Homebuilders in the Twin Cities had their busiest October in at least two decades.
During the month, builders were issued 591 permits to build 1,737 units — the most since record-keeping started in 2003. That includes 555 single-family houses and 1,182 multifamily units, mostly market-rate suburban apartments.
“The low inventory in the housing market is definitely encouraging more residential construction,” said John Rask, president of Housing First Minnesota, in a statement. “With the slow start to 2019 in single-family construction, it’s a strong sign to see demand really pick up at the end of the year.”
Unexpectedly low mortgage rates and a shortage of existing houses that are affordable to first-time and downsizing home buyers is driving demand for new houses in recent months. At the current sales pace there are only enough houses priced at less than $300,000 to last 1.8 months, according to a September report from the Minneapolis Area Realtors. The market is considered balanced between buyers and sellers when there’s a five-month supply.
A strong fall comes after a decidedly lackluster spring for many builders, with single-family construction over the past several months outpacing last year by a significant margin. Last month, for example, builders requested 20% more single-family permits than they did the year before.
Single-family homebuilders were busiest in several second-ring suburbs including Lakeville, which took the top spot with 48 permits issued.
Apartment developers are also on track for a banner year with a record number of new apartments in the pipeline, especially in suburbs where there hasn’t been significant rental construction in at least two decades. The 1,182 multifamily units permitted during October was nearly 40% more than last year. The biggest multifamily buildings were in Minneapolis, where Kraus-Anderson received a permit for a 204-unit building and where Reuter Walton Commercial plans to build 153 units.
Across the metro area, housing has outpaced other kinds of construction. On Wednesday, Dodge Data & Analytics released a report saying that the value of residential construction in the 13-county metro area, including single-family and multifamily housing, totaled $475 million — 34% more than last year. Nonresidential buildings, including office, retail, hotels, warehouses, manufacturing, educational, health care, religious, government, recreational, and other buildings accounted for $221 million, 33% less than last year.
That’s been the case all year. So far this year residential construction was up 10% while nonresidential construction was down 18%.
Despite positive gains, the industry is facing higher prices for everything from land to labor, stifling stronger potential gains especially for builders that cater to entry-level buyers.
“While an increase in all housing inventory helps balance our interconnected housing market, we are still not meeting the demands of the most undersupplied side of the market, affordable single-family housing,” said David Siegel, executive director of Housing First Minnesota, in a statement. “In order to truly provide price relief in that section of the market we need to make substantial changes to how we regulate and prioritize new residential construction.”