Duluth homes prices surge in record year

DULUTH – Home prices and sales rose to record highs in the Duluth area last year despite a deep shortage of available listings and a few months lost to the pandemic last spring.

The median sale price for 2020 was $195,000 — an 11% jump from 2019 in a region that typically sees about a 4% yearly rise in prices, according to data from Lake Superior Area Realtors.

The number of sales also passed 4,000 for the first time in recent memory, with 4,306 properties trading hands in a market that stretches from Duluth up the North Shore and covers much of St. Louis County and all of Carlton County.

Now, after a brief lull over the holidays, 2021 is picking up right where 2020 left off.

"I just talked to an agent who wrote an offer on a home last weekend and they were one of six offers," said Shaina Nickila, president of the Lake Superior Area Realtors board of directors. "It's the same story — we need more listings."

Even as closed sales climbed well past monthly normals as activity surged into the fall and winter, it was clear many buyers were simply taking what they could find. The average number of homes for sale in the area dropped more than 26% from 2019.

"Just finding that middle-of-the-road $150,000 to $250,000 house right now — we have maybe two dozen," Nickila said. "That is hurting us."

"A trend that stood out to me personally as a real estate agent was seeing people come back home," Nickila said. "I had the pleasure of helping a few clients, some personal friends, move back home. It was exciting."

Charlie Smith was early to that trend. He moved back to his city of birth several years ago after being smitten by images of the area posted by Destination Duluth and other social media marketers.

"I had to make it happen," said Smith, 37, who has taken up photography with the hopes of luring others to the area himself. "It's a great place to live, and you can go two minutes in any direction to get your Zen back if you need to."

He bought his Morgan Park home in 2019, another busy year for local real estate. It was the first house he looked at, and his first offer was accepted.

"I've got some friends who still just can't find a house, and I know some people have been looking for six months or more," Smith said. "As soon as a house goes on sale that's halfway decent it's gone."

"Costs for construction are definitely going up due to lack of materials," said Chelle Eliason, executive officer of the Arrowhead Builders Association. "Extended time frames is one of the biggest concerns I'm hearing from people. Getting on a calendar for somebody is almost impossible right now — our members are extremely stretched."

While the pandemic has driven up costs, part of the issue is a limited workforce. The association has teamed up with Project Build Minnesota to help recruit more folks into construction trades.

The National Association of Home Builders reported new home starts were 7.4% above 2019 levels in the Midwest but cautioned that "a shortage of buildable lots is making it difficult to meet strong demand."

"Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices," Robert Dietz, the national association's chief economist, wrote earlier this month.

Across the bay in Superior and northwest Wisconsin, the story was largely the same, if less pronounced. The median home price rose 6.4% to $157,000 in the area and closed sales crossed the 1,000 mark for the first time in years.

"The housing shortage is a nationwide issue, and that's something our leaders in government could work on together: finding homes for all price ranges," Nickila said. "That's going to continue to be an issue."

Nickila said the other big trends of 2020 — a run on lake homes and recreational property driven by the pandemic and record-low interest rates — will likely continue. She also sees the end of the cyclical nature of the local housing market that used to heat up in spring and cool off dramatically by autumn.

"Don't wait until spring — right now is just as good a time to list," she urged potential sellers. "If you're thinking it's only a spring/summer event, it's not anymore."