A friend of mine was recently in the market for a starter home. She told me she couldn’t afford to buy in Shakopee because houses are too expensive and ended up buying in Bloomington.
Others have told me the same thing — housing here is unaffordable. So I reached out to Shakopee resident Kathy Young, a realtor with Prior Lake-based RE/MAX Preferred, to get an overview of the local real estate market. In short, housing prices in Shakopee continue to rise, there’s a shortage of homes for sale, which is driving demand, but houses are still significantly cheaper than those in Savage and Prior Lake.
Young shared numbers from Northstar MLS, a real estate property database, stating the median sales price for existing homes in Shakopee is currently $266,275. By contrast, the median price is $309,500 in Savage and $350,000 in Prior Lake.
“Housing in outer-ring suburbs has really gone up in price. It’s no different here. Prices in Shakopee were up 11% in April compared to April 2019,” Young said. “In a stable market, there’s a six-month supply of housing. We haven’t been at a six-month supply here since December of 2011. We’re at a one-month supply. That means if no new houses came onto the market, the current supply would be gone in one month.”
This is creating increased demand for starter homes. When they do hit the market, they typically sell quickly — sometimes within 24 hours.
“Buyers in the under $300,000 market have to be ready to move quickly to get a house,” Young said. “If they wait, it’ll be sold.”
Anyone who’s recently looked for a single family starter house in Shakopee knows the supply is extremely limited. Several factors are responsible.
“Baby boomers are living in a lot of these types of homes. They’re working later in life than the previous generation, so they’re not interested in selling and moving,” Young said. “Then you have millennials who are minimalists and want a small home that requires little maintenance. So you have boomers and millennials wanting the same properties, and there’s not a lot of supply.”
During the 2008 recession, investors bought many small homes that were facing foreclosure, she said. Those houses are now being rented and generating income, which means owners aren’t motivated to sell.
This already tight market is being further squeezed by the fact that building less expensive homes has become more difficult for new home builders because of slim profit margins, Young noted. According to Northstar MLS, the median sales price of a new house in Shakopee is $384,553, which is 12% higher than in April 2019. The current median price for a new home is $432,297 in Prior Lake and $441,260 in Savage.
“Companies are not building smaller homes. Some of it has to do with state coding. It’s expensive to build new homes in this state,” she said. “The difference between building costs in Minnesota and neighboring states is significant because of stricter building codes and fees along with a continued increase in labor costs and materials.”
While the coronavirus has halted traditional open houses, showings continue virtually or with agents bringing clients to homes one at a time. Preventative measures allow just one agent and his or her customers in a house at one time, with no overlap. But buying and selling continues.
“Right now, working with sellers is super fun. It’s a good time to put your house on the market,” Young said. “If you do want to sell, keep in mind that many showings are virtual or video, and people want to look at pictures online. Use this time to make repairs, improve curb appeal, and take good pictures.”
She notes that even in the sellers’ market, homes must be priced appropriately. Otherwise, buyers will walk away or be unable to secure a loan above the appraised value.
Young advises first-time buyers, who are feeling the pinch in the current market, to start their searches as early as possible and have their finances in order.
“With buyers, there are challenges. One of my clients just offered $20,000 more than the asking price, and he didn’t get it,” she said. “My advice for buyers is to save money for a down payment. You don’t need 20% down, but do clean up your credit and be qualified for a loan so you’ll be in a more favorable position when you’re ready to buy.”