Buyers battle for $1 million homes in Twin Cities area
Connor Walsh is like a lot of really frustrated homebuyers these days, with one exception: his budget is way bigger than most.
He’s young. He has a growing family. And he was able to sell a house for much more than he paid for it, which allowed him to exchange it for a more expensive one. Even though he is capable of spending over a million dollars, he has been outbid on nearly half a dozen houses, leaving him yearning for a bigger and bigger space.
“I sold my house and made a lot of money on it, so complaining is so stupid,” he said. “These are first-world issues, but it’s crazy.”
For years before the pandemic, the Twin Cities‘ most expensive homes were the slowest to find a buyer, even as sales in all other price ranges soared.
Cheaper homes sell even faster today. But seven-figure homes that often took a year to sell now find buyers in just 83 days on average, turning the area’s high end into a seller’s market for the first time in decades.
In February alone, buyers signed 1,429 purchase agreements for homes priced over $1 million, according to Minneapolis-area real estate agents. This was 32% more than the previous year and the biggest increase for any price category during this month.
“My clients know that once something happens, we have to be there in the day and ready to fight,” said Sue Hewitson, a Twin Cities real estate agent who works with several upper-tier buyers who have been outbid.
In late January, she listed a timber-framed home with 75 feet of Lake Minnetonka shoreline for $1.77 million. After nearly 20 showings and an open house with more than 30 snoops, the house sold for $2.1 million.
“It’s a flight to quality; people are willing to invest their hard-earned money in something quality with the intention of staying,” Hewitson said. “Before, the mentality was that buyers moved every five to ten years.”
At the current rate of sales, there were enough million-plus homes for sale at the end of February to last 2.8 months. This is just below a record low and about half the level of what is considered a balanced market.
Drew Hueler, a Twin Cities real estate agent who caters to high-end buyers, said since January at least half of his million-plus listings have received more than one offer and sold at a higher price than the list price.
Many of its buyers have jobs in financial services where they have made lucrative mergers and acquisitions that have yielded big gains. A few years ago, he said, they might have invested those windfalls in the stock market. Today, they are investing that money in an investment they can profit from: real estate.
“They say now is a good time to take chips off the table and invest in a durable asset,” Hueler said. “If they want to do ‘home forever’, now is the time.”
While those homes are usually the trophy for middle-aged executives and wealthy families, Hueling said a growing number of millennials are selling their first home and jumping into a dream home.
For many, the pandemic has upended their plans for the future. Agents say many are swapping the carefree luxury apartment they enjoyed while socializing and traveling for large homes with expansive yards, swimming pools, outdoor kitchens and plenty of multiple reception rooms where parents can work remotely while the children can be entertained.
“A lot of them got pregnant during COVID and their priorities changed and they’re spending more time at home,” Hueler said. “They don’t take vacations and all of a sudden space has become a priority.”
He recently listed several home sites in a new subdivision near Lake Minnetonka, but not on the lake. The lots, which were priced at around half a million dollars – not including the house – sold out immediately. He said most buyers are young professionals with growing families designing 6,000 to 9,000 square foot homes with sports fields large enough to play pickleball.
Although buyers are now willing to spend hundreds of thousands of dollars more than sellers are asking, there’s one thing most top-tier buyers don’t want: a repairman.
Today, Hueler said, people have more money than time.
“If people feel they have nothing to do [to the house]they will pay anything for it,” he said.
This prevailing sentiment worked to Amy Solarz-Patel’s advantage. In February, the Twin Cities realtor listed her 5,000 square foot home in Edina for $1.9 million, received several offers and sold it for slightly more than she was asking .
She swapped a Norman-style French house in Edina that’s almost twice the size of her previous home for a few hundred thousand less than the one she sold.
She quickly sold her previous home, she said, because it was newer and in pristine condition with all the latest bells and whistles. The one she bought was built in the late 1990s and clearly showed its age, she said. Her new home had been on the market for a few months, so she and her husband were able to pay the seller about $225,000 less than the asking price.
“Sellers who think this marketplace will bring them multiple offers and the best price without putting in the effort are wrong,” she said. “We encourage sellers to do at least some updates and renovations before listing to get the best price.”
She said all of her team’s ads received multiple offers and sold well beyond the listing.
Suzanne (Backes) Rowan, a Twin Cities realtor, said the high cost of construction and shortages of labor and materials are also forcing some buyers to buy what’s already built. She recently listed a nearly new home with 50 feet of shoreline on Medicine Lake near Plymouth in early February for $1.4 million. The following night, sellers received seven offers, all above the asking price. It sold for $1.7 million.
“There was so much interest that we could barely take it all in,” Rowan said. “I wasn’t completely shocked by the price because I knew that due to the cost of construction, it’s hard to even get a contractor to build anything for you.”
The rising cost – and limited supply – of lakefront has played a key role in the abundance of seven-figure home sales in the metro.
Walsh, the tree service owner who was looking for a lakeside spot, said his desire for lakeside living started after he bought a three-bedroom house with 40 feet of waterfront. Lake Minnetonka for $895,000 in the summer of 2020. .
The day after buying the house, he buys his first boat. And with her children still enrolled in school, they used the 2,300 square foot home as a cabin, visiting on weekends and during summer vacation.
Walsh sold this house about a year after buying it because someone offered him nearly $200,000 more than he paid.
He mistakenly assumed that he would quickly find another to replace. Instead, he was outbid on about half a dozen houses on the lake, including a four-bedroom Nantucket-style house not far from the one they sold.
The house was listed for $1.83 million, so Walsh offered about $2 million. Someone else offered the same amount, but was willing to pay cash and waive all contingencies.
“Where are these people from? Who has $2 million in their bank account and wants to live in Mound?” He asked. “It’s crazy.”