MINNEAPOLIS, MN - Driven by a handful of large multifamily projects, local homebuilding activity perked up slightly in August. The Keystone Report, which tracks residential building permits in the 13-county metro area, showed that Twin Cities municipalities issued permits for 794 new housing units in August, up from 650 units in July and only slightly behind the same four-week period in August 2007 (817 units).
Generally, however, the numbers are still down significantly from recent years. August traditionally has been a boom time for homebuilding, with cities issuing permits for 1,528 new housing units in 2006 and 1,438 new units in 2005. One particularly busy week in August 2006 saw permits for 913 new housing units, 119 more than the entire month of August 2008. Year-to-date totals through August 2008 (3,596 units) pale in comparison to 2007 (6,409), 2006 (9,409) and 2005 (11,708).
KC Chermak, president of Plymouth-based Pillar Homes and 2008 president of the Builders Association of the Twin Cities, doesn't believe the building permit numbers will ever return to the hot and heavy days of 2005 and 2006, "at least not for the next 25 years." However, he said the August numbers are another indication that the market is stabilizing.
"We have not flooded the market with excess inventory. Our market is going to balance itself," Chermak said in a phone interview. "It's not flying at warp speed, but there is activity. The phones are ringing, things are going on. "We have to feel somewhat good about new building permits, feel like they have bottomed out and are slowly coming up."
David Bieker, president of Deephaven-based Denali Homes, agrees: "I think what we are going to go back to is more normal numbers. You can't realistically say we are down because of the boom years. That is why they are boom years. We have to look at what is more of a normal average pace that we are going to see over the next five years. "I don't anticipate taking a big jump within the next five years. We are going to see a steady increase. We have had a couple of very slow years. Due to the fact that people were unable to sell existing homes, they have not entered into the market" even if they want to buy a new home.
Four cities accounted for the lion's share of the activity in August, according to Keystone. Woodbury led with 18 permits for 143 units, followed by St. Paul (four permits for 136 units), Maple Grove (36 permits for 100 units) and Maplewood (14 permits for 73 units). Rounding out the top 10 were Blaine (24 permits, 42 units), Bloomington (two permits, 37 units), Hugo (12 permits, 24 units), Chanhassen (four permits, 16 units), Eden Prairie (four permits, 14 units), and Lakeville (nine permits, 14 units).
Apartments, rather than single-family homes, drove much of the new construction. In Woodbury, for example, Hopkins-based Frana Cos. is building two 63-unit, three-story apartment buildings at 7260 and 7270 Guider Drive. The project is the latest addition to a development that already includes four buildings with 288 units.
The National Association of Homebuilders recently touted a U.S. Commerce Department report, which showed that sales of new single family homes rose 2.4 percent in July to a seasonally adjusted annual rate of 515,000 units. A first-time home buyer tax credit, which went into effect as part of the recently signed housing stimulus bill, should help spur sales and support a market turnaround, NAHB chief economist David Seiders said in a statement. "While the improvement in new-home sales in July is definitely a favorable development, it comes on the heels of two consecutive months of significant downward revisions to sales numbers for May and June, so we have to keep the latest report in perspective," Seiders added.
Source: Finance-Commerce.com