Home permits hit 17-year high

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A big month of single-family homebuilding activity in April pushed the Twin Cities to permit levels not seen since the mid-2000s.

During the month, cities in the 13-county metro area have permitted 762 new single-family homes, up 61% from a year ago, according to the Keystone Report. Through the first four months of the year, single-family permits are up 48% from the same period in 2020.

Total permits — including multifamily construction — landed at 796 for the month, up 62%. That’s the highest total for any April since 2004, when metro-area cities issued 903 permits, according to Housing First Minnesota.

Year-to-date permits are also at a 17-year high. Through April, the Twin Cities area has seen 2,547 total permits this year — the most since 2004 (3,115), according to Housing First Minnesota.

Multifamily construction is more of a mixed bag.

Among projects with 16 or fewer units, year-to-date permits are up 37% and planned units are about even with last year. But in the category of projects with 17 or more dwellings, planned units are down 18% year-over-year, according to Keystone.

David Siegel, executive director of Housing First Minnesota, said the strong single-family numbers are a reflection of favorable interest rates, demand from a new generation of homebuyers and other market factors.

“If you think back to 2004, 2005, 2006 or 2007, you were probably Generation X looking to buy, and that is a much smaller generation than the millennial generation,” Siegel said. “They’re coming into peak homebuying. And we’ve literally underbuilt for a decade.”

Not that the news is all great. Siegel said the market continues to struggle with delays in the supply chain, labor shortages and other challenges, even as demand for homes — especially the affordable variety — is on the rise.

As a result of those challenges, homes are taking longer to build. A typical suburban home that would normally be ready for occupancy in about 120 days may take six to eight months to complete now, he said.

“The demand is, I think, fundamentally there. … That desire to own a new home and particularly a newly built home is still is really strong,” Siegel said.

Siegel’s observations align with recent statistics from the Minneapolis Area Association of Realtors.

In March, new listings in the Twin Cities region decreased 11.6% while inventory levels fell 50.7% to 4,907 units, according to MAAR. The median sales price increased 10.3% to $327,500, MAAR reported.

“While many homebuilders are working to increase their activity, the cost of lumber and other materials and a backlogged supply chain continue to limit new home construction and have increased costs substantially,” MAAR said in the report.

Johnny Opara, a multifamily housing developer and a licensed Realtor in the Twin Cities, said the market is “very lopsided now” as measured by demand versus available homes for sale.

How lopsided is it? Opara said he recently submitted an offer for a client to buy a single-family home in the Twin Cities. He had a lot of company because there were 34 other offers on the table.

“That is how competitive the market is in terms of folk really looking to purchase a home,” said Opara, the president and CEO of JO Companies.

RELATED: Single-family homebuilding continues to roll

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