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When Ralph and Peggy Burnet put their sprawling Lake Minnetonka estate on the market during the depths of the housing downturn, they knew it could take several years to sell.
But less than two years later, the Coldwell Banker Burnet chairman and his wife sold their contemporary manse to an heir of the Cargill fortune for $9.1 million, the most expensive housing transaction in the Twin Cities last year.
The deal capped a pivotal year for the upper crust of local real estate, which saw sales of houses priced at $1 million or more jump nearly 20 percent. The gain outpaced the broader market, according to year-end data from the Minneapolis Area Association of Realtors, and it's a sign that the area's wealthiest buyers are gaining more confidence in the economy.
"We're not back to writing offers on the hood of a car, but it's not like 2010 where buyers had a month to make up their mind," said John Wanninger, a sales agent with Lakes/Sotheby's International Realty in Edina.
While upper-bracket prices are still soft, the robust increase in the sales suggests that the housing recovery has worked its way up to the luxury segment. Across the country, sales of $1 million properties during the first 11 months of last year were up 51 percent, according to the National Association of Realtors. It's an increase many attribute to buyers looking for a place to park their money as a hedge against inflation. Agents say sales were particularly strong toward the end of the year as sellers rushed to avoid the financial uncertainties associated with the so-called fiscal cliff.
Linda Blyth, head of the Distinctive Homes division at Coldwell Banker Burnet, said sales this year could be particularly strong as deals that were made last year close in 2013. "We think that we're going to be in pretty good shape," she said.
Across the 11-county metro area, only 307 sales were priced at more than $1 million last year, a fraction of the 13,000 properties that sold for less than $120,000. And while sales in all price ranges last year increased 17 percent, there was a nearly 50-percent increase in properties priced from $350,000 to $500,000. The increase in sales from $500,000 to $1 million was only slightly less.
Strength in luxury sales is significant because it represents growing confidence in the overall market. The housing recovery was initially driven by investors and first-time buyers, but more house hunters are coming to the market with cash from a home they just sold or to benefit from record-low interest rates and bargain prices.
Geographically, demand has been strongest along the shoreline of Lake Minnetonka, anywhere within the Wayzata School District and in Edina.
Wanninger, who was involved with several of the region's top sales last year, including a nearly $6 million sale of one of Edina's largest estates, said many wealthy buyers don't want to tinker with older houses that need work, so they're apt to buy something new. And that's why there were 90 tear-downs in Edina last year, he said, with most being replaced with $1 million-plus houses, he said. Confidentiality clauses prohibit him from discussing details of those transactions.
In other parts of the metro, there were also several notable -- and unprecedented -- sales last year, including in St. Paul, which saw its most expensive sale in history. A house on Grand Hill that had been on the market for nearly two years recently sold for $2.3 million. And in the exclusive Bearpath development in Eden Prairie, a house sold for $3.5 million.
Agents say even the wealthiest buyers are taking advantage of low rates. Not only are borrowing costs low, the availability of jumbo mortgages, which are for purchases above the conforming loan limits, has broadened.
During just the first nine months of the year, the number of jumbo mortgages across the country increased 23.3 percent -- the strongest pace since 2007 -- according to data from Inside Mortgage Finance.
Jim Young, a regional manager and vice president with Edina Realty, said many deals today are happening simply because of the prospect of rising home prices.
"They [buyers] can only watch the values from the sidelines for so long," he said. "A lot of them have said, 'This is just too good of an opportunity,' and this was a better use of their money than other things."
Indeed, prices last year were considerably lower than they had been at the peak of the market. The Burnets, for example, originally were hoping to sell four adjacent parcels totaling more than 13 acres along the lake for about $25 million.
During a tour of their Wayzata house shortly after they listed it during the summer of 2011, Ralph Burnet said he sensed that the market was on the cusp of change and that the possibility of a quick sale wasn't out of the question.
"It could be tomorrow, or it could be three years," he said.
In the end, his instincts were accurate.
In mid-2012 they sold two parcels to different buyers for a combined $8.8 million, then at the end of December sold the remaining two parcels, including their 8,500-square-foot house, for $9.1 million. On the same day, they paid $2.75 million for the Minneapolis home that belonged to the man who bought their house.
Meredith Howell, a sales agent with Coldwell Banker Burnet and the listing agent for Southways, a $24 million Lake Minnetonka mansion that's not far from the Burnet property, said the joys of having more buyers in the market has been offset by the frustration of people who are facing the prospect of selling for less than they think their property might be worth.
"I hope the reset is finished," she said. "Sellers now must decide if they want to meet it or hope prices will start to go up."
Jim Buchta • 612-673-7376