Apartments help boost construction activity

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: January 30, 2012 - 10:27 PM

More than half of all new housing this month in the Twin Cities involved apartments.

New apartments helped goose residential construction in the Twin Cities metro this month, according to the Builders Association of the Twin Cities. The group said that during the first four weeks of the year builders were issued 185 permits to build 465 units.

That was slightly fewer permits, but twice as many units compared with the same period last year because of several new apartment buildings slated for construction this spring.

A single permit can be pulled to build more than one unit. This month, for example, five multi-family projects were permitted, including 44-unit projects in St. Paul and in Hudson, Wis., and three projects in Minneapolis with 45, 60 and 75 units.

Curt Christensen, the Builders Association president and owner of Lee Lyn Construction, said he expects an uptick in home construction this year in line with a recent prediction from Metrostudy, a national housing research firm, that said construction will increase 10 to 15 percent this year.

"Our members are gaining more confidence as the economy improves," Christensen said.

Home construction has been limping along at near-historic lows. In the Twin Cities metro area last year construction activity was the second-lowest in recent memory, with single-family homes representing only about half of all new units. With fewer people buying houses, apartment construction has been one of the few bright spots in the construction industry. Developers have plans to build several thousand units in the Twin Cities, especially in Minneapolis and St. Paul, where vacancy rates are falling to near-record lows.

In January, Minneapolis led the metro in building activity with 178 units; St. Paul was next with 46. Hudson, Wis., was close behind with 45. Construction activity of all kinds has been focused on the Twin Cities and the inner-ring suburbs that have easy access to transportation, jobs and retail. During the housing boom, construction moved to the outer reaches of the metro area as prices pushed buyers to exurbs with cheaper land. That trend has been reversed: Last month, for example, nearly 40 houses were planned for Eagan and Maple Grove.

Marv McDaris, president of the Minnesota division of Pulte Homes, said his company is opening two new developments where he's seeing demand even before a "grand opening" is held or a sales center can be built. That includes Fox Ridge in Arden Hills and Josephine Woods in Roseville.

A recovery for the construction industry has been stifled in part because so many prospective new-home buyers can't make a move until they've sold their existing home. Price-wise, builders also are facing stiff competition. Foreclosures and short sales have put serious downward pressure on home prices, making it difficult for many builders to compete with existing homes.

In the Twin Cities metro, the foreclosure rate is lower than the national average and has fallen in recent months. CoreLogic said Monday that the foreclosure rate fell from 2.15 percent in November 2010 to 2.02 percent in November of last year. Nationally the foreclosure rate that month stood at 3.41 percent.

Those foreclosure declines are due in part to recent moratoriums in foreclosure processing as lenders dealt with procedural problems. Those moratoriums have ended and lenders are playing catch-up.

Jim Buchta • 612-673-7376

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