot ceilings, and kitchens that overlook the living room and connect to the dining room.

"Nine out of ten people want that. They're over the old house feel," he said. "When you stack them side-by-side, they're going to take the newer construction."

That finding bore out for Clemens. He remodeled a 1920s home at 49th & Aldrich where a radiator burst and flooded the house while snowbird occupants were away. Much of the plaster was unsalvageable, he said, and the hardwood had heaved 15 inches off the floor. Clemens' company renovated the structure down to the studs and reconstructed it to match its 1920s aesthetic, replicating hexagon tile and commissioning a staircase to match the original hand-carved woodwork. Clemens said he received calls from neighbors thanking him for preserving the original character of the home. But the housing market reacted differently, he said.

"It went on the market last fall, and people wished it was more contemporary," Clemens said. "The neighbors loved it, but we haven't sold it yet."

Hanson said he thinks buyers are choosier than in years past.

“I’ve noticed that ever since the mortgage crisis and the fallout from that, people are much more picky about the house they want to buy,” said Hanson, who also works as a realtor. "Seven to nine years ago, people would buy the first or second house they would see without much thought."

Ganje said that beyond an open floor plan, buyers also want to know nitty gritty details about the home, learning details about insulation, the integrity of the driveway, and the age of the windows.

“They’re willing to pay a premium for a move-in ready product,” Ganje said.

Haney said builders have come to find that it's easier to undertake a new construction project than undertake the headaches and surprises of renovating an older home.

“For an additional $50,000-$100,000, you’re getting a new foundation, updated sewer and plumbing out to the street, and a lot more energy efficiency,” he said.

Hanson estimated that about 30 percent of his business is homes built on spec, and he said that’s necessary in order to find new clients.

“That’s our store,” he said. “People can come in and look at our product. … Eighty percent of the general public has a hard time envisioning what the end product will look like until it’s completely finished.”