Low mortgage rates and a yearning for woods and water are driving double-digit gains in property sales — and record prices — in rural parts of Minnesota.
Statewide, there have been 83,824 home sales so far this year, a nearly 10% increase over last year, according to new data from the Minnesota Association of Realtors (MAR). The median price of those sales was $275,000, an 8% annual increase and a new record.
The latest report, which divides the state into 13 regional development zones including the Twin Cities metro, suggests that the pandemic is boosting sales in vacation areas and rural parts of the state. The gains were especially strong in north-central Minnesota and communities along the North Shore where getaway homes are popular. All but two regions showed annual sales gains, but they varied dramatically.
“COVID-19 has reshaped the housing market,” said Chris Galler, MAR’s CEO. “Realtors in Greater Minnesota tell us that they have consumers buying second homes in rural areas, especially cabins, with funds they would have used on trips — especially foreign travel — pre-COVID. The change in leisure travel plans and the change in employee commuting patterns has led folks to seek out properties away from more populated areas.”
In addition to driving sales, the pandemic has also upended the timing of the market. Though real estate was considered an essential service, the government shutdown and social distancing requirements delayed the spring and summer buying season into fall, a time when sales are most likely to slow.
“People are still listing and it’s Thanksgiving,” said Lindi Mae Carlson, an agent based in Duluth. “And it looks like I’ll probably be working on Christmas.”
She said that while many buyers are still weekenders, she’s seeing more people who are planning to work from their vacation home, especially along the North Shore where there’s strong and steady internet access.
And as they did before the Great Recession, many buyers are taking advantage of rising home prices in the metro area to refinance their primary home and use the equity to pay cash for a second home.
“It’s like 2007 all over again,” she said.
During October alone there were 10,290 closings across the state, a 29.8% increase compared a year ago. Buyers were most active in the North Central region, most of which is about a two- to -three hour drive of the metro, where closings were up 63% over last year, and in the Arrowhead region that’s bordered by the North Shore of Lake Superior, which saw a 32% increase. Gains in both regions outpaced those in the seven-county metro where buyers outpace sellers in some areas and house listings are near an all-time low. The same is true in many outstate areas.
New listings increased 6% statewide during October, but by the end of the month there were 38% fewer active listings compared with last year. Properties are selling faster this year, as well. On average it took 39 days to sell a house last month, nearly 20% faster than a year ago.
Galler said the pandemic and its effect on work and school can’t be underestimated.
“The work element is bigger than the school element,” he said. “Employees and employers have firsthand experience now with working remotely — successfully in most situations. Employees will not be working 40 hours from the employers office setting, but instead look at a new schedule of some time working at the office and some time at home.
The MAR data include sales that are listed through the various Multiple Listing Services across the state, but a smaller share of outstate agents compared with the Twin Cities metro are members.
Ben Winchester, Research Fellow for the University of Minnesota Extension Service Center for Community Vitality, has been conducting an ongoing survey of real estate agents since September to help get a better understanding of migration patterns throughout more rural areas of the state. That survey, which is being done in partnership with the Minnesota Department of Economic Development, shows that there’s no overwhelming single thing that’s causing people to move.”
Winchester said that buyers are a “healthy mix” of full-time and recreational owners and that 54 % of those who are buying lake homes and recreational properties eventually plan to move to the property full time. And based on just two months of responses so far, low mortgage rates seem to be less of a motivation than other factors including the pandemic and rising crime in urban areas.
“An overwhelming number of real estate agents said there is an uptick in business and that they’re much busier than expected,” he said. “There are a lot of confounding factors are at work right now.”