It's been a dreary spring for many homebuilders in the Twin Cities.
During April, builders were issued 407 permits to build single-family homes, according to data compiled by the Keystone Report for Housing First Minnesota.
That was 2% fewer than last year and the third consecutive month of annual declines.
The downturn comes despite low mortgage rates and deep demand for starter houses; builders say crummy weather and rising construction costs are putting a lid on their willingness to dig new foundations.
"The continued drop in single-family permits is concerning, as the housing market is already chronically undersupplied in our region," said John Rask, president of Housing First Minnesota. "We believe weather is still having an impact on residential construction activity, along with rising housing affordability pressures."
Apartment developers, however, aren't holding back. They were issued enough permits to build 1,152 multifamily units in April. That was a 170% increase in units compared to last year.
Most of those units are market-rate rentals in Minneapolis where construction is underway on two buildings with a combined 231 units, a 402-unit project in Bloomington and a 323-unit in Shakopee.
So far this year, Minneapolis has been the most active city for homebuilding. Mostly because of apartment construction, builders there were issued enough permits to build 1,318 units, followed by Bloomington with 402 units and Shakopee with 366 units.
The situation in the Twin Cities metro mirrors what's happening across the country. On Wednesday the U.S. Census Bureau said there's a 0.9% decline in overall construction spending led by a 1.9% decline in residential expenditures from February to March.
Nonresidential spending on education, transportation and other infrastructure projects during March was on par with the previous month.
According to a monthly housing analysis by Herb Tousley, director of Real Estate Programs at the University of St. Thomas, the median price of home sales so far this year has increased at an annual rate of more than 6%.
Those gains are outpacing the increase in wages, making it more difficult for potential home buyers to afford a single-family home, he said, especially for first-time buyers and people wanting to move up from their entry-level house.
During March, the most recent month data were available, new property listings were down 9% compared to last year, following a consistent pattern that started late last year, according to the Minneapolis Area Realtors.
A dearth of house listings for less than $350,000 is putting a lid on sales, which were down significantly during March.
"The market is demanding a surge in affordably priced homes to ease the supply bottleneck," said David Siegel, executive director of Housing First Minnesota, which represents more than 1,100 builders, remodelers, developers and industry suppliers throughout the state.
On Thursday, Freddie Mac said that after several weeks of rising, fixed-rate mortgages dropped.
The 30-year fixed-rate mortgage (FRM) averaged 4.14% with an average 0.5 point for the week ending May 2.
A year ago, the 30-year FRM averaged 4.55%.
Sam Khater, Freddie Mac's chief economist, attributed the decline to slightly weaker inflation and labor economic data.