Aug 30, 2022 - Real Estate

Single family homebuilding slows in Twin Cities

Illustration of a construction crane hook with a downward arrow instead of a hook.
Illustration: Brendan Lynch/Axios

Single family homebuilding is falling fast in the Twin Cities as rising interest rates and construction costs make new homes more expensive.

What's happening: Builders pulled 28% fewer permits for single-family homes this month compared to last August, according to a recent Housing First Minnesota report. That follows a slow July, when permits fell by 33% year-over-year.

Why it matters: The Twin Cities — like most of the country — is still trying to build itself out of a housing shortage that was caused by the 2008-2009 housing crisis, and a slowdown stands to derail the progress of the last couple years.

Yes, but: Multifamily housing construction has kept its hot pace, with 428 new units permitted in August, a 2% increase over the same month last year.

Of note: Nearly 40% of all housing permits in August were pulled in Minneapolis proper, as developers have remained bullish on the city.

Zoom out: Even with fewer new houses, buyers have more inventory to choose from.

  • Home sales in the Twin Cities are down more than 20% this summer compared to last, leading to a 5% increase in inventory, according to Minneapolis Area Realtors Association data.

What's ahead: Housing First CEO James Vagle warned that the current slowdown could hurt the long-term Twin Cities housing market.

  • “We have a large population in their peak homebuying age and a shortage of homes in our region," he said in a news release. "It’s more important than ever that lawmakers and leaders look at innovative ways to bring starter homes back in Minnesota.”
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