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MrSmith

Minneapolis is booming...but will it bust?

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I love that minneapolis is booming. I've heard that within just a couple years Minneapolis will top it's population high which was set in the 50's --before people moved to the burbs. This is quite an accomplishment considering families are so much smaller. It is also quite necessary in order to pay for city services such as the parks.

It really is a natural progression. Eventually as metro areas grow, traffic increases and people move closer to the city for convenience -- look at London, NYC, San Fran, Paris, Boston --the more expensive places to live (more desireable?) are in the city. The poorer folks end up being the ones in the burbs --- quite a reversal from the patterns of the 60's and 70's.

My concern for downtown, however, is twofold:

1. Why are citizens allowing developers to build such tall buildings on the fringe of the central core when there are still plenty of parking lots etc. that can be developed. Minneapolis has remained prosperous because it has tightly controlled growth patterns.

2. What's going to happen when the real estate market cools. There is no way that all 50 of the proposed developments can get built and sold downtown. I was told that at any any of these new developments over 30% are buying on speculation with no plans to move into a unit. So the demand for units is artificially inflated --at least it seems.

Thoughts?

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I wouldn't say Minneapolis is booming. It's recovering more than anything. Also, where did you hear that the city would be regaining its peak population?

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I simply can't believe all these condo units will be sold either. Its just a matter of how big of a glut will be created.

About the peak population thing, I think we have quite a way to go...like over 100,000 more people! Downtown, which is probably the hottest neighborhood right now will probably gain 10,000 in the next 5 years, but that still leaves alot. Although the immigrant communities (Latino, Somali) are growing pretty fast. I think it will take much more than a couple years to surpass the peak.

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I recently read a St. Paul, neighborhood newspaper that stated 20,000 units are currently under construction, waiting construction, or proposed in Minneapolis. I'm willing to bet most of these units are too costly and will eventually end up as rentals.

In regards to the Somali population, I hope the Census does a better job of collecting data. Somali and city leaders have stated the 2000 Census misrepresented the Minneapolis Somali community by roughly 35,000!

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I goofed, I guess it was downtown that is reaching historic highs, not the city as a whole --See: http://www.skywaynews.net/articles/2005/04...news/news01.txt

I must admit I look foward to the day when the economy is ssuch that new office buildings get built and not just condos --but either way, I like that money and residents are flowing into the city and not out.

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My first post here. A few background facts.

I've lived in downtown Minneapolis since 1998 in 3 different condo buildings. I worked downtown since 1996 until recently I was made an offer I couldn't refuse in Bloomington.

1. Why are citizens allowing developers to build such tall buildings on the fringe of the central core when there are still plenty of parking lots etc. that can be developed.

I think the most obvious reasons are that there is first of all demand for the towers (more in the second response). Second many of the parking lots are not controlled by the residential developers. I imagine some of them are going to become office towers in the next office cycle.

2. What's going to happen when the real estate market cools. There is no way that all 50 of the proposed developments can get built and sold downtown. I was told that at any any of these new developments over 30% are buying on speculation with no plans to move into a unit. So the demand for units is artificially inflated --at least it seems

St. Michael about 30 miles NW of Minnespolis plans to absorb some 4,000 housing units. So does Blaine MN. To the extent that those communities are would be able to do so, surely downtown Minneapolis should be able to absorb a comparable amount of housing units especially given the amenities. It is hard to estimate the amount of speculation which could pose a problem but I'm not necesarily convinced. A lot of rental units are being converted. To the extent that pricing is too high, that would put upward pressure on the rental units. That means many of the investment units (speculation) could end up in the rental market. Not a huge problem.

In general I don't think that downtown housing is really that much more expensive than the rest of the metro. On a per square foot basis it is a bit more but not prohibitively so. Also it is the lifestyle that people are purchasing as opposed to square feet and the trade off still is very favorable to many people.

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It will be interesting to see what happens with the market. I know that either the Pinnacle or Falls was built as a condo building in the 80's and converted to rental because the condo market could not support it --now 20 years later is is going condo --so definitely the demand is currently strong.

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My concern for downtown, however, is twofold:

I was told that at any any of these new developments over 30% are buying on speculation with no plans to move into a unit. So the demand for units is artificially inflated --at least it seems.

Mr Smith you *were told* that new developments have 30% spec buyers huh?? Sounds like you have some solid economic data to back up your statement. In any condo development there is a pre sale requirement from the bank to fund the loan for the project. There are PLENTY of projects on the market right now but PLENTY of them will not make due to not hitting the pre sales making them disappear and lay to the wayside...keep your eyes peeled this year as there will be lot of them along the road.

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