Economy may be ailing, but Twin Cities homebuilders keep humming along

Homebuilders in the Twin Cities ramped up production last month, despite a barrage of challenges including growing economic uncertainties and a mandate to practice social distancing rules on job sites.

During April, builders were issued 474 permits to construct single-family homes, a 16% increase over the same period a year ago and the highest April total since 2006, according to a monthly report from Housing First Minnesota. At the same time, planned multifamily construction was down by nearly half compared with last year.

Gary Kraemer, president of Housing First Minnesota, said in a statement that many builders have an extensive pipeline of homes to build, including many that were sold in February and early March.

"We continue to see the impact of the strong demand and buyer activity builders saw to start the year," he said.

The big gain in single-family permits came during the first full month of a stay-at-home order, which exempted housing construction because it was deemed an essential service, enabling projects to continue and new ones to start.

During April, homebuilders pulled a total of 491 permits to build 1,074 units. That was a 16% overall increase in permits but a 31% decline in total units because of that steep decline in multifamily permits. A single permit can be used to build more than one unit, and those permits are often issued long before construction begins.

Multifamily construction tends to be volatile from month to month, but it typically accounts for about half of all construction during the month. During April, builders were issued enough permits to build 600 multifamily units, mostly market-rate rental apartments. That was about half as many as last year at this time, but still accounted for 55% of all planned construction during the month.

So far this year, planned construction is significantly ahead of 2019. During the first four months of 2020, builders have been issued 1,819 permits to build 4,488 units. That's a 15% increase in permits and a nearly 12% increase in total units.

Though hammers are still flying across the metro, homebuilders have had to quickly adapt to changes in the ways houses are bought and sold. Homebuilders scrapped their biggest annual marketing event of the year, the Parade of Homes Spring Preview, and in late March the Minnesota Realtors called for a ban on open houses. Showings, too, are being done on a much more limited basis after buyers first preview houses during virtual tours.

"Builders are getting creative in order to help home buyers find their dream homes safely during this time, whether it's appointment-only sales or virtual tours," said David Siegel, executive director of Housing First Minnesota. "We had an extremely short supply of housing before this crisis and it's even more important after this that we are able to build more inventory at prices families can afford."

During April, Lakeville issued the most permits, 79, followed by Rosemount, with 28 and Otsego with 26 permits.

Jim Buchta • 612-673-7376