The hottest neighborhoods in Minneapolis and St. Paul in 2021
The most dynamic neighborhood in Minneapolis for home buyers last year was in the northeast corner of the city, according to the Star Tribune's Hot Housing Index.
Kenley Johnson last year moved from an apartment in the North Loop neighborhood downtown to a starter house on a tree-lined street near the Columbia Park Golf Course in northeast Minneapolis.
She went from a neighborhood where a square foot of real estate sells for more than anywhere else in the city to the one that's now the city's hottest for houses.
"I wanted something that wasn't right in the middle of the city and not around so much traffic," said Johnson, who spent a year hunting for houses. "But I didn't want to be in the suburbs."
Every single neighborhood in Minneapolis and St. Paul saw house prices rise in 2021. But the most dynamic ones were inexpensive, working-class neighborhoods, according to the Star Tribune's Hot Housing Index. The index tracks year-over-year changes in several metrics that measure buyer and seller activity.
At the top were Columbia Park in Minneapolis and Dayton's Bluff in St. Paul.
Columbia Park's ascension is due in part to its relatively inexpensive housing stock. On average, houses in the neighborhood sold for $188 per square foot last year. That was $35 less than the city average. But it was well above the neighborhood's $154 average of the previous five years.
A similar price spike happened in Dayton's Bluff where houses sold last year for $155 per square foot. That was $30 cheaper than the St. Paul average but also sharply above the neighborhood's $116 five-year average.
"Affordability was No. 1 on my list," said Johnson, who bought 1,600 square-foot, three-bedroom, two-bath house built in the 1950s for $279,000.
Johnson said the people who sold her house, which is just a few blocks from the Columbia Heights border, had lived there for 24 years. She said other properties in northeast Minneapolis are now hitting the market for even more than she paid, and they're selling quickly.
For Minneapolis as a whole, the average price per square foot was $223 last year, a 17% increase over the previous five-year average and one of the highest in the metro. The supply of listings was also above average, as well. In St. Paul, where the price per square foot also increased double digits to $186, listing inventory was also near the top metro wide.
Despite rising prices, urban areas are seeing a noticeable ownership churn that's being driven by a variety of factors, including changing demographics, rising crime and the pandemic.
It's visible in many neighborhoods, including Columbia Park, where there were 51 closings during 2021, a 55% increase over previous years. Houses there sold on average in just two weeks, five days faster than normal. And the supply of listings, which factors in new listings minus sales, fell by 76%.
In Dayton's Bluff, there were 256 sales last year, a 22% increase over the five-year average. Houses there sold in just 12 days, more than twice as fast as normal and the supply of listings fell by 53%.
While crime is on the minds of many buyers and sellers, the pandemic has at least temporarily altered the market by influencing where and how people want to live, said Emily Green, a real estate agent for nearly three decades and a lifelong resident of Minneapolis.
"Three years ago I could show you a zillion houses in far-out suburbs that nobody wanted because people didn't want big houses outside the city," Green said. "But that completely changed and could change again. People have had two years to fall in love — or out of love — with their spaces."
Data has yet to show that rising crime is causing an exodus from the city — and it ultimately may not.
"We're only seeing these new negatives and it's stressful," Green said. "But for the person who says 'I'm done with the city' and wants to sell their house, there are probably 15 people who say 'I'll take it off your hands.'"
Take the neighborhood in Minneapolis where violent crime increased the most in 2021 compared to 2020 — Uptown. House prices rose nearly 10% in that neighborhood last year, a sign of ongoing demand.
And while there were more house listings in Uptown last year compared to 2020, there were bigger increases in some Minneapolis neighborhoods where violent crime was less of a problem.
For Johnson, who had grown weary of the traffic and density of the North Loop, leaving the city wasn't an option. Still, the 28 year-old wanted a community, she said, that was a little less like the big city and little bit more like the small town in western Minnesota where she grew up.
"There are actually grown trees here, and it's a very quiet neighborhood," she said. "It's quaint and cute and I hardly see any traffic unless it's people who live on our street."
Johnson's house hunt initially began in and around the Longfellow neighborhood between downtown Minneapolis and Lake Street. The houses she looked at there were older, smaller and more expensive than the ones she toured in Northeast.
After getting outbid on one house, she bought her house in Columbia Park in early 2021 by paying the sellers more than they were asking.
"We probably looked at 15 to 20 houses before finding this one," she said. "So I got lucky."
For buyers less fortunate, there are still several neighborhoods in the urban metro that are a little less frenetic than those were most popular last year. That includes the Loring Park neighborhood along the south edge of downtown Minneapolis.
This densely populated enclave, which is dominated by condominiums and rental apartments, was at the bottom (No. 83) of the neighborhood index in part because houses took longer to sell and there was a much deeper supply of listings than other parts of the city.
On average, properties sold in 95 days and there was a more than four-month supply of listings. Because the market is considered balanced between buyers and sellers when there's a six-month supply of listings, it was still a seller's market in Loring Park last year.
Still, it wasn't the least expensive neighborhood in the city. That distinction goes to the Hawthorne neighborhood in North Minneapolis where the average price per square foot was $132, nearly $100 less than the city-wide average.
The most expensive was the North Loop, a condo-dominated area that posted an average sale price of $322 per square foot.
In St. Paul, the least-expensive houses were in the North End, where the average sale price was $149 per square foot. The most expensive neighborhood was Macalester-Groveland, where the average price was $237 per square foot.
For buyers looking for less competition, the median market time in the Summit-University neighborhood is just shy of 30 days — the highest of all 16 planning districts. And for shoppers who want the most choices, the highest inventory was in Summit Hill where there was enough listings to last about 1.7 months.
Benton Johnson, who is Kenley Johnson's brother, roommate and the real estate agent who helped her find her house in Columbia Park, said that about 95% of his clients over the past two years have been first-time buyers like his sister.
With prices rising dramatically in the area, he's advising them to adjust their expectations.
"I've had to have that conversation with a lot of potential buyers about what they want and what they actually need," he said. "We have this huge group of young, first-time buyers who are ready to buy and there's just not enough inventory."