Housing market rehab

You know the new-housing market is on the skids when Habitat for Humanity cracks the list of the Twin Cities' biggest home builders.

The local Habitat chapter ranked 15th last year in terms of units built -- 50, valued at $8.3 million. And the housing nonprofit is likely to gain on the big home developers again this year. Habitat is building or refurbishing about 60 units this year for working-class families who must attend home-ownership classes and contribute sweat equity to their homes.

The number of permits pulled to build single-family homes, condominiums and apartments in the 13-county Twin Cities metropolitan area is expected to decline to 3,500 dwelling units this year, from 5,397 in 2008, according to Wendy Danks, director of marketing for the Builders Association of the Twin Cities.

How do those numbers contrast with the go-go days of the housing boom? "We were doing about 19,000 units back in 2004 and 2005," Danks said. "And there were very few rental units. It was mostly houses and condos for sale.

"The market has moved toward rental and senior housing recently."

Outfits such as Lennar, Centex, Ryland and Rottlund are building far fewer units than the hundreds of houses they were putting up in far-flung suburbs, as they cut prices to try to stimulate demand in a market where demand and supply are just starting to come into balance at lower price points. Lennar topped the list, with 457 units built in 2008 valued at $176.5 million.

The Minneapolis Area Association of Realtors reported Monday that the number of pending sales agreements rose 23.5 percent in September, to 4,986 pending home deals from a year earlier. However, the median sales price in the 13-county area dropped last month by 10.5 percent, to about $170,000.

Still, more activity and declining inventory of houses for sale indicate that the market has bottomed after a three-year decline.

Nonprofit Habitat for Humanity, which largely builds inside the first ring of suburbs, is proving a small part of the solution for Minneapolis, St. Paul, Columbia Heights and other communities that are coping with hundreds of foreclosed, vacant, boarded-up and demolished properties. And the Habitat model -- which requires sweat equity, savings and financial counseling from all buyers -- offers enduring characteristics of responsible home ownership that should help keep us from another housing bubble.

Habitat is one of several smaller and nonprofit developers that have agreed to buy and refurbish abandoned but salvageable properties in Minneapolis and St. Paul, and to build additional houses on lots where condemnations have occurred.

"The cost of rehabs runs from $35,000 to $125,000 a house," Twin Cities Habitat CEO Sue Haigh said. "We'll do about 60 properties next year. In Minneapolis, we get some money, about $25,000 per unit, to defray acquisitions costs." Haigh said that Habitat has agreed to buy about 20 additional properties over the next few years in the Twin Cities.

Small-scale projects

"We look for modest properties that can be completely rehabbed for about $65,000, and our average mortgage is about $120,000. We want to provide quality homes with good mechanical systems, good roofs, insulation and good-as-new when it comes to energy efficiency." After a rigorous credit qualification process, Habitat provides a zero-percent, 30-year mortgage through its financial partners, making Habitat houses among the best financial deals around for modest-income buyers.

Meanwhile, the construction action has switched from housing developments on what was prairie or farmland to small developers and buyers, in partnership with anxious communities motivated to get abandoned properties filled with responsible owners and back on the tax rolls.

"There is a residential renaissance going on in north Minneapolis," asserted Tom Streitz, the Minneapolis housing director who is leading a three-year strategy that slowly has started to dent a list of 500-plus boarded-up and vacant homes.

The city, tapping into about $100 million in federal-stimulus funds, state housing money, foundation grants and lender programs, has worked with Greater Metropolitan Housing Corp. to purchase nearly 300 houses. About 200 have been remodeled and sold, or demolished for new construction. The collaborations have led to millions of investment dollars and have returned to work hundreds of electricians, carpenters, plumbers and others.

Housing officials estimate that the city is leveraging every buck it puts into the effort with about $9 from private and other sources.

"We have six clusters on the north side where the neighbors laid out their vision and engaged developers to help them," Streitz said. "Our approach is you take the problem, break it into pieces, create visible change -- and it radiates. We have systematically cleaned out the worst of the housing, the criminal activity and partnered with these neighborhoods, the Home Depot Foundation, the Pohlad Family Foundation, University Bank, Wells Fargo and many others."

New homeowners are eligible for as much as $15,000 in home improvement grants, depending upon the neighborhood.

The combination of lower prices, buyer incentives, home-ownership training and other incentives has led to several hundred new owner-occupants who have affordable mortgages in neighborhoods better known only a couple of years ago as bastions for equity-stripping scams and predatory mortgages.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com