Twin Cities condo market hits the unfinished basement

Are you a fan of downtown living? Real New York-style lofts with floor-to-ceiling windows and solid-core doors? Have you heard that there are units available, right now, in the city of Minneapolis?

Here's the good news, as told by the Minnesota Area Association of Realtors:

  • There are 612 condo units currently listed for sale in downtown Minneapolis (and another 789 in the rest of the city).
  • So far in 2007, 123 downtown units have been sold--a 69 percent drop-off from last year.
  • Sellers are collecting a falling percentage of their original asking price, and units are staying on the market for longer. The average is now six months.
Did we say good news? We meant bad news. Very bad news.

In the last few weeks, developer Rottlund Homes pulled out of plans to build the Revue, a 107-unit building next to the new Guthrie. And Milliken Development backed away from constructing 290 condos in its ongoing project at the corner of Hennepin and Washington.

While the real estate market may be sobering up from its long bender, analysts are not convinced that this drunk has hit bottom. "There was a severe downturn in housing starts in 2006," says Toby Madden, regional economist for the Federal Reserve Bank of Minneapolis. "Our projection is that it will go down a bit this year. So we're not looking for a recovery for another year or two."

But at least a few folks are cheering the ghost developments--real estate agents with other buildings to sell. "We're having a dynamite month at 720 Lofts," says Edina Realty's Fritz Kroll, explaining that the 99-unit North Loop building is down to its last condo.

"All these projects that have cancelled have pushed those buyers out into the market," Kroll continues. "I think demand and supply are going to be in check much sooner than people were predicting."

A day later, however, Kroll calls back with news of a fresh project that will be keeping him busy. The East Bank Mills, Kroll explains, will be holding a sales kick-off event the next day at the hulking Pillsbury A Mills. The current plan is to add another 960 condos to the Mississippi riverfront.