Why Metro-Wide Housing Prices Are Meaningless;
“A Tale of Two Cities Minneapolis Neighborhoods”
“It’s not a stock market. It’s a market of stocks.”
–old saying
“The housing recovery is real and sustained in the metro area, turning a buyer’s market into a seller’s market. But while some neighborhoods soar, others suffer.”
–“Inside Twin Cities Housing Market Rebound: It’s Real, But Uneven“; The Star Tribune (Feb. 1, 2014)
On average since the Twin Cities housing market bottomed around three years ago, prices have retraced about two-thirds of their drop.
Key words: “on average.”
As local Realtors — if not laymen — are well aware, the Twin Cities housing market consists of no fewer than 95(!) micro-markets, each with their own supply and demand dynamics, recent trends, etc. (in economists’ lingo, some are close substitutes — but some aren’t).
Linden Hills vs. Jordan
At the top of the heap, high-demand Twin Cities neighborhoods like Linden Hills have now eclipsed their 2006 high water mark — and by at least 
some measures are now 20% higher.
At the other extreme, laggards such as the Jordan neighborhood in North Minneapolis are still more than 60% below peak prices.
Or as I like to tell prospective home Sellers: “when you’re about to list your home, the housing market shrinks from thousands or even tens thousands of homes down to three — the three Comp’s (“Comparable Sold Properties”) most relevant for pricing yours.”
See also, “The 200+.”
Bay Area Study in Contrasts
The foregoing phenomenon is hardly limited to the Twin Cities.
So, prices in Silicon Valley favorite Palo Alto are now 40% above their 2006 peak.
Cost for an “average,” 3 BR/2 Bath home with around 2,000 square feet in the tony enclave?
Somewhere between $1.6 and $1.8 million.
Meanwhile, scarcely 40 miles northeast in Bay Area suburb Richmond:
“Homes lost 66 percent of their value, on average, and are still worth less than half what they were at their peak. About 28 percent of all mortgages in Richmond are deeply underwater (meaning that the homeowners owe significantly more than their homes are worth), compared with 19 percent nationally.”
–“Eminent Domain: A Long Shot Against Blight“; The New York Times (1/11/2014).
Richmond’s housing market remains so depressed that its mayor is spearheading a legally novel campaign to seize and restructure privately-held mortgages.
The big banks hate the idea — which tells me she’s on to something.
