Sun. Jan 23rd, 2022

Low mortgage rates and a shortage of homes for sale had builders in the Twin Cities working overtime last month.

During June, home builders in the metro were issued 637 permits to build single-family homes, a 63{dc624cd1ddb26e59c55c199aaccd135d5d2b008b423c564a4c8cd488f259ce1d} increase over last year, according to data compiled by the Keystone Report for Housing First Minnesota.

“We have not seen a housing market this unbalanced before; there are simply not enough existinghomes in the Twin Cities to meet the needs of our region,” said Todd Polifka, 2021 president of Housing First Minnesota, the trade group that represents Minnesota builders.

While last month’s single-family construction easily topped last year’s pandemic-hobbled home building activity, the most recent total was down slightly from the previous month and June 2019 when 677 single-family permits were issued.

With materials and labor in short supply, home builders in the Twin Cities have had trouble keeping pace with demand this year. Much of that demand is being fueled by low mortgage rates, which have hovered around 3{dc624cd1ddb26e59c55c199aaccd135d5d2b008b423c564a4c8cd488f259ce1d} for much of the year. On Thursday, Freddie Mac’s weekly survey showed that the average 30-year fixed-ratemortgage(FRM) dipped slightly to 2.98{dc624cd1ddb26e59c55c199aaccd135d5d2b008b423c564a4c8cd488f259ce1d}.

“Economic growth remains steady and is bolstering more segments of the economy,” said Sam Khater, Freddie Mac’s Chief Economist, in a statement. “Although low and stablemortgagerateshave kept the housing market booming over recent months, a deterioration in affordability and for-sale inventory has led to a market slowdown.”

So far, that hasn’t been the case in the Twin Cities. Home builders say demand for new houses remains robust.

It’s a different story for apartments. Multi-family permits, which are mostly market-rate rentals, were down dramatically. Builders were issued permits to build just 335 multi-family units, about one-third as many as last year.

Though multi-family permits can be volatile from month to month, June was the fifth consecutive month that that segment represented less than half of all new residential units in the metro.

“Homebuilders are still struggling to keep up with the demand from homebuyers,” said David Siegel, executive director of Housing First Minnesota, in a news release. “The barriers to bring new lots and developments to the Twin Cities, as well as the ongoing labor shortage and supply chain issues, continue to put a strain on our shortage of single-family homes in the Twin Cities.”

For the month, Blaine issued the most permits (45) followed by Woodbury (44) and Lakeville with 43.

Jim Buchta • 612-673-7376

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