As home sales rise, builders smile

Robust demand for rentals and strengthening sales of new houses helped lift construction activity in the Twin Cities metro during April, putting builders on track to have one of their best years since 1997.

Throughout the 13-county area, home builders were issued 294 permits to build 387 units, according to the Builders Association of the Twin Cities (BATC). That was a 45 percent increase in permits and a 68 percent increase in new units.

"We are going crazy," said Tom Budzynski, owner and president of TJB Homes in Blaine.

He said business has been bolstered because his company offers buyers a special program that allows them to trade their existing home for a new one, alleviating concerns about the resale market.

But for most builders, home sales have been anything but brisk. The demand for rental housing has helped lead the construction industry out of what has been one of the worst downturns in history.

With apartment vacancy rates near record lows of about 3 percent, about half of all planned units so far this year in the Twin Cities are attached housing, mostly rentals. For longtime commercial and industrial contractors in particular, rising apartment construction has helped fill deep gaps in commercial construction.

During March, residential construction in the Twin Cities was up by about a third while non-residential projects fell 11 percent compared with last year, according to contracts for future construction tracked by McGraw-Hill Construction. At $124 million, the value of those residential projects is nearly triple the value of all non-residential projects.

In recent weeks, the market has gone through a noticeable shift, with multifamily housing permits during April falling to 29 percent of all permits from a year-to-date average of 54 percent, according to BATC.

"While a couple of large multifamily projects have boosted permits this year, we're still seeing steady growth in single-family permits, which are 20 percent higher than they were at this point in 2011," said Curt Christensen, BATC's president and owner of Lee Lyn Construction.

That shift has come about largely because of an increase in pending new home sales, which increased almost 26 percent during March, according to the Minneapolis Area Association of Realtors.