Starter homes and townhomes continue to boost Twin Cities market

A flurry of new townhouses and suburban starter homes is helping boost homebuilding in the Twin Cities metro.

This month, 474 permits for 1,117 units were issued, according to metro data compiled by the Keystone Report for Housing First Minnesota, a program of the Builders Association of the Twin Cities. Of those planned units, 60 percent were multifamily units, mostly rental apartments; that's 69 percent more than last year.

After several months of healthy year-over-year increases, single-family construction was flat.

But the data shows development patterns are shifting. Builders were issued 447 permits for single-family houses, just three fewer than last year at this time.

That puts the metro area on track for the biggest ­homebuilding year in a decade, said David Siegel, executive director of Housing First ­Minnesota.

Metrostudy, a national real estate tracking firm, said on Wednesday its third-quarter survey of the Twin Cities housing market shows that despite month-to-month ­volatility, the market is still growing. Buyers, though, are shifting their house hunts farther into the suburbs where the houses tend to be more affordable.

The report shows that during the quarter, housing starts in the metro were up 20.1 percent and closings rose 21.7 percent to the highest level since the end of the recession.

Though single-family construction has been volatile from month to month, townhouses have helped keep builders busy. So far this year, there's been a 65 increase in the number of townhouses permitted in the metro, according to Housing First data. Still, they only make up 6 percent of new residential construction. Before the Great Recession, townhouses sometimes represented half of all new units.

"We're encouraged to see a continued increase in townhouse construction, an important piece of the entry-level housing market," said Bob Michels, president of Housing First Minnesota, in a statement.

Builders attribute the increase in attached for-sale housing to legislation passed earlier this year that was aimed at easing some of the liability companies face when they build association maintained housing.

The biggest projects permitted during the month were in Woodbury, where Big D Construction pulled four permits to build 305 units. In Shakopee, Sand Construction received one permit to build 98 units. And in Minneapolis, Reuter ­Walton Commercial was issued a single permit for 75 units.

During the month, Lakeville issued the most permits at 40, followed by Blaine at 37 and Woodbury at 21.

"While homebuilders look farther out to the collar counties for economical growth," he said. "The core counties also continue to experience growth with the top four counties up by double-digit gains."

Earlier this week, the U.S. Commerce Department said new home sales across the country rebounded sharply during September following two months of declines. The agency said that sales increased 18.9 percent to a 667,000-unit annual rate, the highest in a decade. Sales increased in all four geographic regions, but were strongest in the South, which accounted for nearly 80 percent of that increase.