Home prices gains in Minneapolis lag the rest of the metro

Home prices in the city of Minneapolis did not rise as fast as they did in the broader metro in 2022.

Why it matters: For years, urban home values have made strong gains, but the slowdown could be an indicator that the lure of city living is subsiding for some.

Reality check: There's certainly not a housing crisis in the city — median sale prices still increased by 1.6% in 2022 and they are up 21% over the past five years, according to the Minneapolis Area Association of Realtors' annual report.

Yes, but: They're not keeping up with the metro as a whole. In the 13-county Twin Cities region, median sales prices increased by 7.4%, according to the report.

• St. Paul prices grew by 4.2% last year, outpacing Minneapolis — but not the rest of the metro.
• Of note: Home values in both cities have typically lagged behind the rest of the metro because there are few opportunities to build new housing, which tends to be more expensive. But the gap has widened over the last two years.

What they're saying: Prior to the pandemic, people were willing to live in smaller houses or condos in order to be closer to entertainment and restaurants, said Jamar Hardy, president-elect of Minneapolis Area Realtors.

• That trend has reversed. Now, people want more space to work from home and there's not as much to do in the cities, said Hardy, who is also head of the House Brother's Team at Edina Realty.

Zoom in: Changes in Minneapolis and St. Paul home prices varied widely by neighborhood.

• Median sale prices in the central part of Minneapolis — largely condos in and around downtown — fell by 4.5% in 2022.
• But price increases in the Northeast and Longfellow areas were more on par with the rest of the metro (8.4% and 7.4%, respectively).
• In St. Paul, prices in Battle Creek, Highwood and Como were up by nearly 10%, while prices were flat or slightly down in Frogtown, Payne-Phalen and downtown.

What we're watching: With spring approaching, the home buying season is starting to heat up. Sales prices are expected to grow at a slower pace due to higher interest rates.