Twin Cities single-family housing starts up slightly

Listen to this article

Brian Johnson

Finance & Commerce

August was another steady-if-not-spectacular month for single-family homebuilding in the Twin Cities, but apartment construction continues to lag far behind last year’s pace as summer winds down.

New data from the Keystone Report reveals that cities in the 13-county metro area permitted 678 new housing units in August (down 28% from a year ago), including 586 single-family houses (up 2.6%) and 92 multifamily units (down 75%). The combined value of the permits is roughly $229 million, which is 5% lower than the August 2023 value.

Smaller projects accounted for all of the multifamily activity. Among projects with 16 or fewer units, cities permitted 72 units, according to Keystone. August also saw one project with 20 units and nothing in the category of 60-plus units.

For the year to date through August, single-family housing starts are up 18% year-over-year, while planned multifamily units are 75% behind last year’s pace.

Stubbornly high interest rates and other factors have created headwinds for new residential construction, especially multifamily development, so builders and developers are keeping a watchful eye on the Federal Reserve. The Associated Press reported last week that the Fed is looking to cut rates as soon as mid-September.

“The time has come for policy to adjust,” Federal Reserve Chair Jerome Powell said last week, as quoted by the Associated Press. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

The expected rate cut is welcome news for Housing First Minnesota, a Roseville-based trade association representing residential builders, developers, remodelers and suppliers.

“We are looking to the Fed taking action on interest rates,” said James Vagle, Housing First Minnesota’s executive director. “We have said for the longest time that pent-up demand is there. This could be a season where buyers enter the market. We are excited to see how this plays out. We need all types of housing.”

The monthly increase in single-family permits was slightly higher than last month. In July, metro area cities permitted 452 new single-family homes, which was 1.3% higher than July 2023. During the first half of 2024, monthly increases in single-family permits ranged from 113% to 9%, according to Keystone and previous Finance & Commerce reporting.

Top cities for planned housing units in August were Maple Grove (54 permits, 59 planned units), Woodbury (50 permits, 50 units), Shakopee (14 permits, 49 units), Ramsey (46 permits, 46 units), and Lakeville (42 permits, 42 units).

Citing a report from the Minneapolis Area Realtors and St. Paul Area Association of Realtors, Finance & Commerce reported earlier this month that pending home sales were down 4.2% year-over-year in July. But the Realtors, like homebuilders, are looking for better things to come on the interest rate front.

“The last two weeks with there being so much more talk about those interest rates dropping, our area has picked up a lot,” Geri Theis, president of the Minnesota Realtors, told Finance & Commerce in mid-August. “I think those numbers are going to look pretty good in the next month. I do think people keep an eye on it and they’re watching and they’re waiting for that to happen.”