Housing construction in the Twin Cities peaks in 16 years in 2021
For home builders in the Twin Cities, 2021 has been the busiest year, but not the best, in nearly two decades.
Last year, home builders built nearly 7,400 single-family homes, surpassing the previous year by nearly 1,000 homes and the most since 2005, according to data compiled by the Keystone Report for Housing First Minnesota, a group sales representative who represents the builders of Twin Cities.
Builders received 7,811 permits to build 15,073 houses and apartments. The construction of collective housing is down slightly compared to the previous year. In 2021, builders received enough permits to build 7,687 units, mostly rentals at market rates.
âThe shortage of homes for sale in the Twin Cities and the demand for new housing is now at a level we’ve never seen before,â said Todd Polifka, 2021 president of Housing First Minnesota.
Despite strong demand for new homes, home builders faced a number of challenges during the year that resulted in construction delays and sharp price increases.
âThe problem of supply and demand, regulatory restrictions, labor shortage, lot shortage and supply chain issues add to a very difficult market for manufacturers to overcome. in order to meet the needs of our housing consumers, âPolifka said.
These challenges have made it all the more difficult for home builders to make homes more affordable, especially for those buying their first home or downsizing.
At the end of November, the median sale price of a newly built home in the Twin Cities was $ 466,900, according to Minneapolis Area Realtors, which only tracks sales of new homes listed through a real estate agent. This is an increase of almost 10% over the same period last year and $ 112,000 more than the price of an existing single-family home.
“Given the limited supply and strong demand for new and resale housing, house prices have risen rapidly, causing additional entry-level buyers to rise in prices with each increase,” he said. said Danielle Leach, vice president of Zonda, a national housing research company.
She said the onset of the pandemic had caused unprecedented demand from entry-level buyers as well as first-time buyers in the Twin Cities. While builders have gone to great lengths to start the units in 2021, labor and supply constraints have caused closures to be delayed.
Despite so many obstacles, residential construction in the Twin Cities has far surpassed commercial construction. There is weakness in the office sector but growth in industrial construction, led by distribution centers and warehouses for Amazon and other large national companies.
Dodge Data and Analytics recently said that in the first 11 months of 2021, non-residential construction in the 13-county metro only exceeded 9% the previous year, compared with a 32% increase in construction. residential, which was almost equally among single-family homes. family and multi-family.
Despite tensions from record lumber prices and a worsening labor shortage, developers last year broke new ground on several sprawling projects that had been in the works for years.
This includes the Highland Bridge project in St. Paul, a 150-acre redevelopment of the former Ford plant along the Mississippi River, which has been in planning for about a decade. And in Minneapolis, developers have launched North Loop Green, a mixed-use, multi-block project that will include two towers and 350,000 square feet of office space.
This project and several others have helped make Minneapolis the busiest city for subway residential development. The developers planned to build nearly 2,700 new units – mostly rental housing, more than twice as many as in Lakeville, which saw the second-highest number of units in the metro. For single-family construction, Lakeville, Woodbury and Cottage Grove were the three most active communities.
Leach said that with mortgage rates set to rise to no more than 3.5% for a 30-year fixed-rate mortgage, she expects many of the same forces that have shaped the market in 2021 , including strong demand associated with labor and supply constraints, continue until 2022.
âThe demand from entry-level buyers remains,â she said. “But there is very little inventory at their required and achievable price points.”