Mobility Magazine of the Worldwide ERC, June 2017

by Byron Miller, SRA, AI-RRS, RAA

Minneapolis and St. Paul, Minnesota, represent a tale of two cities. Known to the locals as “the cities” or the “metro area”—“the metroplex” to hipsters—each city has its own personality and draw. Minneapolis is viewed as the younger city, with many modern skyscrapers, while St. Paul maintains an Old World charm in contrast to Minneapolis’ cosmopolitan feel.

Minneapolis is the largest city in Minnesota, with a population of 410,939 as of the 2015 U.S. Census estimate. St. Paul is the state capital and has a population of 300,851. Statistically the cities are known as the Minneapolis, Bloomington, St. Paul, Western Wisconsin Statistical Area.1 MN-WI MetroSA, as it is known, consists of 16 counties, including two in western Wisconsin, with 3.52 million people.

LOOKING BACK

Minneapolis and St. Paul are two very different cities, built by two different industries that share a common thread—water. The cities abut each other in some places and are separated by the Mississippi River in others. In the early days, the mighty Mississippi provided a means of shuttling flour and lumber from the city of St. Anthony, which would later become Minneapolis. Minneapolis’ development is tied to early milling and lumber companies that went on to become international powerhouses such as Pillsbury Company, as well as General Mills, which shipped more than 14 percent of America’s grain at its peak. Further downstream, St. Paul developed as a transportation center, first by shipping goods via the Mississippi and later by the vast railroad network built by James J. Hill.

snapshot

Minneapolis was influenced by early Nordic immigrants such as Norwegians, Swedes, and Finns. St. Paul was influenced more by other European immigrants such as French, Irish, Italians, and Germans. Both cities are influenced by an influx of immigrants to this day—Minneapolis–St. Paul has the largest Somali and Hmong populations of any U.S. city. This welcoming atmosphere still holds true for modern-day transferees.

TODAY

The cities have diverse industries as well as long histories of job creation and innovation. Sixteen Fortune 500 companies have a presence in the area, attracted to the highly educated local workforce. A partial list of major employers includes United Health Group, Honeywell International Inc., Cargill Inc., Target Corp., Best Buy Co., 3M Co., U.S. Bancorp, Ecolab Inc., Xcel Energy Inc., Thrivent Financial, Ameriprise Financial Inc., SuperValu Inc., General Mills Inc. (including Pillsbury), Land O’ Lakes Inc., Medtronic PLC, and St. Jude Medical Inc.

These companies make up key industries such as agricultural, biomedical, engineering, finance, health care, and information technology (IT). The diverse industries buffer the metro area from market cycles, providing economic stability. The climate can be challenging. However, for those who enjoy the outdoors, the area has much to offer. More than 10,000 lakes offer fishing, hiking, and water sports in summer, and skating and skiing in winter. Hunting options are available in each season.

market-at-a-glanceThe Twin Cities host major professional teams for baseball, basketball, football, hockey, and soccer. The cities have much to offer culturally as well. The Minneapolis Institute of Art has a permanent collection of famous artists and hosts traveling art shows from other major metropolitan art institutes. The Walker Art Center has its own permanent collection and hosts more contemporary art exhibits. The cities have well over 100 theater companies, ranging from the world-renowned Guthrie and Fitzgerald theaters and the Ordway Center for the Performing Arts to smaller regional theaters. There is a wide range of live music options as well—after all, the cities are where Bobby Zimmerman, aka Bob Dylan, and Prince first played before stepping onto the national scene.

The local economy is still recovering from the mortgage meltdown of the mid-2000s. Like most of the country, the cities have seen both high and low economic tides over the past decade. However, variations in this area have not been as dramatic as in the rest of the country, due to industry diversity. At the market’s peak in 2007, the average sales price was $302,845. In contrast, the market’s low sales price was $211,580 in 2011. Recovery from the low point continues today, and the market has increased over the past three years. For example, the average sales price (ASP) of a single-family home in 2016 was $282,997, up 4.1 percent from 2015. Year-to-date ASP for 2017 is showing another 5 percent increase over 2016, with an ASP of $297,230. Days on market have decreased over the same period, from 83 days in 2015 to 68 days in 2017. Similarly, inventory has decreased from 4.2 to 2.7 months over the same period. Local unemployment has been steadily decreasing over the last decade. The seasonally adjusted unemployment rate for February 2017 was 4 percent, in contrast to the national rate of 4.7 percent.

Additionally, since the bottom of the last recession, the cities have seen a significant increase in new construction, from starter homes in suburban development to the high-end condo segments in the downtown districts. While there is some multifamily construction, affordable multifamily housing continues to be in short supply.

LOOKING FORWARD

Although still in recovery from the last recession, the cities’ vitals look promising. Low interest rates and unemployment, zero inflation, and a recovering housing market fuel an optimistic tone. However, the caveat to the recovery is that rising interest rates and prices of key staples such as food, clothing, and energy could stall the recovery in the next chapter of this tale of two cities.

1 MN-WI MetroSA: State of MN Employment & Economic Development:

en.wikipedia.org/wiki/Minneapolis%E2%80%93Saint_Paul#Counties.

2 A portion of these statistics supplied by BM Appraisals.

3 Unemployment data: mn.gov.

4 North-Star Multiple Listing Service, February 2017 (Single-Family Homes).

Byron Miller is with BM Appraisals in Minneapolis and is a member of RAC (Relocation Appraisers and Consultants). He can be reached at +1 612 822 5985 or byronmiller@rac.net.