Slowest December in a decade for new single-family home construction
The 2022 Twin Cities housing market saw deep impacts from the rate hikes by the Federal Reserve as they pushed mortgage interest rates to a 20-year high. With a larger share of homebuyers now unable to purchase a new home, permits to build new single-family homes in the Twin Cities stumbled.
According to data compiled by the Keystone Report for Housing First Minnesota, area homebuilders pulled 295 permits for new single-family homes in December, a 53% drop from December of last year. The last time December saw fewer than 300 permits pulled for new single-family homes was in 2012 when there were 198 permits pulled. For the year, there were permits pulled for 5,463 single-family homes, a 26% drop from 2021 and the fewest number of permits pulled for this type of housing since 2016.
“The steep jump in interest rates earlier this year sent homebuyers to the sidelines,” said John Quinlivan, 2022 board chair of Housing First Minnesota. “We’re optimistic that as interest rates level out, homebuyers will find opportunities that were not there last year and return to the market.”
Twin Cities multifamily construction tells a different story in 2022 with permits pulled for 11,001 units a 43% increase compared to 2022. For the month of December builders permitted 524 units a 95% increase from December of last year.
All together, there were 315 permits issued for a total of 819 units during four comparable weeks in the month of December. For the year, there were 5,835 permits issued for 16,464 units in the Twin Cities, according to the Keystone Report.
“We’re concerned that the slowdown in single-family home construction this year could impact the housing market for years to come,” said James Vagle, chief executive of Housing First Minnesota. “The Twin Cities housing market was already a tough landscape for first-time homebuyers, this year’s rising interest rates and slowdown in construction has only made it more challenging. We need more starter homes in our market to preserve homeownership for future generations.”
For the year, Lakeville took the top spot with 477 permits issued. Woodbury came in next with 408 permits. Cottage Grove with 301 permits, Blaine with 289 permits and Shakopee with 285 permits rounded out the top five.
For the year in number of units permits were pulled for, Minneapolis came in on top with 3,557 permitted units, followed by Edina with 985 units. Minnetonka came in next with 914 permitted units. St. Louis Park with 884 permitted units and Lakeville with 753 permitted units rounded out the top five.