Sarah Bigger and her husband, Mike Slingerland, have thought about buying a home for years. When COVID-19 hit and they both found themselves working from home, they realized now was as good a time as any to get some more space.
“Both of us are 40,” Bigger said. “That’s probably later in life than most people buy their first home.”
Ten years ago, the couple had wanted to buy a home, but they were in a very different financial position. Since then, they’ve been saving, have developed good credit and have put themselves in a position where they could afford something nice.
When the shutdown happened last March, Slingerland and Bigger, who generally travel extensively for work, found themselves crammed in their smallish Kingfield apartment.
“Usually we are not in each other’s face as much as we have been,” she said. “I just started to think — we need more room.”
Once they made the decision, things happened fast. After getting pre-approved by their bank, Slingerland went camping with his buddies over the weekend in August while Bigger went house shopping — settling on a home in Tangletown.
“I had a super good feeling about it,” she said.
Bigger made an offer on a Saturday, and her husband got to see the place the following Tuesday.
“He loved it, thank goodness,” she said.
Bigger’s experience mirrors at least one real estate trend happening during the pandemic: home buyers looking to expand their space.
Leah Drury, a realtor with Lakes Sotheby’s International Realty, said she’s seen people want to live in larger homes “because they are in them more than they used to be.”
At the same time, for folks who have lost income because of the pandemic, selling off property is a way to free up cash.
In one case, Drury said, a couple in the Powderhorn neighborhood reached out because one worked in the restaurant industry and the other was a musician.
“Their biggest asset is their property,” she said. “They said, ‘Just to be on the safe side, let’s sell it.’” The market hasn’t yet fully revealed the fallout of the state’s massive job loss, but it has caused a small drop in house prices at the top level, while housing stock continues to be very tight.
Realtor Steven Taylor, who focuses on the Uptown area, said that the market is still seeing a lack of housing stock, keeping with a years-long trend.
“There are not enough homes, and there are a lot of buyers,” he said. “With interest rates hovering around 3%, this is pushing a lot of buyers back into the market, and they can afford more than they were able to previously because of those lower interest rates.”
According to data provided by Minneapolis Area Realtors, the inventory of homes for sale in areas around Lake Harriet was slightly down — 182 in July of this year compared with 191 in July 2019 in the neighborhoods of Armatage, East Harriet, Fulton, Kenny, Kingfield, Linden Hills, Lynnhurst, Tangletown and Windom. Meanwhile closed sales in those neighborhoods went up from 83 last July to 123 this year.
Over in neighborhoods around Cedar, Isles, and Bde Maka Ska, meanwhile, inventory was slightly up— from 1,046 last July to 1,090 this year. Closed sales were down by 5 percentage points in those neighborhoods — Bryn Mawr, Kenwood, Lowry Hill, Cedar-Isles-Dean, East Isles, Lowry Hill East, West Maka Ska, ECCO and South Uptown.
Taylor said now is a great time to get prequalified as a buyer to stay “ahead of the pack in a competitive market.”
“Even if you do not have a home in mind, call a mortgage broker to find out what you need to do to get pre-qualified so you are ready to go when a desirable property does hit the market,” he said.
Realtors say that while homes under $300,000 or $400,000 are often going into bidding wars, higher-priced houses are tending to sit a bit longer and sometimes require price reductions.
The impact on more expensive homes particularly affects the high-priced homes in neighborhoods around Lake Harriet. Data from Minneapolis Area Realtors show that while
the new listings and sales have gone up in July compared with last year in those neighbor- hoods, the change in median sales price went down. In addition, the median sales price for the area dropped 9.2 percentage points, from $468,000 in July of last year to $424,750 this July.
It’s a bit of a different story in neighborhoods around Bde Maka Ska, Isles and Cedar, where new listings have also increased, and sales have gone up as well — even the expen- sive homes in Kenwood, where the median sales price rose from $799,000 in July 2019 to $865,000 this July. Still, the rolling average for that neighborhood has basically flattened, so it’s possible prices may take a drop there in the future as they have in Linden Hills.
“Demand is much greater in those middle-range price points, and there’s less demand as you go up the scale,” said Telly Mamayek, an executive at Minneapolis Area Realtors. “A lot of people are staying put. They are investing in their homes [and] that is adding to the fact that there is not a lot of demand for additional housing.”
Meanwhile, the financial industry has more stringent application procedures for getting
a loan, according to Lisa Wells, who does mortgage financing for single-family homebuyers as well as people purchasing duplexes, triplexes and four-plexes. Wells said the mortgage industry immediately saw the effects of COVID after the shutdown.
“Clients could go into forbearance, which basically means not make their payments,” she said. “The industry freaks out. When clients don’t make payments to services like mortgage companies, the mortgage companies still have to make their payments to bond holders.”
Interest rates went up, she said. “It really wreaked havoc. First-time buyer loans went away overnight.”
Because of that, Wells said, rules changed quickly for individuals applying for loans. Anyone in the restaurant or hospitality industry, as well as self-employed people, had to provide current profit and loss statements.
“Did they get PPE money? Is that a mask for future losses? It’s a glass half-empty,” Wells said. “Prove to us you are going to make this loan vs. the other way around.”
Immediate vs. long-term impact
Constance Vork, an agent with Keller Williams Realty Integrity Lakes, said that when the shutdown started, showings plummeted.
“No one knew if we should or could be meeting, or if we would be putting people at risk.”
Even after real estate agents were deemed essential workers in Minnesota, Vork said there was still a sense of unease. But in June, she said, things started to return to normal.
“Showings didn’t race back immediately,” she said. “We saw a ton of virtual showings — buyers wanting to continue with their search. There was a pause with the sellers. We all tried to determine if they could sell their house.”
By the end of June, the market was hopping, especially in Kingfield and Armatage, Vork said.
“It has just been a feeding frenzy,” she said. “Anything good gets multiple offers. It’s pretty amazing. I don’t have a simple answer for it.”
Vork said that even though unemployment is high, people with jobs still want to engage with the market.
“Nothing about the pandemic is slowing it down,” Vork said. “Our big problem is inventory.”
The housing market also seems to have remained steady through the civil unrest following George Floyd’s killing, according to a report posted on MAR’s website. House listings went down in Minneapolis and surrounding areas after May 30, but the number of days on the market for homes on sale also went down. According to the MAR report, homes sold about 6% more quickly in Minneapolis in June of this year than of last year, while suburban areas like Golden Valley, Eden Prairie, and Minnetonka — as well as St. Paul — saw increases in how long it took houses to sell.
MAR’s findings mirror what Vork has seen. While she has seen people on social media say that people are fleeing the city, she hasn’t seen that happen.
“I have seen zero evidence of it in my experience with my own clients,” she said. “People who are asking questions on their blog are not Minneapolitans.”
Correction: Sarah Bigger and Mike Slingerland have made an offer on a home in Tangletown but have not yet closed on the house, as was mistakenly stated in a caption.