When Will The Minneapolis Duplex Market Crash?

It seems I either get asked if or told almost daily the Minneapolis and St Paul duplex markets are going to crash like the did in 2008 in light of COVID-19, high unemployment and civic unrest.

My answer is I truly don’t know whether or not it ever will.

All I can share is the data I have.

Twin Cities Duplex Sales – Since March 1, 399 new duplex, triplex and fourplex listings came on the market in the 9 county metro area. In the same stretch in 2019, there were 508 new listings. That represents a decline in inventory of 21.5%.

Of those new listings, this year 74.4% already have offers or ownership has changed hands. Last year, 81% of the newly listed properties changed hands.

While there isn’t an easy way to track it, a further decline of supply has continued to result in multiple offers on those properties that have come to market this spring.

This has resulted in an increase in the median sales price for multifamily properties on the entire MLS this year to $274,699. This is up 2.3% from last year’s $268,500. The whole MLS includes data from parts of southern Minnesota, Iowa and western Wisconsin.

Forebearance and Foreclosures – Just 8.55%, or about 4.3 million mortgages are in forbearance under the CARES act. This represents a drop from earlier numbers as more people go back to work and resume making mortgage payments.

Furthermore, the Federal Housing Finance Agency recently extended their moratoriums on foreclosures to August 31, 2020. In Minnesota, the foreclosure process normally takes about a year or more. Even if the homeowners in forbearance default, we are not likely to see a flood of bank-owned properties until the fall of 2021, if at all.

Evictions and Vacancy Rates – Last week Governor Tim Walz extended the state’s moratorium on evictions to July 13. That means a landlord cannot begin eviction proceedings or even give notice for a month-to-month tenant to vacate until that time.

Nonetheless, according to the Minnesota Multi-Housing Association, most tenants continued to pay rent.

June collections were not as strong as April and May. In Class A buildings (the newest, most expensive) 94% of tenants paid their rent on time. In Class B properties (10-25 years old), 92% paid. Class C properties (more-affordable) struggled a bit, with 88% of the residents paying rent on time.

While data isn’t yet suggesting any sort of surge in evictions, when things do open back up, many are expecting a backlog of cases in the county’s eviction courts.

Many anticipate there will be a surge in late or non-payment of rent when federal unemployment bonus payments end on July 31.

What Does It All Mean? The data can be interpreted either positively or negatively.

I can state with confidence however, it’s a great time to sell. Buyers seem anxious to move either themselves or their money into multifamily properties.

And while it doesn’t appear that there will be a wave of foreclosures in the near term, 2021 may tell a different story.

As seems to be the case with everything right now, I guess we will just have to continue to wait and see.