A surge in permits has Twin Cities homebuilders anticipating their best year since the recession.
Growing consumer confidence. Bigger incomes. They’re the kind of things making life pretty sweet for Twin Cities homebuilders.
Housing construction so far this year is up 23 percent from the same period in 2012, putting builders on track for their best year since 2007. During June alone, 496 permits were issued to build 912 units, the Builders Association of the Twin Cities (BATC) reported.
“I definitely can’t complain,” said Pete Lewis of Lewis Custom Homes in Champlin. “We’re as busy as we were before the recession hit.”
Builders also are celebrating the value of those building permits. With incomes rising and confidence growing, area residents have shown a willingness to spend on luxurious homes and upscale rentals, including a sprawling luxury apartment building along the Midtown Greenway in south Minneapolis. In June, the value of building permits grew 33 percent to $857 million.
“As the year progresses, evidence continues to grow that the housing market is truly rebounding across the region,” said Pamela Belz, BATC president and developer with Senior Housing Partners.
So far this year, builders were issued 2,379 permits to build 4,204 units, a dramatic change from this time four years ago when there were only 1,633 units. Though many builders went out of business, or are operating at a fraction of their capacity, those who held on are feeling far more optimistic.
The mainstay of the construction recovery has been the surge in upscale rental apartments and other kinds of multifamily housing, including small townhouse projects and senior living facilities, which represented nearly half of all planned units to be built in the Twin Cities so far this year. The demand is a reflection of a fundamental shift in attitudes toward renting. In the wake of the housing market crash, many would-be home buyers are choosing the flexibility and amenities that come with apartments.
In the Twin Cities metro area, the rental housing boom is taking place mostly in Minneapolis, where nearly 1,500 new units were permitted during the first six months of the year, the most of any metro-area city.
Of the 496 planned units during June, nearly 400 were for Phase II of a luxury apartment building called Elan Uptown, which is being built by Houston-based Greystar Construction. Crews there are busy touching up paint and installing light fixtures in Phase I, which will be ready for occupancy next week. Construction is getting underway on the second phase, making the project one of the largest in the Twin Cities.
The building, with about 600 units, is already more than 30 percent pre-leased, according to property manager Angelia Jarvis. Rents will be more than $2 per square foot, with some of the deluxe units going for more than $2.50 per square foot.
David Reid, a Greystar managing director who was visiting the site from Houston, said he considers the building to be in a prime location because it is within walking distance to the shops and restaurants of Uptown and has private access to the greenway, a 5.7-mile walking and bike path that crosses the city.
“This site has it all,” he said. “It checks as many boxes as I can think of.”
The company is targeting renters who want the finishes and floor plans that they would normally expect in a condominium. The building has wide hallways, tall ceilings and over-the-top amenities including a rooftop deck with skyline views and two outdoor kitchens. Some of the apartments are decked out with wine refrigerators, king-size garden tubs and wraparound terraces.
There are plans to build thousands more apartments in Uptown and other Minneapolis neighborhoods, where the average apartment vacancy rate during the first quarter was below 3 percent.
Single-family construction is also on the rebound across the metro. Over the past year, sales of new homes have been up nearly 30 percent, according to the Minneapolis Area Association of Realtors. That doesn’t include custom homes that weren’t listed through the Regional Multiple Listing Service.
Most of that single-family construction has happened in Woodbury, which issued 176 individual permits so far this year. Lakeville and Blaine were next. During June alone, builders in Brooklyn Park was issued the most permits, with most of that construction happening in a subdivision called Oxbow Creek, an infill development that’s not far from new offices being built by Target Corp.
Lewis, the custom homebuilder, said people who have been cautiously contemplating a new house are feeling far more motivated than they did last year. “The people we see were on the fence before the recession,” Lewis said. But with low interest rates “it’s a good time to buy. It’s almost free money.”