As the housing inventory continues to tighten and homes prices continue to climb, what can real estate investors expect from the Minneapolis housing market 2020?
Minneapolis Real Estate Market Trends and Forecast
The Minneapolis-St. Paul metro makes up the Twin Cities housing market and currently has a population of 3,605,300. The Minneapolis housing market is no stranger to real estate investment activity as investors have been busy in this city for years. But with a new year approaching, many are wondering what the Minneapolis housing market forecast 2020 has in store for them. Let’s go over some of the latest numbers and trends:
Median Home Value Is Increasing at a Slower Rate
The median sales price of a home in the Minneapolis-St. Paul real estate market went up to $294,100 in the second quarter of 2019, higher than both the previous quarter and the same period a year ago. According to Zillow’s latest forecast, however, the median home value of Minneapolis MN real estate is $266,100. The price of single-family homes (which is the most common type of residential real estate in the Minneapolis housing market) increased by 6.7 percent from the first quarter and 5 percent in the second quarter. But the overall Minneapolis real estate market forecast for 2020 is that, while there will still be growth, it’s going to be slower.
Inventory Levels Are Low
This might present an issue for those of you looking to invest in Minneapolis real estate. The beginning of 2019 started off positive with rising inventory levels, but we started seeing a downward trend in July when inventory fell 4.4 percent (compared to the same period last year). And even though new real estate listings in the Minneapolis real estate market were up by 1.8 percent, home sales were higher. Pending home sales in the market increased by 3.2 percent and closed sales went up by 4.5 percent in July. In August, inventory has decreased again, by 3 percent this time. Months supply of inventory dropped 4.0 percent, to 2.4 months. Townhouses currently have the lowest supply on the market. So we can expect inventory to stay tight in 2020.
Minneapolis Is a Seller’s Market
With the supply of inventory tight and buyer demand high, Minneapolis houses for sale are flying off the market. The Minneapolis real estate market is a hot seller’s market and with no signs of near-future residential construction, buyers need to be quick on their feet if they want to find Minneapolis real estate for sale.
According to Redfin, the Minneapolis housing market is one of the most competitive, getting a 91 Redfin Compete Score. Homes typically receive one offer before selling for about 1 percent above the list price. It’s reported that hot homes sell for even more- about 4 percent above list price- and can go pending in around 7 days. The lack of inventory and the continued demand from both people searching for a home and those searching for Minneapolis investment properties has pushed the average selling price way up this year. Increasing by 9.1 percent since last year, the average selling price of residential real estate in Minneapolis is $289,000. If things don’t change, Minneapolis real estate investors can expect the market to stay hot next year.
Strong Rental Market
You can’t research a Minneapolis real estate investment without looking up data on rental property performance there. Mashvisor knows how vital real estate data is for making a smart investment in any US housing market in 2020. So we’ve used our investment property calculator and have summarized our Minneapolis housing market predictions for 2020 based on our most recent data:
- Median Property Price: $411,200
- Price per Square Foot: $241
- Average Days on Market: 46
- Monthly Traditional Rental Income: $1,842
- Traditional Cash on Cash Return: 1.1%
- Monthly Airbnb Rental Income: $2,844
- Airbnb Cash on Cash Return: 3.4%
- Airbnb Occupancy Rate: 61%
Yes, these return rates aren’t as high as you’d expect from a housing market we’ve been speaking so highly of, but that’s only because these are city-level rates. Around 55 percent of the Minneapolis population is composed of renters. Renter demand differs from neighborhood to neighborhood; as this drives the level of rental income your investment property will generate, you need to search for the best neighborhoods in Minneapolis, Minnesota based on your rental strategy. But the Minneapolis rental market is projected to have stable returns in 2020. Clearly, Airbnb has a higher city-level average return, but both strategies are considered profitable. When discussing Airbnb Minneapolis, however, the question of regulations naturally arises.
Is Airbnb Legal in Minneapolis?
Yes, but like any major metro, there are some Airbnb regulations. The Minneapolis Airbnb regulations clear up any confusion that may arise when trying to operate a short-term rental in the Minneapolis housing market. The first thing you need to do is obtain a short-term rental license. This requirement depends on which category your type of short-term rental falls into. These are the three categories as defined by the city, along with their licensing requirements:
- A short-term rental property registration or rental license is not required for an owner who lives at the property, rents out a room, and stays at the property during the rental period.
- A short-term rental property registration is required for an owner who lives at the property, rents out an entire unit, and leaves the property during the rental period.
- A rental license is required for the owner of a non-owner occupied rental property who rents out an entire unit. Only Tier 1 or Tier 2 rental licenses are eligible for this designation. The fees of a rental license for Tier 1 rental properties can range from $70 to $175 (plus $5 for each additional unit) and $112 to $350 for Tier 2 rental properties (plus $5 for each additional unit).
So far there isn’t any news of new bills or laws to be passed regarding short-term rentals in 2020, but I recommend you keep yourself updated.
Best Neighborhoods in Minneapolis
The data our calculator has for the neighborhoods in the Minneapolis housing market will have you wanting to invest now. If you would like access to a full real estate market analysis for Minneapolis, start out your 14-day free trial with Mashvisor now. For now, we’ve pulled our data on a couple of the top-performing areas in the Minneapolis housing market for each rental strategy. Let’s start with Airbnb, then list the best neighborhoods for traditional rentals.
Best Neighborhoods for Airbnb Rental Property
- Median Property Price: $309,820
- Price per Square Foot: $194
- Average Days on Market: 46
- Monthly Airbnb Rental Income: $6,856
- Airbnb Cash on Cash Return: 14.5%
- Airbnb Occupancy Rate: 72%
- Median Property Price: $318,675
- Price per Square Foot: $229
- Average Days on Market: 19
- Monthly Airbnb Rental Income: $6,856
- Airbnb Cash on Cash Return: 13.0%
- Airbnb Occupancy Rate: 69%
- Median Property Price: $283,267
- Price per Square Foot: $204
- Average Days on Market: 89
- Monthly Airbnb Rental Income: $5,194
- Airbnb Cash on Cash Return: 11.6%
- Airbnb Occupancy Rate: 73%
Best Neighborhoods for Traditional Rental Property
St Anthony West
- Median Property Price: $185,000
- Price per Square Foot: $185
- Average Days on Market: 13
- Monthly Traditional Rental Income: $1,907
- Traditional Cash on Cash Return: 5.6%
- Median Property Price: $225,138
- Price per Square Foot: $139
- Average Days on Market: 27
- Monthly Traditional Rental Income: $1,895
- Traditional Cash on Cash Return: 4.3%
- Median Property Price: $178,184
- Price per Square Foot: $109
- Average Days on Market: 55
- Monthly Traditional Rental Income: $1,351
- Traditional Cash on Cash Return: 3.4%
Do you have a free Mashvisor account and want to start searching for Minneapolis investment properties for 2020? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!