It was the most robust August in at least five years for Twin Cities homebuilders.
Builders were issued 737 permits to build 1,310 units, according to Housing First Minnesota. That included 711 single-family homes, 10% more than last year at the same time.
“It’s a good sign to see that builders are ending the summer strong,” said John Rask, president of Housing First Minnesota, a trade group that represents metro-area builders.
The gain continues a string of annual increases, reversing course on what had been a particularly slow start to the year for area homebuilders. Construction of single-family homes is now 2% ahead of last year at this time as builders backfill a shortage of existing houses that are affordable to first-time buyers and downsizing baby boomers.
At the end of July, 10% fewer existing homes priced at less than $300,000 were on the market, according to a July sales report from the Minneapolis Area Realtors. At the current sales pace that meant there were only enough houses priced at priced from $150,000 to $350,000 to last one to two months. The market is considered evenly balanced between buyers and sellers when there’s a five-month supply.
“Housing inventory is still sitting well below what is necessary for a healthy housing market,” said Rask in a statement. “We hope to see a continued increase in construction activity throughout the rest of the year.”
During August, builders pulled only enough permits to build 699 apartments and other multifamily homes — about the same number as last year — even though there’s a near-record number of market-rate apartments in the development pipeline. Those multifamily units represented 49% of all planned construction during the month.
Though apartments have made up the bulk of residential construction over the past several years, multifamily has been outpaced by single-family construction in recent months. July was the second-slowest month so far this year for multifamily permits.
The trends have been similar nationwide. New home sales across the country so far this year are 4% ahead of last year, making it the best year for new homes since 2007, according to data released last week by the Census Bureau and the Department of Housing and Urban Development. The median sale price of new home across the country was $312,800, a 2.2% increase from June, but a 4.5 % decline from a year ago.
Price increases are being attributed to rising construction costs and a shortage of skilled labor. Last week a combined report from Autodesk and the Associated General Contractors of America said that 80% of the 2,200 construction firms surveyed reported they’re having a difficult time filling hourly positions.
More than 73% of those firms said it will continue to be hard, or get even more difficult, to find hourly craft workers over the next 12 months. In Minnesota, 71% of the firms surveyed said they would have to hire additional workers over the next 12 months.
Concrete workers, carpenters and pipe layers were the most difficult positions to fill, those Minnesota firms said, and more than half of them said they’ve had to raise wages or increase incentives to keep jobs filled. More than half also said that projects are taking longer.
For homebuyers, unexpectedly low mortgage rates in recent weeks have helped offset higher home prices. On Thursday, Freddie Mac’s Primary Mortgage Market Survey said the 30-year fixed-rate mortgage averaged 3.49%, a slight increase from the previous week but nearly a full percentage point lower than last year at this time.
“After a bumpy start to a year filled with some ups and downs, it’s heartening to see we’ve caught up to last year,” said David Siegel, executive director of Housing First Minnesota. “Mortgage rates are definitely helping homebuyers, if we could fix our affordability challenge this market would be in overdrive.”
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