A shortage of house listings has builders in the Twin Cities working overtime.
During February, 339 permits were issued to build 717 units, mostly single-family houses and upscale rental apartments, according to a monthly report that tracks housing permits from the Builders Association of the Twin Cities (BATC). That was a 93 percent increase in permits and an 18 percent in planned units compared with the same period last year.
The winter rally comes on the eve of the builders’ biggest marketing event of the year — the Parade of Homes Spring Preview, which begins March 4 when 481 new houses and 64 remodeled houses open for tours. “With a strong start to the year, our builders are very optimistic for a strong spring Parade of Homes,” said Bob Michels, the BATC’s 2017 president.
Of those planned units (a single permit can be issued to build more than one unit), 385 of them were multifamily, or attached housing, representing 54 percent of the total construction activity. They included a 195-unit building in Apple Valley, a 128-unit building in Shoreview and a 49-unit apartment building in Lakeville called Lakeville Pointe.
While apartment construction has dominated the recovery, builders are responding to deepening demand for single-family houses, especially those at the lower end of the price spectrum. During February, 332 single-family permits were issued, a 19 percent increase over the same time last year.
In many communities across the metro, house listings have been in short supply, forcing buyers who can’t find what they want to consider building new. At the end of January, there were just 8,212 houses on the market, a 25 percent decline compared with the previous year, according to the Minneapolis Area Association of Realtors. At the current sales pace, those listings would last only 1.6 months.
New houses that are affordable to first-time and entry-level buyers are the most scarce. Of the nearly 500 houses featured on the Parade of Homes Spring Preview, for example, only 29 are priced at less than $300,000; 84 are priced in the $300,000s; and 110 are priced from $600,000 to $999,999.
The imbalance between buyers and sellers has been particularly pronounced in the several Twin Cities neighborhoods and inner-ring suburbs where entry-level houses are scarce and inexpensive land for development is even more rare.
The busiest cities for construction during the month were Plymouth, which issued 30 permits, Lakeville (29 permits), Lake Elmo (24 permits), Woodbury (18 permits) and Apple Valley (14 permits).
Matt Baker, senior vice president for Twin Cities-based Coldwell Banker Burnet, said that given the shortage of options for new home buyers, the company will focus more on helping agents and their buyers pursue new construction options via a new construction training and certification program. Likewise, the company will train agents to help developers assess market conditions.
The situation in the Twin Cities mirrors a national trend. In February, the U.S. Census Bureau said that new home sales during 2016 were 12 percent higher than the prior year, and that during January new home sales had increased 3.7 percent compared with the previous month.
In a statement, Svenja Gudell, chief economist for Zillow, said while the increase was positive, it would have been larger if there were more options for new home buyers. “Instead of slow and steady gains, the market needs a big infusion of new construction and new home sales activity, and there are signs this could come as the busy spring shopping season gets underway,” she said.