The hottest Twin Cities housing market in decades is sparking bidding wars with offers well above asking price, prompting bewildered questions from shellshocked combatants:
Where are all these buyers coming from? And where are they getting the cash?
Real estate listing sites reveal part of the answer. A growing number of house hunters in the Twin Cities are out-of-staters brandishing windfalls from sales of coastal market houses where ramblers fetch seven figures. Their tidy sums provide an outsized advantage in a metro market where asking prices are a relative steal.
During the first three months of this year, nearly a quarter of the people shopping for a house in the Twin Cities on Redfin, a national online real estate website, lived outside the area in more expensive cities such as New York and Denver. On average, those out-of-towners had house-buying budgets of $751,800, 61% higher than local buyers. Only two other U.S. markets saw higher price disparities.
"That means more locals will lose at bidding wars," said Taylor Marr, lead economist at Redfin. "It's good for economic growth, but at the same time locals are losing out on homes from people who have extra cash."
As low mortgage rates fuel surging home sales across the country, the pandemic and a growing acceptance of remote work are upending U.S. migration patterns and creating a new breed of equity migrants.
"I got the OK to rework remotely so figured it was time to move," said Kyle Bryant, a software engineer who last year decided to move with his wife and two kids from a suburb of Provo, Utah, to the Twin Cities. "Technology made this possible."
A desire to swap the desert landscape of Utah for one that has more trees was part of the motivation. Affordability was also a key driver. Parts of Utah have become popular with West Coast transplants, including other tech workers.
Before buying in the Twin Cities, the Bryants listed their house in Utah. After 106 showings, more than 20 offers flowed in for far more than they were asking. The buyer paid cash and closed in two weeks.
"It's a little absurd," Bryant said of the housing market in Utah.
The Bryants received about 50% more for their house than they paid just a few years ago, enabling them to trade up to a much larger house in the Twin Cities. They made five offers — all for far more than the sellers were asking — but got outbid every time before making a sight unseen winning bid on an Elk River home that's nearly twice the size of their old house on a much larger lot. With lots of trees.
"People are on the move from all over the country," said Seanne Thomas, their sales agent in the Twin Cities. "And they know they can cut their costs significantly by moving to the Twin Cities."
Thomas never met the Bryants face-to-face. She helped them shop by sending videos and doing iPhone walk-throughs. The first in-person visit to their new house in Elk River was last week after they'd closed on the sale and driven to the Twin Cities.
Thomas and other agents say out-of-state buyers are often extremely decisive in a market that's already hypercompetitive. During March, home sellers in the Twin Cities received on average about 102% of their asking price, which suggests most buyers are paying more than sellers are asking.
Mark Parrish, a sales agent in the south metro, said that even upper-bracket houses are fetching multiple bids, sometimes for $100,000 or more than the sellers are asking. Within the past year he's had at least three buyers from out of state, including New York, Las Vegas and the coast of California, for whom Twin Cities prices seem a bargain.
During March, sales of $1 million houses in the Twin Cities were up more than 70% over the previous year, according to the Minneapolis Area Realtors. The number of Zillow page views on Twin Cities homes from outside the metro area was up 23% compared with a 16% increase in page views from within the metro.
While many of those clicks might simply be from tire-kickers, some evidence suggests that the Twin Cities is drawing actual buyers from more expensive regions.
Zillow's Mover Report, which uses North American Van Lines data that tracks actual moves, shows that during the first 11 months of 2020, for all the people who moved to the Twin Cities from outside the state, the majority of the moves were from much more expensive regions including Los Angeles, New York and Washington, D.C.
Jeff Tucker, senior economist at Zillow, said buyers from these more expensive markets tend not to adjust their budgets when they move to more affordable markets.
"They're willing and able to agree to a high price compared with a local shopper," he said.
Out-of-state buyers are willing to offer far more than sellers are asking because they're often living in temporary housing and are eager to get settled in their new city.
Rebecca Rizzuto, a self-employed massage therapist in her early 40s, owned a house in Petaluma, Calif., an hour north of San Francisco. She was tired of feeling "house poor" and decided to sell. She explored several more affordable metros, including the Twin Cities, where she has a handful of friends with West Coast connections. She was also drawn by the parks and easy access to nature.
"The Twin Cities checked all the boxes," she said. "And everything costs about half as much as I'm used to."
She sold an 1,800-square-foot house in California for $1.25 million — about $525,000 more than she paid less than four years earlier and more than she was asking.
"It's crazy," she said of the California market. "I almost feel guilty."
The person who bought her house had been stuck in an Airbnb for seven months while house hunting. Rizzuto vowed to avoid the same fate during her move. So earlier this month, after checking into an Airbnb in the Seward neighborhood in Minneapolis, she hired an agent and immediately started house hunting.
When a house in a neighborhood along the west shore of the Mississippi River in south Minneapolis popped up during a late-night listing search, she and her agent immediately made an appointment and quickly submitted a full-price cash offer that was accepted right away.
"The cash offer definitely gave me a leg up," she said.
She's relieved to be living far from the West Coast, where she'd grown weary of wildfires and threats of a water shortage. And she's looking forward to working less.
"I didn't want to keep grinding the way I was," she said. "I was looking for a quality-of-life shift."