Beating Expectations

Most people have read and heard plenty about the lackluster housing market in the Twin Cities, with its oversupply of homes, stagnant prices, and lack of buyers. But the untold story is the robust health of the luxury home sector. For the past decade, the number of residences sold for more than $1 million has marched steadily upward, and prices of luxury homes are setting records across the metro area from Wayzata to North Oaks.

Linda Blyth, director of the Previews Distinctive Homes division of Coldwell Banker Burnet, a real estate company based in Edina, sees abundant evidence of the healthy luxury market. It shows in last year’s record-breaking sales, such as the 74-acre estate on Lake Minnetonka that went for $17.5 million. There was also the home designed and renovated by architect Ralph Rapson in Edina that netted $5.5 million, and the 13,000-square-foot house on Lake Pleasant in North Oaks that brought in $4 million.

Sales numbers like these are indicative of the luxury market as a whole, Blyth says. According to the Edina-based Minneapolis Area Association of Realtors, 437 homes costing more than $1 million sold in the Twin Cities in 2004. In 2005, 500 $1 million–plus homes changed hands, a 14 percent increase. While the number of $1 million–plus homes sold in 2006 dipped slightly to 463, it still topped 2004 numbers by 6 percent and outperformed the overall 2006 market by the same percentage.

Compare those numbers to 1997, when buyers purchased only 40 homes worth more than $1 million. In fact, since 1998 the portion of the total market comprised of $1 million–plus homes sold has increased tenfold.

“All last year it was gloom and doom nationally, and it was the cause célèbre to say that the upper bracket market was tanking,” Blyth says. “But I kept saying things are just fine in the upper end of $1 million–plus. That end of the market held up beautifully all year.”

More Buyers, Higher Prices

The real estate industry defines a luxury home as a residence worth more than $500,000, but solid appreciation in home values over the past decade means a large portion of houses in the Twin Cities would be considered luxury. Most industry experts generally characterize a luxury home in the Twin Cities as worth at least $1 million.

But it’s not just about price. A luxury home generally will be found on an exceptional lot—on a lake, wetland, or with a prime location in the central cities or a first-tier suburb, such as the Kenwood neighborhood of Minneapolis, in Edina, or on Summit Avenue in St. Paul. They also generally include unique materials, custom interior finishes, and special spaces, such as two-story 10-car garages, libraries, or indoor swimming pools.