Single-family homes take a big jump in September construction

Homebuilders in the Twin Cities had their best September in a decade. Apartment developers had one of their worst.

Throughout the 13-county metro area, 526 permits were issued to build 767 units, according to the Builders Association of the Twin Cities. That was a 36 percent increase in permits and a 15 percent decrease in units.

Those September permits will enable construction of more than 500 single-family houses, a nearly 40 percent increase over the last year, while apartment construction during the month declined by half.

"We're very excited to see this year's permit numbers outpace 2015, but we know that we still have a ways to go to get back to normal market levels," said David Siegel, executive director of the builders association.

The increase in single-family construction this month is part of a slow shift from apartments to detached homes. Multifamily construction — mostly rental apartments — represented just 33 percent of all planned units during September, a steep decline from previous months. Single-family construction so far this year is up 11 percent.

This shift comes at a time of deepening concern about the housing shortage in the Twin Cities region. The National Association of Home Builders recently said that the Twin Cities was one of the 16th-most undersupplied metros in the nation based the number of homes being built relative to the jobs being created. Nationwide, the historical average is a ratio of one housing unit for every six jobs, but in the Twin Cities that ratio stood at 7.9 jobs for every new house built.

The shortage of new houses is being compounded by a shortage of existing ones. Even though house listings have been increasing marginally every month in the Twin Cities metro, demand has outpaced supply in many parts of the region. During August, for example, there was an 18 percent decline in the number of properties available for sale at the end of the month.

Those inventory constraints are being blamed for stifling home sales in the Twin Cities and beyond. On Thursday the National Association of Realtors (NAR) said its Pending Home Sales Index, a forward-looking indicator that's based on how many purchase agreements were signed during the month, declined 2.4 percent in August. That puts the index at its second lowest reading this year.

Lawrence Yun, NAR's chief economist, said that unless housing construction picks up, the housing recovery could falter. Nationally, housing listings have fallen year-over-year for 15 straight months causing a house price increase for 54 consecutive months.

"There will be an expected seasonal decline in new listings in coming months, which could accelerate price appreciation and make finding an affordable home even more of a struggle for would-be buyers," he said in a statement.

In the Twin Cities metro, entry-level buyers are the ones facing the biggest deficit of options, builders said.

"We hear that demand is out there, but it's very difficult for us to serve that demand," said Graham Epperson, division president at Pulte Group. He said that building houses for entry-level buyers is difficult because land, labor and fees are so expensive.

"I wouldn't say they're selling faster than we can build them, because we can build them fast," Epperson said. "But when we get into that $300,000 price range they certainly go a lot faster."

For the year so far, Minneapolis has been the busiest city for homebuilders and by a long shot. The city issued enough permits to build 833 units. Golden Valley was next with 603.

Jim Buchta • 612-673-7376