These affluent buyers wield outsized influence on the housing market, particularly at the luxury end.
In the 20182023 period, their home purchases surged to new heights, driving record sales of high-end properties.
By early 2021, luxury sales accelerated further, up 75% year-over-year in January.
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Virtually all households in this income tier are homeowners, and many own multiple homes.
During 20182023, upper-bracket home sales in the Twin Cities hit all-time highs.
Affluent buyers gravitated toward suburbs known for luxury properties especially those with lakefronts or large lots.
Urban centers have seen high-income demand as well.
In downtown Minneapolis, a wave of luxury condominium development catered to affluent downsizers and professionals.
There are over 124,000 seasonal or recreational homes (cabins) across the state.
Minnesotas lake regions benefited from this surge.
What Types of Homes Are High-Income Minnesotans Buying?
For example, in the Lake Minnetonka area, it became common to see older 3,0005,000 sq.
ft. houses torn down and replaced with sprawling new residences 8,000+ sq.
One teardown on Grays Bay turned a 5,000 sq.
ft., $1.6 million lake house into an 8,700 sq.
ft. home featuring six bedrooms, a game room, bar, and even a squash court.
Luxury features that were once rare are now almost expected in these high-end homes.
Smart home technology and robust broadband are highly valued.
have grown in popularity.
An increasing number of luxury homes feature dedicated wellness spaces, reflecting a post-2020 emphasis on health at home.
For second homes or primary residences on water, private shoreline and panoramic views command a premium.
Properties on Minnesotas coveted lakes (Minnetonka, White Bear Lake, Gull Lake, etc.)
often include boathouses or extensive docks.
Minnesota saw a burst of luxury condo development in this period, especially in Minneapolis.
Popular upscale lake destinations (e.g.
Trading Up (Upsizing)
Many affluent homeowners chose to upsize their primary residence during this period.
Paul saw numerous cases of this trading up dynamic.
There doesnt seem to be any hesitation or resistance in the [luxury] market right now.
This trend was evident throughout 20182023, as baby boomers began retiring in greater numbers.
Many empty-nesters no longer needed a 5,000 sq.
ft. suburban home and opted to move into something like a condo or a villa townhome.
Properties like one newly built 4,200 sq.
This indicates that downsizing doesnt necessarily save money for high earners; its more about lifestyle and maintenance.
Second Homes and Early Retreats
A significant portion of Minnesotas high-income households purchased additional properties during 20182023.
These include second homes in-state (lake cabins, hunting properties) as well as out-of-state vacation homes.
The pandemic motivated many to act sooner on second-home dreams.
Some high earners even made their second home into their primary home, moving to cabins full-time.
For others, the second home remained a vacation getaway, but with much higher usage than pre-pandemic.
This trend contributed to record sales in traditional vacation counties.
This trend became even more pronounced from 2018 to 2023.
Minnesota reflects this national pattern.
Why Cash?
High-income buyers can leverage cash for a few reasons.
Many could tap stock portfolios or equity to buy in cash, planning to refinance later if needed.
This nearly half-cash statistic underscores how the wealthy circumvented the mortgage market.
It was not unusual for a luxury buyer to put 50% or more down.
20182023 vs. 20082017: How Do the Trends Compare?
When comparing the recent five-year period to the decade prior, the differences are stark.
Market Conditions
The 20082012 period was a downturn.
High-income buyers largely sat on the sidelines or were very selective during the recession years.
In contrast, 20182023 began in a late-boom upswing and then saw an unprecedented pandemic housing rally.
Even a sharp rate increase in 2022 only temporarily cooled the high-end market, which rebounded by 202324.
The earlier decade never saw the volume or velocity of high-end transactions that the later years did.
Luxury Inventory and Development
Prior to 2018, new construction targeted at luxury buyers was limited.
After the mid-2000s housing bubble burst, very few high-end condos or mansions were built for several years.
Developers were cautious; some projects were put on hold or canceled.
Starting in the mid-2010s and accelerating by the late 2010s, luxury development picked up.
By 20182019, multiple new upscale condo projects launched, and suburban builders increased speculative building of high-end homes.
Thus, 20182023 had far more new luxury inventory entering the market than 20082017, meeting growing demand.
Price Trajectory
The decade 20082017 saw prices at the top end recover slowly.
Many luxury homes took years to regain their pre-2008 values.
In 20182023, by contrast, luxury home prices accelerated rapidly.
North Oaks median spiked ~30% in one year (2020).
And many individual high-end properties sold for record amounts in the early 2020s.
That underscores how much the ceiling has lifted.
Conclusion
Between 2018 and 2023, Minnesotas high-income households reshaped the homebuying landscape.
Going forward, the influence of this affluent segment is likely to persist.
making a second home a primary residence) suggests they will continue to set trends.
