Single family homebuilding slows in Twin Cities

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.”