“What goes up, must come down: thoughts about the residential real estate market through 2010″ is one of the more lucid articles I’ve read about the state of the Twin Cities real estate market. The article was written by Chris Galler, SVP for the Minnesota Association of Realtors (MAR). The Minnesota Association of Realtors has done an excellent job of trying to prepare agents for the coming changes in Minnesota real estate. They have always spoken honestly about the challenges facing the local real estate market.

We all know about the rising supply of houses for sale due to overbuilding, low interest rates, and lax lending standards. What most people don’t realize is that part of the slowdown we are currently feeling is in part due to a major demographic shift that is afoot right now in the State of Minnesota. There is real concern that there aren’t enough young people coming up to buy the homes from the baby boomers. Add to that the rapid aging of the population and one has to realize that the tide has turned in Minnesota.

The housing stock has essentially been built for married couples with children. However, that category of buyer is a dying breed in many ways. There will be a rapid rise in households without children. They may include a married couple without children or a single mom, single dad or single person. Those buyers aren’t likely going to be interested in the 4,000 – 5,000 square foot two story often found in today’s suburbs. As a result, I believe we will continue to see ongoing pricing pressure for many of these bigger suburban homes for years to come.

There will be cities that will handle this demographic change better than others. For example, it’s my opinion that cities such as Maple Grove and Medina will continue to attact the traditional married couple with children who are looking for the traditional two story home in a nice neighborhood with good schools, amenities and services. In the case of Maple Grove, they are also making sure they have housing to meet the needs of the various households that are being formed today and they have an excellent span of housing options for people.

While we are currently down about 4.5% in prices this year and quite possibly will be down another 5% in 2008, no one that I know of is predicting a big drop in home prices here in Minnesota. That being said, sellers need to be aware of the fact that the market is not likely to bail them out of their home any time soon given the shifts that are taking place demographically in Minnesota.