Housing's comeback spurs new building

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: June 23, 2012 - 10:06 PM

Builders are putting new emphasis on areas close to jobs and highways.

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A crew from Carpentry Contractors puts house wrap on roof trusses on a Mattamy Corp home in the Chevalle Developmentin Chaska. Wednesday, June 20, 2012

Photo: Glen Stubbe, Star Tribune

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Stalled in the housing downturn, the Chevalle development in Chaska is starting to make up lost ground.

The 80 homes built and sold at the 300-acre development since 2007 are far short of the nearly 300 that developer Dave Igel planned. But about 50 came in the past year, and builders are lining up for another 60, Igel says.

"We went into hibernation like a lot of other people," said Igel, who is developing Chevalle with his wife, Rachel. "Fortunately, we were able to hold on."

The scenario is playing out in communities throughout the Twin Cities. Single-family homes are back on builders' drawing boards and the agendas of city planners.

But the developments have a different flavor than those that boomed before the Great Recession: Smaller and concentrated in places where jobs, transit and major highways are already nearby, they stand in contrast to the rural cornfields that became subdivisions in the mid-2000s.

In Chaska, part of the credit for the upturn is the new Hwy. 212 that has given Carver County access to a freeway for the first time. The city recorded only 36 single-family permits in 2008, but 54 last year. Less than halfway into 2012, the total is 41, according to the Builders Association of the Twin Cities.

"The access to get into this area was so difficult before. The new highway removed a huge constriction," said Kevin Ringwald, Chaska's planning director. He said the highway not only should help the housing market, but also Chaska's industrial base as the economy recovers.

Chevalle's proximity to the new highway, as well as to Hwy. 5, was a major draw for Tracy Rundell, who moved there last fall with her husband and two young children.

"It's so easy to head east into places like Eden Prairie to go shopping or to a restaurant," she said. Rundell, who grew up in a small town in Illinois but spent the past several years in New York, said Chaska offered the best of both worlds. "It's a picturesque place, but I don't feel so far out and disconnected."

Meanwhile, in much of the farther-out and less-connected counties such as Wright and Scott, housing is still flat-lining. Otsego, in Wright County, has as much as 10 years' worth of inventory of undeveloped parcels, estimated Charlie J. Pfeffer, a sales associate at Maple Grove land broker Pfeffer Co. Inc. "The demand for residential land is vastly different the further you move out to places like Otsego or Jordan," he said.

"A mile can make a huge difference."

The new activity is nowhere near that of the housing boom -- Chaska added 221 houses in its peak year, 2003 -- but it's a definitely a step up from the past few years. "Two years ago we had a national builder wringing their hands over whether to do eight or nine lots," Ringwald said.

In Lakeville, located right on Interstate 35, the city had issued 93 single-family permits through the end of May, more than twice the number for the same period a year ago.

"We're trying to figure out if this is a long-term trend or a blip," said City Administrator Steve Mielke.

In the Twin Cities at large, single-family permits for the first five months of the year were up almost 30 percent compared with the same period in 2011, according to the builders association.

Across the country, home builders pulled the highest number of permits in May since September 2008. An index of "builder sentiment" compiled by the National Association of Home Builders and Wells Fargo recently edged up to a five-year high, an indication that the housing market is recuperating.

Schools, taxpayers benefit

The modest rebound will be felt in cities in a number of ways.

Lakeville's population is aging, a factor in the closing of an elementary school in 2011. Mielke said an influx of new homeowners, including families with young children, could help the city slow the aging trend.

Mielke and other city officials say it's too soon to measure the effect of the revival but agree it's welcome. "Every time you can turn a third of an acre into a new single-family home, it adds to your tax base," said Karl Batalden, a housing specialist and associate planner in Woodbury.

Other suburbs seeing healthy building activity include Plymouth, Woodbury, Blaine and Maple Grove.

Builders say they're drawn by strong school districts, as well as location. Steve Juetten, community development director in Plymouth, said last year's jump in single-family permits to a 10-year high was probably due partly to open enrollment closing in nearly all schools in the Wayzata School District, which serves most public school students in the city.

A sound housing market contributes to a stronger tax base, something communities like Woodbury need in order to build and maintain amenities such as parks, Batalden said. He cited the Bielenberg Sports Center, which includes indoor ice rinks, a domed field house, baseball fields, trails and picnic facilities. "It was 100 percent locally funded," Batalden said. "We wouldn't be able to offer amenities like that without a strong tax base."

Juetten said housing growth figures into the bond ratings that agencies assign to cities. "You can borrow money more cheaply than communities that can't demonstrate growth," he said.

City officials say the home-building revival has not yet sparked significant commercial development. That's unlikely to happen until more existing space is occupied. Recent research by Cushman & Wakefield/Northmarq shows that the average Twin Cities retail vacancy rate has fallen since 2009, but it is still much higher than it was in the early and mid-2000s.

Ringwald said there's truth to the adage that retail follows rooftops.

"Let's see a few more years of growth in the housing market," he said.

Managing risk

Ringwald and other city planners say the new wave of home building is far more restrained than the previous boom. Phases of 25 to 30 new houses are the norm instead of 200. "They're taking much smaller bites of the apple and managing risk," he said.

Builders also are picking up parcels that were foreclosed on the cheap. Lennar Homes recently bought an 81-acre subdivision in Lakeville from Wells Fargo, which took back the property in 2008 when the original developer ran into trouble. Jon Aune, director of land operations at Lennar, declined to disclose the purchase price but said it was below the most recent listing price of $2.7 million. The original developer paid $7.7 million.

"A lot of site work was already done, so we could just move into the shoes of the previous developer," Aune said.

Lennar is about to begin work on the second phase of another previously bank-owned property in Woodbury. Twenty-one of the first 24 homes that went on the market last fall have sold, Aune said.

Price is another factor favoring a rebound in the inner suburbs. Pfeffer noted that during the red-hot market several years ago, buyers flocked to communities outside the seven-county area because they couldn't afford homes in inner-ring suburbs. Falling prices have made cities such as Maple Grove more affordable, he said.

The flip side is stagnation in the exurbs. Otsego, for instance, recorded 58 single-family permits last year, the lowest number since 2008 and far below the 308 in 2005. It has 36 through the end of May this year.

Staff writer David Peterson contributed to this report. Susan Feyder • 612-673-1723

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