Small area home-building projects inspire hope

Last week, the Blaine City Council approved construction of 19 new homes in that city's Willowbrook development.

Three years ago, a project that small would barely make a ripple in the city's new-housing scene. But these days, city officials and developers, battered by the worst housing market in generations, find hope in the smallest of projects.

"The general sense within the industry is that we're seeing a light at the end of the tunnel, and we're cautiously moving toward it," said Joshua Fowler, executive vice president of the Builders Association of the Twin Cities.

Few but the most pie-eyed optimists are predicting an imminent end to the slide in home values. The inventory of unsold homes remains high, and about 40 percent of sales this year represent homes that have been in various stages of foreclosure. New housing construction is unlikely to approach the levels achieved in 2005 and 2006.

Still, builders are beginning to take small steps, picking up stalled projects or starting new ones in phases, say metro-area community development officials. And while the new-housing market remains down from last year, nearly 30 percent of the year's new building permits were granted since July 1, according to the Keystone Report.

Nationally, housing starts rose to a seven-month high in June, and sales of newly built houses grew in each of the past four months, including an 11 percent increase in June that was the biggest in eight years.

Locally, builders and bankers are shying away from risk, and buyers are embracing frugality. As a result, city councils are approving proposals for 10 or 20 new homes, compared with, say, 100 in the past.

• In Maple Grove, developers are proceeding to fill in gaps in new neighborhoods where construction halted late last year.

• In Woodbury, developers are seeking creative ways to meet a need for senior housing without taking on too much risk; some have brought in preliminary plans to build small, or in phases.

"Obviously, there is more optimism out there, more good news out there now than there is bad news," said Mike Swanson, president of the Builders Association of the Twin Cities, and a vice president for Rottlund Homes builders.

He referred to the incremental development as the "little green shoots" of the recovery.

One of those may be the Fountains in Coon Rapids, approved last month to start with 18 lots, developed by Signature Ventures. The development had been approved in April 2008 as an 81-unit Pulte Homes undertaking before stalling with the economy.

City officials, although encouraged, also are not expecting a return to boom times.

"The gates aren't going to come crashing open," said Dick Edwards, Maple Grove's community development director. "It's going to be a fairly long and slow haul."

Swanson said that buyers are taking another look at new construction. The number of foreclosed and short-sale homes on the market is down from its peak last summer, and although buyers are still looking for a deal, Swanson said, they recognize the price they may have to pay to bring some abandoned homes up to par, and are comparing it with the price of a new house.

Nationally, the average new-home size is down for the first time in about 15 years, he said, and new homes are coming with fewer bells and whistles.

"This recession is going to dramatically alter the way consumers spend their money, and I'm not only talking about their homes but their cars, clothes, food and everything else," Fowler said. "Need is going to become the new want. I don't think they're going to get the frills and extras. They're going to get what they need and be happy with it."

Jason Budzynski, vice president for marketing and sales at TJB Homes, which is developing Deacon's Forest in Blaine, said that many developers are still sitting on land that they bought at the height of the market. They have the pressure of paying that off, in addition to facing more stringent requirements from cities and lenders that they'll be able to sell the homes they build.

"We're just trying to keep moving and keep one foot in front of the other," he said. "At some point in time, even though it's going to cost 10 to 15 percent more in the long run, the phasing in of eight lots allows me to proceed and start chiseling at the principal. It keeps you moving forward, and moving forward is always better than standing still or moving backwards."