Map Monday: Minneapolis Home Values Minus Purchase Price

Here’s a fascinating map put together by Scott Shaffer for a new post on the blog of Board alum Nick Magrino. It shows the current home values of homes in the city minus their purchase price, or as Magrino states “a rough way of estimating how much equity people have on top of whatever they’ve paid down on their mortgages.”


Shaffer Property Value Increase Map

Magrino argues that lots of people are making money off the status quo, even if they do nothing at all. He writes that:

There are winners and losers in a constrained housing market. There are ups and downs in the market, but the long-term trend is very clear. Areas with lots of amenities and good access to jobs and services are in demand, and market values have been driven up by low supply. Intentionally or not, there are people who are making hundreds of thousands of dollars by keeping new housing out of their neighborhoods.

The big takeaway for me is would be some variation of the truism “you can’t be neutral on a moving train.” The real estate market is always working behind the scenes, no matter what sorts of policies one adopts or how much one embraces or shuns change.

PS. The map also reminds me of the “racial wealth inequality” chart I put up in 2015, showing the increase in wealth over time for different racial groups.

Wealth Disparity

A huge amount of American wealth came from owning a home in rising real estate markets, and home ownership was a privilege largely restricted to white people for critical generations during the twentieth century.




9 thoughts on “Map Monday: Minneapolis Home Values Minus Purchase Price

  1. Sean Hayford OlearySean Hayford Oleary

    I’d love to do or see a version with a rough annualized rate of return — which I would guess would be much closer to equal, although I’m sure certain neighborhoods still do better. My big issues with the units on this map are:

    1. Using absolute dollar amounts — which will always make it look like wealthier neighborhoods are doing better.

    2. Not accounting for years of ownership.

    One thing that would also be helpful to know (but I do not know is feasible with simple value and sale data) is improvements and additions to home — which again I’d guess are more common in wealthier areas.

    In terms of the conversation of how much wealth people have, the absolute dollar amount is important. But in terms of how well they’re doing in terms of creating value for owners, I think the rate of return people are getting is the most important.

    1. Steve S

      Without that annualized rate of return and from a personal standpoint I don’t find that chart useful.

      I was lucky to buy my house 20 years ago, but at the time it didn’t seem like I was lucky because housing prices were soaring and there were bidding wars. My wife and I wondered if we had paid too much and then prices kept going up and up until they crashed. Fortunately and luckily, we bought our house with the idea of living in it for 30+ years and not considering it as our retirement fund. Our house didn’t go underwater and now the prices have rebounded, but there was an obvious period when they went nowhere.

      Sure, the price I could get for my home is substantially higher than the sale price, but you have to consider mortgage interest (even with deductions), taxes, improvements, repairs, etc.

  2. Trent

    This chart doesn’t show how long someone has owned their house and it doesn’t show how much they spent to add on, improve, tear down – for example do those really tall spikes correspond to tear downs where someone spent $350k for a house and then spent another $1M? took a second mortgage or cashed in all their savings? without that info this chart is not useful.

    The graph overlaps another graph on this site of where teardowns have occured – so obviously all those dots from that map would be massive spikes in valuations by this map method but they don’t represent “a rough way of estimating how much equity people have”. well maybe a very, very, very rough way.

    1. Eric AnondsonEric Anondson

      Those areas aren’t spiking in value because there are a bunch of teardowns.
      The teardowns are in those areas because that’s where the widespread wealth and opportunity hoarding is happening, making teardowns viable.

      1. Trent

        The article purports to estimate the equity homeowners have based on a simple view of subtracting current value from what they paid initially. Until you remove the many properties where a second (or third) substantial investment occurred, it’s not a useful view. You are right that in-demand neighborhoods are where these activities occur but that doesn’t make the map correct or useful without this additional info.

  3. Andrew Evans

    Well the good news is the map shows that very few purchases are underwater. I bet it was very different 5 and 10 years ago.

    I’m wondering if this chart/map would be more useful if it showed percent improvement rather than dollar amounts. For instance (knock on wood) we’re looking to double our homes value in a few years if the market keeps going in Nomi, and even now we’re around 180% or so of what we paid, however that would only be tickling $100k on the chart. That same amount of growth on a more expensive property far out shadows my neighborhood and my house.

    I’m also willing to bet that the more desirable areas of town see less turnover. So some of that improvement is from homes that were last sold 20+ years ago. Maybe I’m wrong, but that plays into things too.

    There has also been a lot of turnover in Nomi, and other more affordable parts of town. Those new purchases aren’t going to reflect in this map the same way, and again those values as they increase aren’t going to do so in the same way as higher priced neighborhoods.

    A better map may be percent growth in the general market by zip codes.

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