Twin Cities-area home building continues to be strong
Neal Gendler
Star Tribune
Published Nov 8 2001
Despite national economic woes and security anxieties,
residential construction in the Twin Cities area was stronger
last month than in October 2000.
Low mortgage rates and a surge of interest in
maintenance-free housing options are buoying local building
activity.
The 836 permits issued last month were 10 more than in
October 2000, and the 1,631 units planned from those permits
increased almost 45 percent from 1,128 a year earlier,
according to data released Wednesday by the Builders
Association of the Twin Cities. Home building this year is at
about the same level as in 1998, which builders say was a
normal year compared with the boom in 1999 and 2000.
"These statistics indicate that so far, the Twin Cities housing
market hasn't reacted too adversely to the Sept. 11 tragedy and
the subsequent economic downturn," Jeff Schoenwetter,
association president, said in the report. "Interest rates
continue to make home ownership very attractive."
In an interview, Schoenwetter said that "about half the permits
are being issued in the form of attached or
association-maintained" housing. "The Number 1 reason is
affordability. Typical attached housing is higher in density and
therefore has a lower cost to the consumer because each unit
has a lower pro-rated share of land cost."
For the past few years, he said, half of the homes in the
builders' Parade of Homes are association-maintained "in one
way or another." Schoenwetter said that although association
housing, such as townhouses, is an affordable entry point to
ownership, and a way for empty-nesters to downsize, it is
attracting buyers across the demographic spectrum.
Compared with 1998, year-to-date permits are about 5
percent behind and units are more than 2 percent ahead, the
association said. Compared with the first 10 months of 2000,
permits are about 8 percent behind, and units are about 3
percent behind. Those permits typically would be for contracts
signed within the month, Schoenwetter said.
The value of homes to be built keeps rising, but Schoenwetter
said there has been little inflation in home-building costs from
2000. Year to date, homes built in the 137 metro-area cities
tracked for the association by the Keystone Report are valued
at $2.005 billion, compared with $1.973 billion last year.
Through October, 9,019 permits were issued to build 12,964
units. Year-earlier numbers were 9,775 permits for 13,405
units.
He gave an example of how low interest rates help sales. Buyers
seeking a $250,000 loan a year ago might have had a 7.75
percent interest rate. On Wednesday, rates were around 6
percent.
Now, Schoenwetter said, he can get a 5-percent rate for those
buyers by paying about two points for them. A point is 1
percent of the loan amount. His outlay of about $4,500 results
in a monthly payment of $1,342, he said.
Schoenwetter said low interest rates were one of "a lot of good
indicators that would cause you to be cautiously optimistic"
about the next six to eight months.
However, he said, "As much as there are reasons for
enthusiasm and velocity, there are reasons to expect some
contraction in that enthusiasm among consumers.
-- Neal Gendler is at ngendler@startribune.com .
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