Homebuilders in the Twin Cities had their best February in nearly 15 years as low mortgage rates and a shortage of house listings helped boost housing construction in the metro.
Last month, builders were issued 393 single-family home permits, a 19% increase over last year, according to Housing First Minnesota, a trade group that represents builders in the Twin Cities.
"Since the Super Bowl, traffic has really picked up," said Todd Polifka, president of Woodbury-based Custom One Homes.
He said open houses at the company's models have been unusually busy, in part because the weather has been conducive to house shopping. The biggest motivators, though, are low rates and a shortage of previously used homes.
A recent report from the Minneapolis Area Realtors (MAR) showed that more listings are hitting the market than last year at this time. There's a bumper-crop of buyers who are signing purchase agreements as quickly as those houses are listed.
There were 15% fewer listings on the market at the end of January than last year at the same time, according to MAR. The shortage is most acute for first-time buyers, but builders have struggled to serve that market because of rising construction costs. New townhouses in the $300,000-plus range often sell with multiple offers, Polifka said.
"People are buying them even before they're finished," he said.
Already, new homes are significantly more expensive than previously owned houses. During January, the most recent data that's available, the median sale price of all new homes was $407,000, about $130,000 more than a median previously owned home, according to MAR.
During the same month, only about 10% of the 5,700 pending new-home sales in the Twin Cities metro were priced at less than $250,000. Rentals are also in short supply in many areas despite steady increases in apartment construction. In February, developers were issued enough permits to build 487 units, a 16% annual increase.
The biggest apartment projects were permitted in Edina, where a 227-unit project was planned, and in Minneapolis, where developers are working on 100- and 56-unit buildings. David Siegel, executive director of Housing First Minnesota, said in a statement that price increases aren't likely to level off until supply catches up with demand.
"We will not see housing costs level out until we can build more new homes at more affordable price points," he said.
Polifka said because it's difficult to build houses that are affordable to first-time buyers, many young professionals are waiting a little longer and buying what used to be considered move-up homes.
"They're taking time to pay off debt," he said. "But I have people who are coming into the market with a first-time purchase of $500,000 to $600,000."