Real estate sales propelling economic surge in Twin Cities

  • Article by: Adam Belz , Star Tribune
  • Updated: September 18, 2013 - 9:22 AM

Growth in the Twin Cities, with diverse business base, was well above national average.

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geekfreedomSep. 17, 1311:52 PM

"The Twin Cities economy grew at its fastest pace in nearly a decade last year, and real estate was the big driver." Ruh roh.

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tenthmtndivSep. 18, 13 1:34 AM

Better said than Ruh roh: "the growth drivers in the state GDP numbers are the product(s) of the unsustainable artificially low interest rates created by a Federal Reserve that literally prints dollars to finance the purchase of treasuries and purchase or insure against mortgage defaults, all designed to incentivize banks to make mortgages to increase real estate sales and thus creating growth in the GDP whilist deficit spending over $1,000,000,000,000 a year at the Federal level. BTW: Dayton could actually do something that would create something than paper gains in GDP: open up mining in the Iron Range (ie Ely) and create some real jobs. Wages are not increasing, just prices of certain asset classes. Be wary. This is not good news. It should feel very 2006-2007 to you.

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Truckman182Sep. 18, 13 5:22 AM

The bubble is inflating yet again.......

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cedarriverSep. 18, 13 7:35 AM

It hasn't reached North Central Mn. yet! My Realtor wants me to drop my price again (3rd time.) Investors should be here buying up homes as there is a terrible shortage of housing for rentals. I get calls all the time asking if I will rent the house. But no buyer yet, just some low ball offers.

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unclemushySep. 18, 13 7:35 AM

Wasn't there a story a week or two ago about a large company buying hundreds of houses to convert to rental units? Hmmmm?

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turgidSep. 18, 13 7:41 AM

Surely this is impossible. Didn't we just raise income taxes? Business should be fleeing the state in droves.

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allhailfsmSep. 18, 13 7:47 AM

How exactly does increasing prices in rents and real estate add to economic growth? People are paying more to find a place to live. Is income from actual employment going up, or are more people being shut out? I do get that the bankers are making more money. When you average out the income of the bankers and the workers, then everybody is doing better. We need to pay the bankers even more to bring up those averages!

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duck2013Sep. 18, 13 8:32 AM

Sales of existing homes do not drive economic activity. There is very little labor performed or value added involved in the sale of an existing home. Higher housing prices are never good. The more money someone has to spend on housing the less money they have to spend elsewhere in the economy. Paying an additional $200 a month in mortgage or rent payments means that is $200 that cannot be spent on restaurants, merchandise, or anything else. We are in an asset bubble deliberately created by the Federal Reserve printing money to inflate asset values. Do not be fooled by this "high housing costs are good for the economy" nonsense. High housing costs are bad for everyone except heirs who inherit homes when their parents pass on. 14% annual price inflation means there will be another foreclosure crisis in a couple years.

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theagonygopSep. 18, 13 9:29 AM

duck2013: "The more money someone has to spend on housing the less money they have to spend elsewhere in the economy." Think about it. The realtor makes more money, the title company makes money, the movers make money and, most importantly, the seller makes more money. All this money as a result of the sale can be spent elsewhere in the economy.

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fenderu2Sep. 18, 13 9:33 AM

Sales of existing homes do not drive economic activity. There is very little labor performed or value added involved in the sale of an existing home. Higher housing prices are never good. The more money someone has to spend on housing the less money they have to spend elsewhere in the economy. Paying an additional $200 a month in mortgage or rent payments means that is $200 that cannot be spent on restaurants, merchandise, or anything else. We are in an asset bubble deliberately created by the Federal Reserve printing money to inflate asset values. Do not be fooled by this "high housing costs are good for the economy" nonsense. High housing costs are bad for everyone except heirs who inherit homes when their parents pass on. 14% annual price inflation means there will be another foreclosure crisis in a couple years. Someone who sees it from my side of town. If all houses go up 10% there is no great wealth creation. It is actually inflation at work. What's good for the seller is bad for the buyer. I don't think we're ever going to see a foreclosure crisis like we saw, but I do wonder what will happen if interest rates normalize (7-8%). Prices will have to come down. The thing that does scare me is if interest rates are kept artificially low we will have another bubble in 2-3 years. The FED needs to raise interest rates to prevent another bubble. It may cause us to go into a slight recession now, but it's better than a bubble. Raising rates is something they should have done back in 02 03 and 04.

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