Deep demand for urban rentals and dwindling supplies of homes for sale are putting Twin Cities builders on track to have their best year since the housing crash.
“We’re not lighting the world on fire, but things are good,” said Rob St. Sauver, project manager for Lakeville-based Tradition Development.
During the first five months of the year, builders were issued 1,879 permits to build 3,292 units, the most since 2007, according to the Builders Association of the Twin Cities (BATC).
An apartment boom underway in downtown Minneapolis has been a key driver of the recovery in the construction industry. Nearly half of all planned units during May were for multifamily buildings, including Stonebridge Lofts, a 165-unit condo building downtown.
With buyers and renters favoring urban living over the long commutes that come with living in outer-ring suburbs, Minneapolis continues to be the busiest city in the metro for housing construction. Last month, 183 multifamily units were permitted in the city on top of more than 1,000 already permitted. Thousands more apartments have been proposed, mostly in the North Loop neighborhood, Uptown and near the University of Minnesota campus.
Low housing inventory is also fueling construction as buyers continue to outstrip the supply of homes for sale. In general, housing is on the rise as unemployment rates fall and consumer confidence grows, giving the broader economy — and the prospects for deeper growth — more buoyancy.
“Builders today are more optimistic than they’ve been in the previous few years heading into summer” said Pamela Belz, BATC president and developer with Senior Housing Partners.
So far, Stonebridge Lofts is the only condo building under construction in downtown Minneapolis, but more are expected soon as the supply of for-sale condos dwindles. Though the project won’t be ready for occupancy until next year, buyers have already signed purchase agreements for more than 60 units, according to its developer, Coon Rapids-based Shamrock Construction.
Attached housing is being built in the suburbs as well. Last month, an eight-unit townhouse project in Chanhassen and a large senior housing project in Blaine were both permitted.
St. Sauver, the project manager for Tradition Development, said his company has sold slightly fewer houses this month only because he’s running low on inventory. Two suburban developments recently sold out, and he’s closing on a land purchase next week that will help create more lot inventory.
A subdivision in Inver Grove Heights, for example, sold out in March, so “we’re scrambling to put in 10 additional lots because there’s a lot of demand,” St. Sauver said.
Jeff Park, Minnesota division president for K. Hovnanian Homes, the developer of the eight-unit townhouse project in Chanhassen, is in a similar situation. He’s pursuing construction of the building in the Liberty on Bluff Creek subdivision because he’s already sold out of similar housing in other projects, including one in Maple Grove. With a base price of $179,995 to $199,995, these townhouses appeal to buyers who can’t find what they want in the existing market.
“We’re finally seeing more demand than we can meet at the moment,” he said. “People are finally realizing that the bottom is behind us.”