Homebuilders in the Twin Cities are picking up the pace this spring, but not at the same rate as last year.
During March, builders pulled enough permits to build 574 single-family houses, according to a monthly report from Housing First Minnesota, a trade group that represents area builders. That was 8% fewer than last year but the second-strongest March since 2006.
“We’re not surprised to see single-family permits and construction fall behind last year’s breakneck pace,” James Julkowski, a Twin Cities builder and president of Housing First Minnesota, said in a statement.
“As builders continue to face a challenging supply chain, labor market and regulatory environment, we could see this trend continue into 2022,” he said.
Apartment developers had a much busier month. During March, they were issued enough permits to build 860 units — mostly market-rate rentals, which was a 160% increase over last year.
Because a single permit can be issued to build more than one unit and multifamily buildings tend to be large, this category tends to be vary from month to month.
In March, for example, three large projects were permitted. That included a 250-unit building in St. Louis Park, a 225-unit building in Minnetonka and 163-unit building in Minneapolis.
Combined, builders were issued 599 permits to build 1,434 units throughout the metro. That was a nearly 8% decline in permits but a 50% increase in total units.
The report comes at a time of rising mortgage rates, which have yet to dampen demand for housing in the metro. But there’s growing concern that higher borrowing costs could erode buying power and stifle sales.
On Thursday, Freddie Mac’s latest weekly rate survey showed that the 30-year fixed-rate mortgage averaged 4.67% for the week ending March 31. That’s up from 4.42% the previous week and 3.18% a year ago.
For now, though, there are still more buyers than sellers in parts of the metro, which is seeing stiff competition in virtually all areas and price ranges.
John Rask, vice president of land for the Minneapolis division of M/I Homes, the second-largest builder in the Twin Cities, said that so far rising rates are actually stimulating sales as buyers race to beat future increases.
“These are still historically low rates,” he said. “And we haven’t seen people shy away from purchasing. And we’re not seeing cancellations, but it is in the back of people’s minds.”
Already, there are subtle signs that housing demand is easing slightly. The Mortgage Bankers Association’s unadjusted purchase index, which tracks mortgage applications, was down 10% year-over-year during the week ending March 25. That was the second-straight week of a double-digit decline from the year-ago level.