Hottest housing markets in the Twin Cities were pretty far out from the cities

Driven by a deepening quest for more space and lower prices, homebuyers in the Twin Cities went way off the beaten path last year, sending several far-flung communities to the top of the Star Tribune's sixth-annual Hot Housing Index.

Though buyers outnumbered sellers in virtually every corner of the region last year, nearly a dozen mostly rural communities — from Minnetrista to Princeton — replaced several inner-ring suburbs at the top of the index.

That shift is being driven by buyers like Luke and Emily Kramer, who set aside concerns about long commutes and a lack of urban amenities and moved to the exurbs.

"When we realized that we'd be growing our family and working remotely, we decided to pull the trigger," said Luke Kramer. "It just came down to square footage,"

Last fall, the Kramers sold a tiny bungalow in a Minneapolis neighborhood they cherished and bought a much larger house in Minnetrista after both started working from home during the COVID-19 pandemic. Though they always knew they'd need to trade up to a bigger house, the pandemic led them to accelerate that decision.

Last year, seven of the top 10 communities on the index were outer-ring suburbs. This year, it was a total sweep for the exurbs.

"The pandemic really changed the world of real estate," said Matt Baker, president of Coldwell Banker Realty. "Last year was a continuation of what started in 2020."

The Star Tribune used data from the Minneapolis Area Realtors to compile its index, which ranks communities based on the annual change in the number of sales, listing inventory and sale price (per square foot) during 2021 compared with the previous five-year averages. A score for each of those metrics is assigned, ranked and combined to determine an index score.

Rather than focusing on cities that were simply the most affordable or expensive, the index identifies communities that experienced the biggest changes in 2021 compared with previous years.

In Wayzata, houses fetched $321 per square foot last year, making it the most expensive city in the metro. That was a 30% increase compared with the previous five-year average, but a smaller gain than most top-ranking communities. The number of home sales and available listings in the city didn't rise or fall particularly dramatically, so it ranked No. 67 of 107 cities that met the 80-sale threshold to be included in the index.

In Minneapolis, where concerns about public safety influenced many sellers, the average price per square foot increased only 17%. At the same time there was a much more dramatic increase in sales and listings, which made the city the 46th hottest in the metro.

Safety wasn't a concern for the Kramers. They loved their neighborhood and, while the house was big enough for the couple and their first child, it wasn't big enough for remote working and a second child.

After their son Henry was born in early 2020, they put his crib in their bedroom. Later, they moved it to a second bedroom where Emily had been working. That forced her to the dining room and, when Henry grew mobile, to the basement.

So when Emily got permission to work remotely even after the pandemic, a move to one of the far western suburbs become an unexpected reality. Minnetrista is more than an hour from her office near White Bear Lake, but they found a much larger house than they could have afforded in one of the inner-ring suburbs.

"Size of the home absolutely remains a factor for many of these buyers as they need office spaces and more room to roam when multiple people are working from home," said Eric Newman, the real estate agent who helped the Kramers buy that house. "Minnetrista definitely offers larger homes on larger lots."

On average, houses like the one they sold in Minneapolis fetched $223 a square foot last year compared with about $150 a square foot in top-ranking Cambridge, Isanti and Princeton. Though prices in those three cities might seem like a bargain compared with Minneapolis, those cities saw home prices increase significantly more than in past years. The five-year average for those cities was about $115 a square foot.

Like many move-up buyers, the Kramers were able to sell their house in Minneapolis quickly and for more than their asking price, but also had to pay more than the list price for their new house. In Minnetrista, the average price per square foot was up 28% compared to the previous five-year average and on par with other suburbs. At the same time, the city posted among the steepest declines in house listings and closings.

More than half of the top cities on the index were northern suburbs, where house prices fell the most during the 2008 recession and prior to the pandemic had been slower to rebound.

That's all changed. Top-ranking Cambridge, St. Francis and Isanti all saw price increases that exceeded 30%, besting Wayzata and several places that were historically in high demand.

In Princeton, which is a full hour north of Minneapolis, home sales posted a 40% increase in price per square foot. That was the biggest increase in the metro and was the key reason Princeton was the 10th hottest market in 2021.

"You definitely get more for your money the farther out you go," said Alyssa Boeckermann, a sales agent in Apple Valley. "So price is a factor."

She said buyers who would have never considered those northern suburbs are now expanding their search. She recently worked with first-time buyers who were living with their parents and were shopping for a starter home with a big yard in the southern suburbs. All the houses that had the space they wanted in the southern suburbs were far out of reach for them, so they ended up buying a house in Cambridge.

The same is true in several cities that straddle I-35E in the east metro. In Stacy, which topped the index in 2020, Trevor and Darcey Sloneker paid the seller of a fixer-upper on 5 acres about $20,000 more than the $409,900 asking price. They owned a townhouse in Coon Rapids for several years, but they wanted a much bigger yard.

After three years of shopping, they knew the house in Stacy checked all the boxes for them, so they immediately made an offer without inspection and finance contingencies.

"We looked at houses a little closer in, but we couldn't get anything for the price we wanted to pay," said Trevor Sloneker.

The Kramers were in a similar situation. After already getting outbid on one house, they decided to make the sellers of their house in Minnetrista an offer they couldn't refuse. The four-bedroom, three-bath house was listed for $489,000, but there were three other bidders. So they offered the sellers nearly $35,000 more than they were asking.

The 2,480-square-foot house is nearly three times larger than the one they owned in Minneapolis, and it has a lower level they can finish if they need the space.

"It's become a running joke that we now have so much space we didn't know what to do with ourselves," said Luke. "We see it as place where we can raise our family for the next 15 to 25 years and it really hit the sweet spot on location."

None of that would have been possible, though, if not for Emily's ability to work remotely and Luke's hybrid work schedule.

"That really allowed us to expand our search, it made sense for us to look in western suburbs and maybe farther out than we originally thought we'd be able to," said Emily. "We didn't want to lose this house, it has everything we wanted and needed."