In the midst of a seasonal slowdown in home sales, Twin Cities home builders are holding their own.
Builders pulled 360 housing permits during March— almost the same as a year ago, according to a monthly report released Thursday from the Builders Association of the Twin Cities (BATC). All but a few of those permits were to build single-family houses, a departure from previous months when apartments dominated construction.
"Prospective buyers are seeing prices rise, inventories decline and mortgage interest rates moving upward, all creating a sense of urgency for families to make the decision to buy now," said Shawn Nelson, Builders Association of the Twin Cities 2014 president and president of New Spaces.
Housing construction has been a bright spot during what has been an otherwise tough winter and spring market. Bad weather and a shortage of listings have conspired to slow existing home sales at a time when the market typically speeds up.
This week, the Minnesota Association of Realtors (MAR) said that there were 6,937 home sales statewide in February, a 10.7 percent decline compared with last year. The median sales price of those closings was $158,525, an 8.6 percent increase. Because of the shortage of listings, competition is fierce in some areas, driving up prices.
But there's a statistical shift underway, as well. A steady decline in heavily discounted foreclosure sales and an increase in more expensive sales has helped boost the median.
Home builders say that with fewer existing houses to choose from, orders for new ones have been on the rise. During February there were only 6,937 new listings, leaving buyers with 6.6 percent fewer options statewide.
"There are many people ready to make a purchase — there just aren't many homes to choose from," said Chris Galler, MAR's CEO.
Despite miserable weather, builders are now on track to build more houses than last year. Through March, there were 1,028 permits issued to build 2,011 units. That's a 1.5 percent increase in permits and a 20 percent increase in planned units.
Apartment construction has largely led the recovery for home builders, but in March there was a notable decline in requests to build multifamily housing, which represented only 27 percent of all permits issued during the month.
Those rentals, senior housing projects and townhouses typically account for more than half of all construction activity during a normal month.
Mary Bujold, president of Maxfield Research, said the recent decline in apartment construction was caused by a pause in the permitting and construction cycles rather than the beginning of a slowdown in that sector.
"We're just in a temporary lull right now," said Bujold, noting that there are still several projects working their way through the planning process, but aren't ready for construction.
"A lot of stuff is in the hopper, but it isn't to the point of pulling a permit yet."