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Low supply + high demand = 'real estate Hunger Games'

Mirroring most other U.S. markets, a limited number of houses with a growing number of buyers has heated up real estate in southeastern Minnesota. In 2021, 6,549 homes sold in the Southeast Minnesota Realtors’s seven-county region, which was down 38 from the 6,587 closings in 2020. However, the Rochester market tallied 2,394 house sales, which was up from 2,377 closings in 2020.

hollihartman.jpeg
“I've been calling it the real estate 'Hunger Games' -- it was kill or be killed” is how Holli Hartman described buying a 64-year-old, four-bedroom house in southwest Rochester. She beat out 17 other offers by paying $55,000 over the listing price and putting down $10,000 in non-refundable earnest money.
Contributed / Holli Hartman
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ROCHESTER — Shopping virtually from Denver for a house in Rochester, Holli Hartman knew she had to be “aggressive” when a listing for the style of home that she wanted popped up in the area she wanted to live in.

Hartman and Realtor Tracie Fogelson soon realized that a lot of home shoppers also were interested in the mid-century modern home in southwest Rochester. The sellers ended up with 17 offers.

As someone looking at a daily commute to Austin, that house in that spot was unquestionably Hartman's best choice. All she had to do was win it.

“I've been calling it the real estate 'Hunger Games' — it was kill or be killed,” said Hartman with a chuckle recounting the experience of buying the 64-year-old house. “So we put together an offer and we kind of loaded for bear. I knew that I was going to have to give up every right to back out of this deal. As an attorney, it's against my nature to do something like that. But I knew that if I wasn't aggressive, I was probably going to lose out.”

Compared to local shoppers, she had the advantage of knowing that her smaller house in the white-hot real estate market of Denver would sell for three times what she would pay in Rochester.

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She put in an offer with an escalation clause with no cap to automatically increase her offer by $1,000 more than the competition's best bid. Hartman also waived a home inspection.

However, it was putting down $10,000 in nonrefundable earnest money that made her offer the most attractive one in the bunch. Once the offer was accepted, she ended up paying $55,000 more than the original listing price of the house.

All of this happened without Hartman physically visiting the house, although her mother in Iowa did walk through it. Once she did get to walk through it, Hartman was very happy with her purchase and a meal at Hot Chip Burger Bar sold her on living in Rochester.

Bidding wars like this have become more commonplace in the past few years as the number of houses on the market have dwindled and demand has surged.

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Looking back, Southeast Minnesota Realtors describe 2021 as a sequel of 2020 with the speed of the action and drama ramped up.

In 2021, 6,549 homes sold in SEMR’s seven-county region, down 38 from the 6,587 closings in 2020. However, the Rochester market tallied 2,394 house sales, up from 2,377 closings in 2020.

The tight Rochester market pushed many buyers into surrounding communities. Stewartville closed 100 house sales in 2021, down from 108 in 2020. Kasson tallied 154 sales in 2021, a decrease of 1.9 percent from 157 closings in 2020.

Some small cities saw sale gains, after building new houses. Bryon sold 173 homes in 2021, an increase from 162 in 2020. A total of 96 houses sold in Pine Island in 2021, up by 23.1 percent from 78 in 2020.

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The big winner was Blooming Prairie with 40 closings, which is a 42.9 percent increase from selling 28 in 2020.

Acknowledging that it is a revved up market, Rochester Realtor Adam Howell, president of Southeast Minnesota Realtors , stressed that home buyers still found houses in a variety of price ranges in 2021 and will continue to do so in 2022.

“It comes down to adjusting priorities,” he said. “Buyers can accept a house with a smaller yard or outdated colors. They can also be patient and wait for a house with everything they want, but they might be waiting a while.”

He pointed out that on Feb. 7 there were 60 homes ranging from $185,000 to more than a $1 million listed in the area and 38 of those houses had been on the market for 20 days or more.

“Everybody will find a house. It just is a matter of when they'll find the house,” said Fogelson, who represented Hartman in her purchase.

17th Street Southwest
510 17th Street Southwest, is pictured Wednesday, Feb. 9, 2022, in Rochester, Minnesota.
Traci Westcott / Post Bulletin

The limited supply of available houses means there will be more bidding wars. Fogelson said Hartman’s situation wasn’t that unusual. She saw two houses in Stewartville end up with 15 to 17 offers each.

All of that interest equals higher prices.

The median price for a house in the region was $240,766 in 2021, up 9.2 percent from $220,548 in 2020.

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In Rochester, the 2021 median home price was $290,000, an increase of 11.6 percent from $259,900 in 2020.

Sales in the surrounding communities also climbed from 2020 to 2021 with Byron going up 21.7 percent to $335,000, Zumbrota increasing 14.4 percent to $272,000 and Pine Island going up 19.2 percent to $297,900.

Looking ahead, the addition of new housing developments and increase in mortgage rates could slow down the momentum, but probably not enough to make a major difference.

“The good news is that if you liked 2021, you’re going to love 2022, because it is going to be more of the same,” quipped SEMR CEO Eric Brownlow at the annual market discussion.

Jeff Kiger writes a daily column, "Heard on the Street," in addition to writing articles about local businesses, Mayo Clinic, IBM, Hormel Foods, Crenlo and others. He has worked in Rochester for the Post Bulletin since 1999. Readers can reach Jeff at 507-285-7798 or jkiger@postbulletin.com.
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