Set on opposite sides of the upper Mississippi river, Minnesota’s largest city, Minneapolis, and its capital, St. Paul, form the core of a seven-county region that in 2009 counted 3.25 million people in its boundaries. With its diverse economy and high quality of life, the Twin Cities has recently seen steady growth, expanding 8% in population and 10% in number of households in the last two decades. Middle-aged and senior populations — with smaller household size — grew fastest among market segments. In the ’90s, about two-thirds of population growth here was natural increase (i.e., births over deaths), about a third from in-migration.
Growth over the decades has seen neighborhoods closest to core downtown areas fill in, then push south and west, later north, expanding past city limits and the I-494/694 beltway, then beyond as much as an hour’s drive out. Recent years have seen that process reversed: Hennepin and Ramsey, the two counties that make up Minneapolis and St. Paul, are now adding population at the expense of exurbs. “A metro area once considered one of the nation’s most sprawling is now strengthening at its center while its outer rings wither,” noted an April article in the Minneapolis Star-Tribune.
Remodeling contractors watch this process at work every day. “We see people moving from the country into the inner rings,” says Bjorn Freudenthal, of College City Builders, a home building company with a remodeling division. A recent example: the retired couple from a rural town who bought two condos in Edina and wanted the remodeler to combine them into one. Within the city limits and in first-ring suburbs, such as Edina and St. Louis Park, the housing stock is typically 50 or more years old; Minneapolis itself has many “mature” neighborhoods, the most prized of them clustered around its string of lakes. “It’s a great city for remodeling,” says Michael Anschel, co-owner of Otogawa-Anschel, a Minneapolis design/build company, “a city that loves its old homes.”
Many inner-ring neighborhoods have held their value here, Freudenthal and others say. And even within those neighborhoods there exists wide variation in the size, style, and age of houses, as well as the demographic profile of residents. Local remodelers often focus their marketing on one or two demographic groups. For instance, remodeling company owner Loren Schirber says that at any given time his firm, Castle Building & Remodeling, in Minneapolis, is working on projects for three or four couples in their 30s who are expecting a child and are therefore in need of additional living space or another bathroom. The houses they own, he says, are not the big, stately structures with a lake view but the smaller homes three or four blocks away.
That demographic — what Hanley Wood Market Intelligence (HWMI) calls “Family Life,” is also a prime customer for Dreammaker Kitchen & Bath in first-ring suburb St. Louis Park. Company owner Lynn Monson started his business, a franchise, in 1997 with an expensive demographic market mapping. The red areas of the map — ZIP codes where likely clients were most prevalent — greatly aided Dreammaker in finding the midrange kitchen and bath remodels that are its staple. Monson says that his biggest customer demographic then was baby boomers. Today the members of that demographic group are in their late 50s and 60s, the homeowners who fall within the designation “Active Adult” or “Elite” by HWMI. “They’re still an important demographic for us,” Monson notes, though they’re buying a different kind of project — often an aging-in-place renovation — for a different reason than the family in its first or second home. That baby boom customer “has more disposable income” and rejects trendy design. (“Minnesota doesn’t like showy,” Anschel agrees.) But even more important to his company, especially in the last two years, Monson says, are those young families in first homes. Often they’re calling because something went wrong. “They’re fixing it up because they have to fix it up,” he says. “The jobs are small, the budgets are tight, and the DIY skills aren’t there.” Typically such work may involve updating a kitchen by changing out countertops, cabinet doors, and hardware rather than doing a full-on remodel. Monson often gets calls from homeowners who are planning a DIY project but who got as far as the demo, then, without planning to, ended up needing a contractor.
Favorable, i.e., older, housing stock and a state with an unemployment rate — 7% in November — several points below the national average bode well for remodeling in the Twin Cities. But, as elsewhere in the nation, the overall value of housing here has dropped. Not as far or as fast as it has in once-sizzling real estate markets such as Nevada or Arizona, but still, housing prices peaked several years back, when the average home in the Twin Cities metro area was valued at about $200,000; that’s now $171,000, off 15%. And in exurbs — where real estate is slow to move — the drop has been steeper. This has made it more difficult for homeowners to finance large-ticket projects, if they even want to at all. “The key,” says Realtor Teri Eckholm, who has sold homes in the northern and eastern areas of the metro market for 10 years, “is to work with people who might want to sell the house in five years so they make smart choices and so that they don’t over-do for that neighborhood.”
In some markets, that prime demographic — families in early middle years — has faded as credit has tightened, making it harder for people to finance projects. “Right now our clients tend to be older,” says Shawn Nelson, owner of New Spaces, in Burnsville, a southern suburb just beyond I-494. “They probably have equity in their homes and cash available.” Such clients tend to be older, married, college-educated, often with children at home. And the most popular jobs, these days, for New Spaces, are kitchen remodels.
That also describes many homeowners in the core areas where Sylvestre Construction builds. Owner John Sylvestre says that his company is “geared to older, 1920s houses.” He guesses that about 60% of his clientele are slightly older — 55+ — some with children still at home. It’s an older demographic than would have been the case 10 or 20 years ago, though Sylvestre still works in the Minneapolis neighborhoods where he started out 38 years ago. “People like the older housing stock, and they like the idea of older neighborhoods,” he says.
Neighbor to Neighbor
Selecting a specific neighborhood and client type to work with — or market to — is more of an option in the Twin Cities than it would be in, say, Chicago or Los Angeles. You can pretty much drive anywhere — including to Wisconsin — inside of an hour. Some companies work all over. Most pick a neighborhood, or several, or a suburb, and a type of client, and direct their marketing outreach to that specific client type or area. Anschel says that the rule for his company is 15 minutes drive time from the office. New Spaces, a half-hour south of downtown Minneapolis, does most of its work in the Burnsville and Bloomington area. For years, Castle Building & Remodeling, in Minneapolis, marketed to St. Paul. Two years ago the company opened an office there and soon found far more success selling to residents of the state capital. Locals like dealing with local companies. And local means you know what people are going to need and when they’re going to need it. Nelson recalls that when his family moved to Burnsville 30 years ago, the area behind their house was a farm field. That field has long since been developed. “It’s been a good remodeling market,” Nelson says. “We’re doing all the first phases of the houses, adding decks and porches. And then after 20 or 25 years you’re updating the bathrooms and the kitchens. You kind of watch as the area grows.”
—Jim Cory is editor of REPLACEMENT CONTRACTOR, a sister publication of REMODELING.
This is a longer version of an article that appeared in the January 2011 issue of REMODELING magazine.
Want to find out which remodeling markets are hot? The Residential Remodeling Index from Hanley Wood Market Intelligence has the answers.
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