Twin Cities sees big uptick in single-family permits - Finance & Commerce
Single-family housing starts in the Twin Cities were up by double-digits again in March, but apartment construction is a much different story as only a handful of multifamily units were permitted during the month. Single-family housing starts in the Twin Cities increased by double-digit in March, according to the Keystone Report. However, only a handful of multifamily units were permitted during that period. Cities in the 13-county metro area issued permits for 411 new housing units overall in the past month, up 12% from March 2023, including 405 single-family homes (up 37%) and six multifamily homes (down 91%) respectively. This is consistent with longer-term trends, with single-families 41% ahead of last year, while multifamily housing units (683) are off 53%. This marks the ninth consecutive year-over-year gains for single-Family permits. The increase in single-income growth is attributed to low inventory and a shortage of homes on the home ownership side, not rental.
Published : 4 weeks ago by Brian Johnson in
Single-family housing starts in the Twin Cities were up by double-digits again in March, but apartment construction is a much different story as only a handful of multifamily units were permitted during the month.
Cities in the 13-county metro area issued permits for 411 new housing units overall in the past month (up 12% from March 2023), including 405 single-family homes (up 37%) and six multifamily units (down 91%), according to the Keystone Report.
One month of data is a small sample size, but the numbers are consistent with longer-term trends. Through the first quarter of 2024, single-family starts (1,226) are 41% ahead of last year, while planned multifamily units (683) are off 53%.
March represents the ninth consecutive month of year-over-year gains for single-family permits. Put another way, single-family permits haven’t been in negative territory for any month since June 2023, according to Keystone data.
Most of the single-family gains have been significant. Specifically, year-over-year increases have been in double-digits or better for eight of the past nine months, including gains of 113% in February and 110% in October.
Katie Elfstrom, vice president of marketing and communications for Housing First Minnesota, said March 2023 was a slow month for home construction, which is one reason for the big year-over-year gain.
The permit totals this March are similar to 2018 and 2019, which represent more typical market conditions, she said.
With the lack of inventory, Elfstrom said, more buyers are looking to “get what they want, not just what is available. That has them turning to new construction as a great opportunity.”
David Arbit, director of research for the Minneapolis Area Realtors, said the market has been underbuilding new homes for a decade and a half.
If interest rates go down to something in the neighborhood of the high fives, he added, homebuyers “are going to come out of the woodwork, and we will not have enough homes to sell them.”
At the same time, people are noticing that the “real shortage is on the home ownership side, not necessarily rental,” Arbit said. “Builders are coming around to that and saying, ‘Maybe it makes more sense to build to sell instead of building to rent.’”
Andrew Babula, director of the real estate program and the Shenehon Center for Real Estate at the University of St Thomas, notes that inventory is low in the market overall. Many single-family homeowners are holding off on selling, which is creating a need for additional housing to meet demand.
Single-family builders “are finding that despite the high interest rate environment, they can still make numbers work, because there is demand out there,” Babula said.
On the multifamily side, however, the higher interest rates are making it more difficult for projects to pencil out.
“Not only are interest rates lowering the return that developers are seeking, but we are seeing a little bit of slowdown in lease-ups of newer apartment buildings and sales of apartment buildings that have been newly developed, so that is putting pressure on developers,” Babula said.
Top metro area cities for single-family starts in March were Woodbury (40 units), Maple Grove (28 units), St. Michael (25 units), Shakopee (24 units), Cottage Grove (22 permits) and Blaine (22 units).
RELATED: Single-family permits up, multifamily down in February