Electoral enthusiasm usually closes off home buying. Not this year. Record-low mortgage rates and a flood of buyers looking for home offices and more space helped spur housing construction on the eve of the presidential election.
According to a monthly report from Housing First Minnesota, sister city builders had their busiest October in 15 years. However, residential construction fell by almost half.
In October builders received 712 single-family permits, 28% more than the previous year, and most of the single-family permits since October 2005.
"It's been solid," said Gary White, president of M / I Homes' Minneapolis division.
Despite a particularly challenging April, the company has reported more sales and closings so far this year than last year. Headquartered in Columbus, Ohio, M / I has served 22 parishes in the Minneapolis / St. Paul metro area in recent years. White said his company and others continued to grapple with material shortages, supply chain and delivery issues.
"Employees and trades are working harder than ever to get the same results as they did before the pandemic," he said.
The company has increased production to both satisfy growing sales and build inventory. "There is high demand and limited supply," he said.
New home sales in the Twin Cities Metro increased nearly 23% year over year in September, the latest sales data available, according to the Minneapolis Area Realtors.
However, the bidding wars that were common with existing homes are not happening, White said, even though the supply of new homes for sale has declined year over year.
In September, 1,500 homes were put up for sale through the regional multiple listing service, 30% fewer than last year.
White and other builders say the demand for single family homes is being driven by the lack of existing homes that are affordable for millennials buying their first home. There has also been strong demand for suburban homes, appealing to buyers contemplating a future that includes more time to work from home. The number of homes in the market has dropped dramatically in the Twin Cities suburbs in recent months.
"The combination of more home time and lower interest rates has made many decided that now is the time to buy a new home that fits their new lifestyle," said Gary Kraemer, president of Housing First Minnesota and a property developer from Twin Cities. "We expect the search for new homes to continue as the resale market simply does not have enough inventory to meet home buyer demand."
Data for Housing First Minnesota is compiled from the Keystone Report, which counted 756 permits to build a total of 1,387 units in four comparable weeks in October. More than one unit can be built with a single permit.
White said while traffic in shopping malls and open houses has decreased year-on-year, those who shop are more serious.
"There aren't that many casual buyers," he said. "Buyers who come to our sales centers are converting faster than in the past."
These buyers include a larger proportion of renters and millennials who are taking advantage of low prices to buy homes that are cheaper to work from home, he said. These buyers are pushing the sale of townhouses, which tend to be cheaper than detached houses, but building these more affordable homes is challenging given the rising cost of land, labor and materials.
"They're looking for office space in their home and bigger houses," he said. "There's a greater sense of urgency today than there was a year ago," said White.
This year was well on its way to becoming a record for the Twin Cities apartment developers, but they've been pulling the brakes over the past few months. Apartment buildings usually make up at least half of all planned units in the metro, but that number has been below 50% as of July.
In October, the developers received sufficient permits for the construction of 675 units, mainly rental apartments available on the market. That was 43% less than in the previous year. Much of this decline is occurring in Minneapolis.
Vacancy rates in Minneapolis, St. Paul and a few suburbs in the inner ring have risen significantly in recent months, partly because the pandemic has slowed employment growth and young professionals who could normally rent their own apartment are moving in with their parents or roommates.
The situation in the twin cities reflects the national building trends. On Monday, the US Census Bureau said total construction spending rose 0.3% nationwide from August to September, the fourth straight monthly gain. Most of that profit came from growth in the residential space. At the same time, however, retail spending, which includes hotels, retail stores, and institutional buildings, fell significantly.