Why (Some) Twin Cities Real Estate is Headed Higher — Part One
Instead of focusing on “when” the housing market is going to bottom and start recovering, a more useful (and answerable) question is, “where?” While market turns are notoriously difficult to call, where the Twin Cities (and national) housing market is headed, long-term, is increasingly evident.
Perhaps the single biggest trend afoot is the “centripetal” pull of the core neighborhoods — downtown, uptown, and the close-in suburbs. (If your high school physics is a distant memory, “centrifugal” is the force exerted away from the center, “centripetal” is the pull towards the center).
There are a couple, inter-related reasons for this, starting and ending with gas prices.
All the new subdivisions (5 years or younger) on the periphery of the Twin Cities were predicated on (continued) cheap gas. Places that were conceived and might have made sense when gas was $2.19 a gallon are prohibitively expensive now that gas is $3.49 — and you’re commuting in a SUV that goes through a tank a week, easy.
The remote ‘burbs (dubbed “exurbs”) also come with long commutes — and, frequently, inferior services. Too often, developers put up the houses first, and hope the grocery stores, dry cleaners, and restaurants follow them.
Stranded in the Suburbs?
Unfortunately, due to how fast the downturn overtook many of these subdivisions . . . they aren’t. Services are few and far between. Meanwhile, many of the homes are only partially complete, and a significant percentage of the completed ones are sitting, vacant and deteriorating. Needless to say, prices are . . . soft.
As the development tide continues to run out, these subdivisions will have a hard time holding on to the people currently living there, let alone attracting newcomers. (See, “Minnesota’s New Ghost Towns,” Star Tribune; 4/21/08). Click here for the link:
http://www.startribune.com/local/west/17932454.html
By contrast, closer-in communities offer mature infrastructure; established services; proximity to the unparalled city lakes and park system; and access to downtown and the River. The airport is close in, and, because of budget constraints, is going to stay that way. The antiquated, 35W-Crosstown (62) “T” that’s bottled up traffic south of downtown for decades is about to disappear.
There’s more.
Light rail is a success and going to be expanded (next: a connection between the two downtowns). The new Twins stadium is going to invigorate and expand the warehouse district. The new 35W bridge over the Mississippi — borne of tragedy, but vastly superior to its predecessor — is nearing completion.
Also consider: the University of Minnesota is about to have a brand new, outdoor football stadium — to go with several hundred million dollars of new campus construction the last decade. The Washington Avenue corridor connecting downtown and the University is filling in nicely, and is located just south of the River and new Guthrie. See, “With Books as a Catalyst, Minneapolis Neighborhood Revives,” NY Times; 4/30/2008). For the link, click here:
http://www.nytimes.com/2008/04/30/realestate/commercial/30books.html?_r=1&scp=1&sq=washington+corridor&st=nyt&oref=slogin
Within 2 miles or so of all this are thousands of new, interesting, and CHEAP condo’s.
Last but certainly not least . . . the new administration — whoever it is — is likely to vastly beef up spending on infrastructure, both because it’s needed, and to stimulate the economy. “Them that has, gets.”
So if you’ve got some money to put into real estate the next year or two, hoping to pocket some nice, *tax-free, long-term appreciation, where are you going to look??? To update Horace Greeley, “go towards the center, young man.”
Next: Wall Street Bust, Midwest Boom?
*Singles may exclude up to $250k in long-term capital gains from a sale; couples $500k. Both are subject to qualifying rules.
