Construction was up this month, but trails 2010

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: October 28, 2011 - 10:16 PM

Home building accelerated a bit in October, but 2011 results haven't kept up with last year's.

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A scene from 2010: Crews from Enbak Construction laid water pipe in the Willows, a small Pulte Homes development in Plymouth.

Photo: Glen Stubbe, Star Tribune

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You can't call it a recovery, but home builders are picking up the pace.

Construction activity in the Twin Cities metro area rose slightly this month compared with September, but was down significantly from last year, according to the Builders Association of the Twin Cities (BATC).

The group said that during the four-week period ending on Oct. 24, 289 permits were issued to build 378 new units.

Those numbers include some small apartment buildings and senior housing facilities, but most of those units are for single-family houses. For home builders, that's good news. For much of the year, attached housing, mostly rental apartments, have dominated the market.

"Without a doubt, the housing market remains well below where we would like it to be," said Rich Riemersma, BATC's president and co-owner of Imperial Homes. "But we're very pleased to see a few positive signs."

From January through October, permits were down 2 percent, while the number of units was off 22 percent compared with last year. By both measures, the industry is better off than it was during 2009, the worst year so far this century for building.

Steep declines in the number of existing homes for sale and record low mortgage rates have helped put the pressure on buyers considering new construction. That's translating into stronger sales for some builders, especially those who work in high-demand locations.

"In the single-family world, life is OK," said Jeff Schoenwetter, chairman and CEO at JMS Cos. He said that in addition to lower existing home inventories, there are far fewer new houses for sale. He focuses on small developments in the southwest suburbs, including Edina, where he's been taking advantage of lower home prices to buy houses that will later become tear-downs.

Other builders and developers are embracing the same strategy. They're focused on small- and midsize developments in established suburbs that have easy access to transportation, shopping and other amenities.

Blaine, for example, has the right combination of proximity to both downtowns, lots of retail and relatively low land prices. It's where builders planned to build the most homes both during October and so far this year. It was closely followed by Woodbury, Farmington, Plymouth and Savage. For year-to-date activity, Blaine also led the pack, followed by Bloomington, Minneapolis, Plymouth and Woodbury.

Still, the industry as a whole is suffering the wrath of a struggling economy and stiff competition with low prices on existing homes. That means 2011 is likely to be the second-worst on record.

Jim Buchta • 612-673-7376

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