Rising land prices in the most coveted spots of the Twin Cities are pushing developers to the fringes of the metro area, where they’re reviving some subdivisions halted during the recession.
In Otsego, Minn., Meridian Land Co. is bringing back Wildflower Meadows, which stalled when its previous developer ran into financial trouble. Crews are already building roads and installing utilities on 28 lots that will be sold to area homebuilders. The project is among at least six mothballed projects in Otsego getting a second chance.
“That hasn’t happened for a long time — that’s a change,” said Lori Johnson, city administrator for Otsego, a once-sleepy Wright County farm town 30 miles west of the Twin Cities.
Before the recession, exurban communities gained attention because there was an abundance of inexpensive agricultural land that made housing more affordable than in spots closer to the Twin Cities. But development dried up during the downturn as people shunned the long commutes and builders ran into financial difficulties.
Recently, there has been an uptick in housing construction in several exurban areas, including Hudson, Wis., Cologne, Farmington and Elko New Market, said Ryan Jones, regional director for the Twin Cities office of Metrostudy. During the worst of the housing crash, such far-flung communities represented as little as 11 percent of all metro-area housing construction, but new data show those areas now accounting for nearly 17 percent of all housing starts.
Still, he cautions that many homes in these locales are being built by people who already live nearby, rather than by newcomers seeking affordability. The so-called “drive-until-you-qualify” trend will emerge only if the cost of new and existing homes closer to the Twin Cities continues to rise.
“We’re at a turning point,” Jones said. “Inventory is very low, and prices are increasing.”
Glenn McCabe, regional manager for Meridian Land, said the supply of developable lots in Otsego has fallen by about half. In 2009, there were more than 700 vacant, developed lots in the city, but only 43 annual housing starts. During the second quarter of this year, there were 327 vacant developed lots and 151 annual starts.
“A year ago we wouldn’t have been looking to finish these lots because there were so many lots, and prices didn’t justify the cost of developing them,” said McCabe.
Meridian, a Virginia-based division of Twin Cities-based United Properties, acquired Wildflower Meadows in late 2010 after the project hit the skids in 2009. Originally planned for 254 lots, it was among 10 subdivisions that were liquidated when its owner, Rottlund Homes, succumbed to the housing downturn and went out of business.
For much of this year, cities within the seven-county metro area have dominated housing construction. Richard Palmiter and Brian Pankratz, brokers with CBRE Brokerage Services, said that as home and land prices have risen, a few communities on the outskirts of the metro area have shown signs of awakening.
During September, for example, Farmington was one of the five most active area cities for housing construction, according to a monthly report from the Builders Association of the Twin Cities.
“Buyers have and will move further out of the metro area to find value,” Palmiter and Pankratz said. “Subdivisions in good locations along good transportation corridors and in perceived good school districts are back in demand.”
In Dayton, about 25 miles northwest of Minneapolis, Hans Hagen recently started developing a $100 million development called River Hills on land passed over by another developer during the downturn. The target market for that project, with houses from the upper $200,000s to $500,000, is young families and empty-nesters who want low-maintenance single-family houses — something in short supply closer in. “With strengthening demand for new homes, builders are looking at the next tier of communities,” Hagen said.