When Jeffrey Dewing is working with relocation buyers — often well-paid executives and their families — there's one Twin Cities suburb that's almost always at the top of their wish list: Wayzata.

"It's very much a first-choice city," said Dewing, a Wayzata-based sales agent.

It was also — by a long shot — the most expensive city in the metro on the Star Tribune's Hot Housing Index, which showed houses in the western suburb sold for $394 per square foot last year. That's more than double the cost of Delano, the hottest city on the index.

And while home prices posted an annual decline in nearly every one of the 98 cities on the list, Wayzata was one of the few that posted an increase in price per square foot. Prices there in 2023 rose 5% through the previous year and were 36% higher than the five-year average. Some say that's a signal of both Wayzata's desirability and a shortage of listings. But it also heralds how upper-bracket buyers with upper-crust budgets are less likely to feel the effects of higher mortgage rates, if they even need a mortgage at all.

"We do see a lot of cash transactions," said Dewing, adding that houses in the area often sell without ever hitting the market. Last summer, Dewing listed a Lake Minnetonka house that sold for $13.5 million before appearing on the multiple listing service, also known as MLS.

Not-so-humble village

Wayzata, population 4,400, is only about 10 minutes west of downtown Minneapolis and situated along a big bay on Lake Minnetonka. The heart of the city is a bustling bayside shopping area with upscale shops, restaurants and offices.

The focal point of downtown has long been a Tudor-style train station that once served the Great Northern Railroad. Today, that building houses the Wayzata Historical Society and other community groups.

Peter Hitch, a longtime resident of the area and a Wayzata business owner, said the city is a hub and gathering spot for several communities that surround the lake.

"We say we're the gateway to Lake Minnetonka, and we're only eight miles to downtown Minneapolis," he said. "And all that fuels the real estate market."

Hitch is the executive director of a group that started an initiative more than a decade ago to help improve access to the lakefront for residents and visitors alike. Known as the Panoway, the three-phase project will include a more than 900-foot lake walk that will connect the old depot to a new park, trails and garden on the east end of town.

He acknowledges that what once seemed more like a village looks nothing like it did decades ago, but he said it only makes the area more sought-after for homebuyers.

"It's changed," said Meredith Howell, a downtown Wayzata resident and agent who has brokered many of the biggest deals in the city through the years. "But the walkability is still a big draw."

Howell said in contrast to other towns on the lake, the city's extensive shoreline is part of what makes Wayzata so much more appealing to some buyers.

Because the city was once a monied summer playground, many of the first houses were upscale summer cottages that have only grown more grand. That or a more spectacular construction has replaced them entirely, a phenomenon that has made the area a magnet for hedge funders, athletes and wealthy families. The Cargills, for example, several years ago paid $10 million for a house commissioned for one of the Dayton heirs, only to tear it down and build a much larger one.

Wayzata is now one of only a few cities in the metro area where the median sale price exceeds seven figures. At the end of last year, the median price of all closings was more than $1.275 million, according to the Minneapolis Area Realtors (MAR). And that doesn't include deals that closed without ever hitting MLS.

Known for its stately houses tucked into a maze of leafy neighborhoods, the city does still have some more affordable options, mostly condominiums and townhouses. A 900-square-foot Wayzata Villa condo near the south shore of Gleason Lake sold late last year for $295,000.

Whatever the price, those maintenance-free townhouses and condos are a hot commodity, and a rarity, Howell said.

She said there's pent-up demand, especially among baby boomers and retirees who already live in the city and want a part-time summer house or to downsize.

"You can't get into Wayzata for less than $1 million, and there's nothing for sale," she said. "Our story is very, very low inventory across the board price-wise."

Bid early and often

At the end of December, there were only 21 houses for sale in the city and only enough to last three months at the current sales pace, according to MAR. On average, houses in the city sold in just 43 days, 30 days faster than at the same time the year before despite higher mortgage rates.

Last summer, Dewing listed a three-bedroom townhouse overlooking Wayzata bay for $3.395 million. On the first day on the market, he had nine showings and multiple offers. It sold for more than $100,000 above the list price, and the buyer paid cash. Howell also sold one in the same project for $3.48 million before it officially hit the market.

About the same time, he also sold a three-bedroom condo at the Harrington House, a boutique seven-unit condo project on a hill overlooking the village and the lake. That sold for the list price of $5.4 million.

"When something special goes on the market, that buyer pool is large," Dewing said. "That means there are eight other people looking in that price range."

Dewing said the per-square-foot price in the city is especially high in part because of those condo and townhouse sales, which tend to fetch a much higher per-square-foot price tag. Those recent townhouse sales, for example, sold for about $300 per square foot higher than the city's average.

New houses, too, are driving up prices, even for houses that aren't on the lake. When a newly built "modern European masterpiece" on a one-third acre lot hit the market last summer for $3.5 million, a buyer paid slightly more than asking price on its first day on the market.

"Our inventory levels are scarce," Dewing said. "It's a very, very desirable place to live."