Homebuilders in the Twin Cities are putting the wraps on one of their best Septembers in a decade.
This month, builders were issued 568 single-family permits, about a 14 percent increase over last year, according to data compiled by the Keystone Report for Housing First Minnesota. There were a total of 601 permits issued, including single-family and multifamily.
Apartment construction increased significantly, as well. Builders were issued 33 permits to build 334 multifamily units, a 32 percent jump in units.
“Interest popped back after the typical yearly doldrums,” said Nathan Chaika, a sales agent who specializes in new construction for Better Homes and Garden Realty in Edina.
Chaika said that after new home sales peak in the spring and early summer, families often take a break from new home shopping in August to deal with other distractions, including family vacations, back-to-school preparations and the State Fair. Buyers hit the pavement again in September, he said.
“I’m getting calls on lots I have for sale, and I’ve met with some builders who have a lot of confidence,” said Chaika.
Earlier this month the University of St. Thomas Shenehon Center for Real Estate and the Builders Association of the Twin Cities published a survey that shows builders in the region are far more optimistic than last year about various aspects of the market. Builders expect sales to increase and house prices to keep rising, but they are concerned about the soaring cost of land, labor and materials.
“While the numbers are trending in the right direction, it’s clear Minnesota’s regulatory climate and an industrywide labor shortage are holding the industry back from additional growth,” said David Siegel, executive director of Housing First Minnesota.
September marks the end of the busiest summer in at least a decade. From January through September, Twin Cities builders were issued permits to build 9,975 units, up from 6,635 last year at this time.
Permit issuance reflects demand based on deals that were signed the previous month, or an expectation of future sales. During August, there was a 21 percent increase in pending sales of new houses in the Twin Cities metro, according to the latest data from the Minneapolis Area Association of Realtors.
However, on Tuesday a report from the U.S. Census Bureau painted a more dismal picture. It said that across the country, sales of new single-family houses fell 1.2 percent in August compared with August 2016. Zillow chief economist Svenja Gudell said that despite favorable buying conditions, including rock-bottom mortgage interest rates, builders aren’t producing enough houses.
“What’s missing from the equation is a lack of homes actually available to buy at a price point that’s reasonable for most buyers,” she said in a statement.
In the Twin Cities, there’s also an imbalance between apartments and renters. The average vacancy rate in the Twin Cities has remained near historic lows for the past several years, which is why builders have been focused on rentals. So far this year more than half of all new housing units built in the metro were apartments.
But in September, houses outpaced apartments. The largest project permitted during the month was a 133-unit apartment complex in Shakopee.