Building permits for new homes rose 11 percent in the Twin Cities this year

Twin Cities homebuilders are ending the year on a high note.

Housing construction was the most robust in a decade, with single-family homes posting the strongest gains since the housing crash, according to a year-end report from the Builders Association of the Twin Cities.

With just two days left in the year, builders were issued 5,345 permits to build 9,868 units in 2016. That was an 11 percent increase in permits and a 1.3 percent gain in planned units.

"Owning a home is still very much a part of the American dream and the 2016 permit numbers show that it's becoming a reality for more families," said Meg Jaeger, the association's president.

Attached housing, mostly upscale rentals, represented 48 percent of the total planned units during the year. But builders saw solid gains in new home sales that led to a 12 percent increase in the number of single-family permits issued during the year.

December was the 10th consecutive month for gains in single-family construction. Multifamily construction was much more volatile. Apartment construction was up in December, but down 9 percent for the year. A single permit can be issued to build more than one unit.

Those gains are being attributed to a variety of factors. Rising mortgage rates are helping motivate new home buyers who thought they might wait until next year, and a dearth of existing houses for sale has forced many to build.

According to the latest survey from the Mortgage Bankers Association, mortgage applications for new home purchases during November increased 12 percent compared with last year.

Though construction costs, including labor, materials and land prices, have been on the rise, more builders and developers are catering to entry-level and downsizing buyers with less-expensive houses.

During December, for example, the total value of the permits issued during December was 5 percent lower than last year even though the total number of houses had increased significantly.

Mike DeVoe, division president at CalAtlantic Homes, said earlier this winter that more than 40 percent of the company's planned units are in communities where the base price starts at less than $300,000.

Based on the total construction activity during the year, Minneapolis was by far the busiest city for builders with 2,491 planned units followed by Golden Valley (614) and Blaine (563). For single-family houses, Lakeville took the top spot with 401 permits followed by Blaine (309) and Plymouth (286).

In a statement, the builders association's executive director, David Siegel, said, "While the growth we've seen in 2016 is promising, we also know that we are still below what's considered normal levels for residential construction."

Jim Buchta • 612-673-7376