If you’re thinking about buying a home this year, your mortgage isn’t the only cost you have to consider. Home buyers have to pay property taxes every year, there’s homeowner’s insurance, plus a host of other costs, like home repairs and fix-ups that run into the thousands-of-dollars.
But even with these costs, home buyers can take comfort in knowing the money they’re spending is going into a solid investment. Real estate prices in the state are climbing. In fact, home buyers should consider purchasing property as quickly as possible because more and more people are being priced out of the state’s real estate market because of rising prices.
Take the Twin Cities as an example. In April 2019, the median house sold for $281,000. That was a record in the area. It was also a big 5.2% jump from April 2018. That’s when the median home price was just $267,000.
Here’s a statistic that shows just how hot the region’s market is: Minneapolis Area Realtors figures note that Twin Cities market homes sold for 99.4 percent of their asking price.
What does that mean for Minnesota home buyers? You need to do your homework and partner with a professional real estate agent who can help you get a great deal and take advantage of this booming market.
Prices may climb, but that’s not necessarily a negative for house hunters, if they can buy a home before prices climb out of reach. Home buyers may pay more, but they can also be confident that their purchase will be an excellent investment that will grow into the future.
You should speak to a professional realtor about Minnesota home prices, where the best opportunities for growth are, and the costs you can expect as a homeowner. Here is our in-depth guide to the cost of living in Minnesota.
Typical Home Prices in Minnesota in 2019
The median home value in the state is $235,700. Like the Twin Cities, other areas of the state are also seeing big growth. Median home values across Minnesota went up 5.4% between 2017 and 2018.
One of the most affordable areas of the state is Duluth. That’s where you can find a median-priced home for $175,500. Like other parts of Minnesota, this is a red hot real estate market. Home prices went up by nearly 5% in 2018 and they’re continuing to climb in 2019.
Bloomington is another hot housing market. Median home values there also climbed by nearly 5% last year over the previous year. The median home value in Bloomington is $271,000 and real estate analysts expect them to keep climbing into 2020.
As you can see, there are a wide range of home prices in the state that can help home buyers on almost any budget to buy their own home. The best way to make the most of Minnesota’s housing boom is to work with a professional realtor.
They know the hottest neighborhoods and will help you buy your dream home for the lowest price. You can then watch your home value climb along with the properties of your Minnesota neighbors.
How Much Are Minnesota Property Taxes?
Minnesota’s property tax rate is close to the national average. It’s 1.19% while the average property tax rate is higher at 1.21%.
Property taxes are an ad valorem tax, which just means they are taxes assessed on the value of your property. Because they are based on what your home is worth, they vary from property-to-property. They are also assessed at different rates in various jurisdictions.
What you will pay in property taxes depends on the services the community provides and what it costs to provide those services. Schools, local roads, and community centers are among local services funded by property taxes.
The amount of money collected by the jurisdiction and the money allocated for specific services will determine the quality of that service in the community. For example, if you live in an area with a high property tax rate that boosts local funding with property tax rates, expect the quality of schools in that area to be better than neighborhoods with less funding. Areas where residents pay less in property taxes see that reflected in what services are available to them.
So, how does the local or state community determine what your property is worth? There are several ways assessors can determine the value of your property. They can use a “sales comparison” by calculating the value of your home based on similar properties sold in the area. An assessor may also use the “cost method” where they calculate how much it would cost to rebuild your home from scratch to come up with its property value.
As noted above, Minnesotans pay about the national average in property taxes. But what does a 1.19% property tax rate mean for what you will pay every year? At that rate, if you own a home valued at $250,000 you will pay $2,975 in property taxes every year.
A homeowner in Washington County will pay less. They’re assessed at a rate of 1.10%. They would pay only $2,753 in property taxes. That’s still much higher than most property owners pay in Hawaii where the property tax rate is just 0.29%. The typical property tax bill every year on a $250,000 home there is just $695.
But Washington County is much better than Hartford County in Connecticut for low property taxes. The tax rate in Hartford County is 2.04%. That means a homeowner with a property valued at $250,000 pays a whopping $5,095 a year in property taxes.
Average Homeowners Insurance in Minnesota
One of the worst decisions you can make to save money as a homeowner is to forgo homeowners insurance. This can have terrible financial consequences in a state like Minnesota. The fact is that home insurance may appear costly, but it’s the one thing protecting your investment in your property.
That’s why lending institutions require Minnesota home buyers to buy a home insurance policy. They provide mortgages based on the home being collateral for the loan. If something happens to the property, they lose their collateral, so they want to protect their investment. You should whether it’s mandated on not.
Minnesota home buyers should research insurance policies and carriers during their home search. A professional real estate agent is an excellent source to start with. They know the hazards Minnesota homeowners face and they will provide excellent advice on what homeowners insurance you need.
What you will pay for your home insurance depends on several factors, including the size and value of your property, the hazards covered by the policy, and the amount of the deductible.
Home insurance fees are also determined by the home structure, its age, and even the security features it has. The location of the home also plays a role. If you live in a low crime area with a fire or police station nearby, your insurance will cost less than properties in high-crime areas.
According to the Insurance Information Institute, Minnesota ranks among the highest in the U.S. for home insurance premiums. On average, a homeowner in the state pays about $1,340 a year for a policy. That’s less than Mississippi where they pay more than $1,500 per year on average. But in nearby Michigan, the average home insurance premiums are only $952 a year.
Common Home Maintenance and Repair Costs in Minnesota
Homeowners will also have to contend with maintenance and repair costs on top of their mortgage payments each month. It’s difficult to determine what the overall cost will be each year because you will spend more in some years than others, depending on what problems arise.
A good rule of thumb when determine what yearly repairs might cost is the 1% rule. That’s when you set aside one percent of the value of your home for maintenance and repairs. That means if your home is worth $300,000, you can expect to spend about $3,000 every year for fix-ups.
While every Minnesota property owner pays a different total amount in property taxes, they do all have one thing in common. That’s Minnesota’s bitterly cold winters. That adds more strain on homes than those in warmer climates and that means higher repair bills in the state.
Some regular maintenance costs in the state include checkups for a home’s HVAC heating and air systems. You can expect to spend about $400 or more, if there are no problems.
Other maintenance costs include regular plumbing upkeep, chimney cleanings, fixes to the roof, and making sure that your home’s electrical system is in top shape. Problems in any of these can cost your thousands-of-dollars to fix.
Other Costs of Living in Minnesota to Consider
If you live in a major East coast or West coast city, your salary will go much further in Minnesota. That’s because of the state’s low cost of living. For example, a worker who earns $90,000 a year in Minneapolis earns the equivalent of a worker with a salary of $134,459 annually in Washington, D.C.
Everyday items like food and groceries are also less expensive in Minnesota than many other areas of the country. Healthcare is also less costly in the state than in the rest of the country, and so are utilities.
You will pay more for transportation in Minnesota than the national average and median home values are also higher at $235,700 than the national average of $226,800.
Find a Top Minnesota Real Estate Agent
Buying a new home has many annual costs associated with it. You will have to pay for property taxes, home insurance, and other fees throughout the year you do not have to contend with as a renter.
Don’t let the costs dissuade you. Buying a home is one of the best things you can do for your financial health. Minnesota real estate is a sound investment that will not only provide you a great community to live in, but will also give you a good return.
A professional realtor can help you create a budget that can help you buy and maintain your ideal home. Clever partners with top-real estate agents from major companies like Keller Williams, Century 21, and RE/MAX. They can help you find cost-saving opportunities when you buy your home.
They can even help get you a home buyer’s rebate that can put $1,000 back in your pocket. This can help you with closing costs or with the down payment. Clever Partner Agents are experts in real estate and their guidance will help lift the stress that comes along with buying a home.