Mortgage rates weren't the only thing homebuyers focused on during 2022.
Buyers were obsessed with big houses and big yards, making far-flung suburbs the most popular places in the metro area last year, according to the Star Tribune's seventh annual Hot Housing Index, which tracks the annual increase in sales, prices and other metrics for nearly every city in the metro.
By that measure, the hottest city for home buyers last year was also one of the most inconspicuous: Lake Elmo, a second-ring suburb that's a sharp contrast to its livelier next-door neighbor, Woodbury.
With hundreds of acres of rolling farmland, a regional park and several lakes, Lake Elmo was a magnet for house shoppers on the hunt for a more rural life in the suburbs.
"We didn't want cookie-cutter suburbia — we wanted a property that felt unique," said Jessica Brockshus, who recently moved to Lake Elmo with her husband and three kids. "We love the charming downtown and the small-town feel of Lake Elmo."
That bucolic, laid-back life comes at a cost.
The median price of those Lake Elmo sales last year was $635,000, nearly twice the metro average. On average, houses sold for just over $217 per square foot. That's near the metro average, but a whopping 37% increase compared to the city's five-year average and one of the largest gains in the metro.
Across the Twin Cities region, prices increased the most in several outlying northern suburbs including Princeton, North Branch and Cambridge, which all saw the price per square foot increase more than 40% over the five-year average, according to the index, which is based on data from the Minneapolis Area Realtors.
The least expensive city was Belle Plaine, where the average fell just shy of $159 a square foot. In Wayzata, the most expensive city, houses sold on average for $337 per square foot.
Minneapolis tied with St. Louis Park for the sixth most expensive city at $226 per square foot, just behind Orono, Shorewood and Edina.
Lake Elmo has maintained its rural feel for so long because city leaders were content for it to remain less developed. Though many houses are on more than a couple acres, the city used to have a one-acre minimum. Much of the development now is higher density, with three to four houses per acre.
That change came after the Met Council, which regulates growth in the metro area, stepped in and asked the city council to come up with a growth plan. Many residents fought the mandate, but the state Supreme Court sided with the Met Council, and now parts of the city are connected to city sewer and water, enabling more development.
Brockshus and her husband, Shane, both grew up in small towns and most recently were living in a rural farm community in Oregon when Shane's company relocated him to the Twin Cities in late 2021.
Lake Elmo was their first choice because so many of the developments are like the Fields of St. Croix, where houses are clustered together and swaths of open space around them are preserved and planted with native prairie plants.
A house they bid on sold before they could offer, but they were smitten with the city's vibe.
"We like that the amenities [like shopping and doctors] of Woodbury and Stillwater are both very close, but we don't have to live right in the busyness of those cities," Jessica said, adding that it was important to be within a mile or two of the kids' schools in the Stillwater school district.
After several unsuccessful bids, they bought a five-bedroom rambler on three-quarters of an acre in the Heritage Farm subdivision, where their 3,644-square-foot house faces a park and backs up to a pond that's surrounded by walking paths.
With more buyers than sellers in the city and relatively few houses for sale, the family bought their house sight unseen and paid slightly more than the asking price. Though Lake Elmo was the fastest-growing city in the state last year, the 24-square-mile city had only 136 existing home sales last year compared with 1,055 in 35-square-mile Woodbury.
"The fact that everyone else is just finding out about it is kind of comical," said Jason Gorman, a real estate broker who grew up in St. Paul.
In 1980, when Gorman was a kid, his dad bought a family style restaurant in Lake Elmo's tiny downtown.
Today, Gorman's office is in Oakdale, just across the border from Lake Elmo, and he's not surprised that it was the hottest market in the Twin Cities last year. He said buyers are attracted to the city because most of it is within the Stillwater school district.
The only thing lacking, he said, is housing for entry-level buyers and for empty nesters who want smaller houses and single-story living.
"If there's something missing, it's the starter market," Gorman said, noting that only five houses sold for less than $300,000 last year.
Lake Elmo: Metro area's hottest housing market in 2022
Lake Elmo claimed the top spot in 2022 on the Star Tribune's annual Hot Housing Index. Despite rising interest rates, the city saw higher prices, shorter selling times and sustained demand.
Annual closed sales
Price per square foot
Days on market
Months supply of inventory
Months supply of inventory is defined as the inventory of homes for sale at the end of the most recent month, based on one month of activity, divided by the average monthly pending sales from the last 12 months.
Bryan Brussee & Yuqing Liu, Star Tribune • Source: Minneapolis Area Realtors (MAAR) and RMLS of MN Inc.
That dearth of listings makes it a tough sell for entry-level buyers and for people like Joe and Pam Connolly, empty nesters looking to downsize.
The Connollys bought a four-level house — then brand new — in Lake Elmo 34 years ago. Now they're thinking about the next phase of their lives but don't want to leave the city.
"When we married and started looking for a house, we chose Lake Elmo for its rural nature yet close to the cities where our career opportunities in technology lie," she said.
Their house is on a 1.5-acre lot and Joe likes mowing and gardening, so they're looking for one-level living and a three-car garage.
"We like the new open kitchen/living space for entertaining and would each like an office area in the home," she said.
"For years there wasn't much going on, it almost became a flyover zone," she said. "There are so many hidden gems and treasures that people don't know about if you don't live here."
Like the other top three cities on the index, Lindstrom and Minnetrista, Lake Elmo's relative anonymity is exactly what has made it so popular these days.
Tom Wiener, a longtime builder, remodeler and real estate broker in neighboring Oakdale, credits Robert Engstrom, a longtime Twin Cities developer, with helping set the tone for the kind of city that Lake Elmo would become today by championing the preservation of as much open space as possible.
"It's not one of those places where overzealous builders have squeezed as much as you can out of the land," he said. "Lake Elmo doesn't have that perception."