Homebuilding in the Twin Cities was up 50% last month as buyers took advantage of persistently low mortgage rates.
During March builders were issued 631 permits to build single-family homes — the most since at least 2004, according to a monthly report from Housing First Minnesota, a trade group that represents homebuilders.
"We are seeing the impacts of having the millennial generation at peak home buying ages while boomers are also in the market for their move-down home," said Todd Polifka, 2021 president of Housing First Minnesota, in statement. "All while there is a historic shortage of homes for sale in the Twin Cities."
Rental construction, however, has been flat. Last month builders were issued enough permits to build 323 multifamily units, mostly market-rate rentals. That was the worst showing for rental units in at least a year.
With so many renters shopping for homes, rental developers have been less aggressive than in the past, especially in urban areas where apartment construction has been most robust over the past decade.
According to the Keystone Report, which compiles the data for Housing First Minnesota, a total of 648 permits for a total of 954 units were issued during March. That total was on par with the previous month, but about 200 units more than last year.
Builders are on track to have the best year in at least a decade. Last month, and so far this year, Lakeville has been the busiest city in the metro for builders. But with apartment buildings being developed in Minneapolis, the city has remained among the top three busiest.
On Thursday, Freddie Mac said the 30-year fixed-rate mortgage (FRM) averaged 3.18 % — unchanged from the week before.
Mortgages rates have increased slightly in recent weeks from record lows, but remain well below historic averages. Still, the slight increases are coming at a time of record increases in home prices. Nationally, that's beginning to stifle demand.
Sam Khater, Freddie Mac's chief economist, said in a news release that home buyer demand is now only 8% ahead of pre-covid levels compared with a 25% gain at the beginning of the year.
"Although mortgage rates remain low, we are beginning to see a pullback by those looking to enter the housing market," he said. "This is confirmation that while purchase demand remains strong, the marginal buyer is feeling the affordability squeeze resulting from the increases in mortgage rates and home prices we've experienced in recent months."
Jim Buchta • 612-673-7376