9 Month Supply of Luxury Townhomes ($500,000+) Eden Prairie, Minnetonka, Chanhassen
As the baby boomers continue to downsize from their larger homes, the expectation has been that they will move in to luxury townhomes and twinhomes. While some of that is going on, perhaps some of the builders have gotten ahead of themselves.
There are currently 35 townhomes/twinhomes over $500,000 for sale in Eden Prairie, Minnetonka, and Chanhassen. There are 4 townhomes/twinhomes pending which means there is a 9 month supply of luxury townhomes in this part of the metro.
Just for comparison sake to see how that stacks up against single family homes, there are currently 376 homes over $500,000 in the same three cities. However, there are 74 homes pending which makes the housing supply only 5 months.
Properties for Sale in Medina, MN
Here’s a link to properties for sale in Medina.
Buying Listings - Sellers Beware
To add to the topic of homes being overpriced in today’s Twin Cities housing market, an additional challenge occurs when real estate agents “buy” the listing.
They say they can sell it at a higher price but then work on getting successive price reductions. In a rising market, this strategy generally didn’t damage the seller too much. However, in a decelerating or flattening market like the one we’re in, that tactic is highly problematic for the seller. It will likely mean netting less on your home than had you listed it at fair market value in the first place. Often this strategy is incorporated with providing services at a discounted commission rate. As with most things in this world, you get what you pay for.
Let’s say two agents are in competition for a listing. One comes in with a market price of x. The other agent says he can sell the home for 5-10% more than x. The seller likes the idea of making 5-10% more on the sale of their home - so they think.
What ends up happening is the seller’s expectations are now too high - higher than what the market will pay. The seller has to constantly keep the house clean and leave for all the showings, but at the end of the day they don’t get any offers. Eventually the agent has to ask for a price reduction. This is a strategy is unfortunately used by far too many in the business. It helps to keep their listing inventory high, but it’s of no service to their client, the seller, or to the seller’s buyer.
A good example of this is I recently lost a listing on a property in the Western Suburbs in the highly sought after Wayzata School District. My CMA (competitive market analysis) came in at $870,000. My recommendation was to list it at $870,000 if they wanted to sell the property. I even had agreement from Mr. seller that it sould be listed under $900,000 especially given the softer market conditions.
The home ended up with an agent who initially marketed the home at $950,000. Within days, the price came down to $925,000 and then after 60 days moved to $899,900. After 3 months, the home is now no longer on the market. It did not sell. Unfortunately for the sellers, it’s unlikely they will see even $870,000 for their home. Had they initially marketed it at the more appropriate price of $870,000 they would have had a much better chance of getting their price while not having to put up with 25 showings over 3 months only to have no offers.
Getting the price right is the most important part of marketing your home in today’s buyer’s market. Chosing the right agent that you can trust to help set the price is critical. Be leery of the agent who says he can sell the home for 10% more than the others. While your mind might drift off on what you will be able to do with that extra 10%, listen to your gut if you have a sense that he’s too optimistic.
Twin Cities Homes - many are overpriced
The inventory of homes for sale is up approximately 35% for 2006 compared to 2005. This is on top of a similar increase for 2005 compared to 2004. 2005 was a record year for home sales. However, now that interest rates have risen and taken the edge off of the hot housing market, sales volumes are down 10-15% depending upon which city or suburb you reside in in the Twin Cities.
Generally speaking, appreciation rates are remaining positive in the 2-5% range from many communities. But with the growing inventory, sales times are increasing as is the competition. There will be some communities that will see flat to slightly negative appreciation for ‘06. I know that doesn’t sound good, but the Twin Cities has seen very steady price appreciation for the past several years.
Could the market be cured if everyone took a 10% price reduction? No. But that doesn’t mean many homes today aren’t 10-20% overpriced for today’s market. And that’s a challenge for both Realtors and buyers and sellers. The buyers are paricularly challenged today because there is so much to look at. Since many sellers start with an inflated asking price, it’s hard for the buyer to know where the real selling price will be. Because of that they wait and continue to look.
Wayzata Schools - Number of Children per Neighborhood
I had found this file earlier in the year when I was researching controvery surrounding the redistricting of the Wayzata Elementary School boundaries. For those looking for neighborhoods with lots of young children in the Wayzata schools, this is an excellent resource.
Real Estate Search - Zillow and RealestateABC
There has been much buzz about some of the new real estate search engines coming online. I have to admit, they are fun to use and I recommend you go ahead give them a shot. For an earlier review of both these products, check out Tech Crunch.
Search engines such as Zillow and RealestateABC seem to be geared toward those trying to guage market value of a particular property. This of course is critical when it comes to buying and selling your home. However, you should know that they are pulling information from tax records which don’t always reflect accurate market data.
For example, in Foxberry Farms, a Lundgren development of approximately 150 upper bracket homes in Medina, Minnesota, I found that the home values estiblished by the County Assessor’s office was anywhere from 1-2% below market value to 25% below market value. (BTW, wouldn’t it be nice to live in the home that’s being taxed at 25% under market value?)
I ran an estimate of my home value on both Zillow and RealestateABC. It was interesting to see the results. Both were significantly inflated from what my home is worth in the market today.
It’s important to know this because in the slowing market that we’re in today, sellers still have an unrealistically high expectation as to what they think their home is worth. It doesn’t help having services like Zillow and RealestateABC inflate everyone’s expectations.
Since so much is available these days via the internet, people think they can become the expert on home pricing. It is a difficult challenging thing and something that is very difficult to do just from a mathematical model. You need to be in the field each day buying and selling homes to have a feel for pricing. And even then, it’s difficult for professional real estate agents to get the price right.
Update: Northwest Plymouth Development Plans
The Plymouth City Council met on Tuesday, June 27th this week to discuss and approve the current plan for the development of Northwest Plymouth. Approximately 50 people attended the meeting. Most people who addressed the council were Plymouth land owners requesting higher densities on their properties.
At the end of the meeting, the City Council amended the land use plan from June 13th and slightly lowered the overall density for Northwest Plymouth. For a comparison of the plan as it existed on June 13th compared to June 27th, see here. Click here for a visual of the latest preliminary land use map as adopted by the council on June 27th.
One of the more challenging aspects for land owners and developers is the City’s new requirement for a 100 foot setback. This is a significant increase from the normal 50 foot setbacks. The Council did amend the plan to allow property along the Vicksburg corridor to maintain the status quo with 50 foot setbacks.
The next time the City Council will address land use will be in the September/October timeframe.
McMansion Glut - coming to Minnesota?
“America’s love affair with sprawling homes is showing signs of waning as the real estate market and aging boomers seek smaller houses. Our report on nervous sellers and the growing supply of ‘faux chateaux.’” This is a must read if you live in what the elites call “McMansions.” The Wall Street Journal defines McMansions as:
- 5,000+ square feet
- 4+ bedrooms
- grand two-story entries
- 3 car garages
- double-height family rooms
- master suites with sitting rooms and whirlpool tubs
The Wall Street Journal published this article on June 16, 2006. The aging of the population across America and particularly in Minnesota will have a major impact on local real estate. What was in demand for the past 20-30 years will not see the same demand in the future.
If you are unable to open the link to the WSJ article, e-mail me and I will mail a copy to you.
Northwest Plymouth Development Plan - City Council Divided
According to the Lakeshore Weekly News, the Plymouth City Council remains divided on the density requirements for the 1,700 acres of developable land in Northwest Plymouth. This land is the last remaining large area of Plymouth to be developed.
Having personally attended many of the public meetings that the City has held during the past several months, my experience has been that many, if not most, of the land owners would like to see higher density. They can sell their land for more if the density is higher. However, given the status of the lack of dollars coming from Hennepin County to help widen and improve County Road 47, the Council appears to be cautious not to overburden that roadway with higher densities.
Plymouth has published several interesting charts on their web site. In addition, they have updated the land use map.
The Plymouth City Council will have a meeting June 27, 2006 to discuss the formal adoption of the land use plan.