Top housing news for quite some time has been that entry level homes are the most sough-after segment in the Twin Cities housing market. Supply has long been short while low mortgage rates have attracted first time buyers along with downsizing baby boomers, driving high demand. It’s a combo that has made for a frenzied market – with ballooning, high-speed offers, bidding wars, and disenchanted buyers. At the beginning of last year, there was much optimism for new homes helping to alleviate the situation by adding stock to at least the lower mid-range housing segment. An article in the Star Tribune shares the situation unfortunately didn’t pan out as hoped.
Local homebuilders were constricted in homebuilding activity overall, but especially in mid-range homes, due to high costs on the back end. The article shares that there’s little cheap property to be had, and construction costs have also risen for both labor and materials. Only 34 more single-family homes were built in 2018 from the prior year, well short of expectation. New homes simply cost more than the “used” stock. In order to try and meet the demand for cheaper sales price, builders included more attached housing (i.e. townhomes), increasing the supply by almost 30% over 2017.
The demand for more housing is strong in the Twin Cities, though the article cites some locales are reaching saturation for apartments. There are still some high-profile projects in the works, including the much-debated and revised 7200 and 7250 France Avenue project (see Star Tribune article) in Edina. We will continue to track the situation and keep you updated!
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