Twin Cities homebuilding permits shot up 25 percent in January

Homebuilders in the Twin Cities just finished the best January in a decade, setting expectations for a stellar 2017.

Last month, 455 permits were issued to build 1,092 houses and apartments in the 13-county metro, according to the Builders Association of the Twin Cities. That was a 25 percent increase in permits and a 66 percent increase in new units.

"Twin Cities homebuilders are definitely feeling optimistic about 2017," Bob Michels, the association's 2017 president, said.

Though 66 percent of all planned units were apartments and other kinds of multifamily housing, there was a significant increase in single-family housing construction, continuing strides that sector made in 2016.

"It was a bit busier than normal last month and it feels pretty good — like things are moving forward," said Scot Waggoner, chief executive of W.B. Builders in Edina.

January is typically a sleepy month for new home buyers, but Waggoner put together a deal last month and said he expects demand for new houses and remodeling bids to ramp up by mid-February.

Waggoner said that as demand for new houses and remodeling services increases, he expects the labor market to tighten, increasing prices and extending timelines.

The association's report contrasts with new federal data showing that sales of new single-family houses at the end of the year had fallen slightly to a seasonally adjusted annual rate of 536,000, or 10.4 percent below the revised November rate. Meanwhile, the number of new homes that were finished and for sale nationally in 2016 was more than 10 percent higher than the previous year, which is good news for buyers struggling with chronically low inventory.

Zillow's chief economist Svenja Gudell, in a statement, said the decline in new home sales and increase in finished construction suggests many builders across the U.S. are still focusing on upper-bracket houses rather than those that are affordable to entry-level buyers.

In the Twin Cities, 2016 was one of the best years in decades for all sorts of construction with residential and commercial construction posting a 23 percent gain over the previous year, according to a report from New York-based Dodge Data & Analytics, which also showed housing far outpacing commercial projects.

Total construction starts in the 13-county area totaled $6.7 billion in 2016. That included $2.8 billion in nonresidential construction, a 21 percent increase, and $3.9 billion in residential projects, up 25 percent.

In December alone, there was $599.8 million worth of construction starts in the Twin Cities region, including $470.4 million in residential (a 119 percent increase) and $129.4 million in nonresidential projects (a 49 percent decline).

Those residential figures include single-family and multifamily housing, which has been shifting from downtown Minneapolis and St. Paul to the suburbs.

Jim Buchta • 612-673-7376