Homebuilders thrive amidst soaring mortgage rates. Twin Cities resilient real estate
30.09.2023 posted by Admin
Mortgage rates reached their highest point in 23 years this week, and the pace of new home sales is slowing down. However, homebuilders in the Twin Cities are not slowing down; in fact, they're busy laying the foundations for new homes at an impressive rate.
This month, homebuilders in the metropolitan area obtained 656 permits for single-family homes, marking an 80% increase compared to last year and the highest number for any September in nearly two decades, as reported by Housing First Minnesota in their monthly update.
John Quinlivan, the board chair of Housing First Minnesota, remarked, "Despite the challenges posed by rising mortgage rates and a shrinking supply of existing homes, the Twin Cities' homebuilding industry remains robust."
In a recent survey by Freddie Mac, the 30-year fixed-rate mortgage averaged 7.31% last week, the highest it's been since 2000. This is a slight increase from the previous week when it averaged 7.19%. A year ago, the 30-year average was one full percentage point lower. While these rates are now closer to historical averages, many buyers are still grappling with the adjustment to higher monthly payments, which has caused some to delay their homebuying plans.
Sam Khater, the chief economist at Freddie Mac, noted, "Unlike the early 2000s, home prices today are rising alongside mortgage rates, primarily due to low housing inventory. These challenges are leading both buyers and sellers to wait for more favorable conditions."
The Commerce Department reported a national decline of 8.7% in new home sales from July to August, with a seasonally adjusted annual rate of 675,000 units. However, sales were up by 5.8% compared to the previous year.
Locally, the Minneapolis Area Realtors (MAR) reported a 6.2% annual decrease in the sale of new homes in the metro area listed through the Regional Multiple Listing Service during August. This contrasts with a more significant decline of over 25% in the sale of previously owned homes.
Despite these trends, builders in the Twin Cities are pushing forward. In September, single-family home construction in the 13-county metro area increased by 80% compared to the previous year. Multifamily units, mainly market-rate rentals, saw a decline of 33%.
Builders are focusing on replenishing their inventories of unsold homes, aiming to cater to buyers who cannot find suitable existing homes on the market. John Quinlivan emphasized, "Builders are diligently working to meet the needs of Minnesota homebuyers by offering something the existing housing market cannot."
Meanwhile, as homeowners with historically low mortgage rates remain in their homes for the long term, the number of homes listed for sale in the Twin Cities continues to decline, with a 17% drop this year, according to MAR.
Apartment developers are also grappling with challenges, including higher interest rates and stricter underwriting requirements, resulting in a decrease in multifamily construction. In September, permits were issued for 820 multifamily units, primarily market-rate rentals, marking a 33% decline from the previous year, according to Housing First.
The most active cities in terms of homebuilding in the metro area this year have been Minneapolis, with 1,021 new units, predominantly rentals, followed by Rosemount with 779 new units.
This month, homebuilders in the metropolitan area obtained 656 permits for single-family homes, marking an 80% increase compared to last year and the highest number for any September in nearly two decades, as reported by Housing First Minnesota in their monthly update.
John Quinlivan, the board chair of Housing First Minnesota, remarked, "Despite the challenges posed by rising mortgage rates and a shrinking supply of existing homes, the Twin Cities' homebuilding industry remains robust."
In a recent survey by Freddie Mac, the 30-year fixed-rate mortgage averaged 7.31% last week, the highest it's been since 2000. This is a slight increase from the previous week when it averaged 7.19%. A year ago, the 30-year average was one full percentage point lower. While these rates are now closer to historical averages, many buyers are still grappling with the adjustment to higher monthly payments, which has caused some to delay their homebuying plans.
Sam Khater, the chief economist at Freddie Mac, noted, "Unlike the early 2000s, home prices today are rising alongside mortgage rates, primarily due to low housing inventory. These challenges are leading both buyers and sellers to wait for more favorable conditions."
The Commerce Department reported a national decline of 8.7% in new home sales from July to August, with a seasonally adjusted annual rate of 675,000 units. However, sales were up by 5.8% compared to the previous year.
Locally, the Minneapolis Area Realtors (MAR) reported a 6.2% annual decrease in the sale of new homes in the metro area listed through the Regional Multiple Listing Service during August. This contrasts with a more significant decline of over 25% in the sale of previously owned homes.
Despite these trends, builders in the Twin Cities are pushing forward. In September, single-family home construction in the 13-county metro area increased by 80% compared to the previous year. Multifamily units, mainly market-rate rentals, saw a decline of 33%.
Builders are focusing on replenishing their inventories of unsold homes, aiming to cater to buyers who cannot find suitable existing homes on the market. John Quinlivan emphasized, "Builders are diligently working to meet the needs of Minnesota homebuyers by offering something the existing housing market cannot."
Meanwhile, as homeowners with historically low mortgage rates remain in their homes for the long term, the number of homes listed for sale in the Twin Cities continues to decline, with a 17% drop this year, according to MAR.
Apartment developers are also grappling with challenges, including higher interest rates and stricter underwriting requirements, resulting in a decrease in multifamily construction. In September, permits were issued for 820 multifamily units, primarily market-rate rentals, marking a 33% decline from the previous year, according to Housing First.
The most active cities in terms of homebuilding in the metro area this year have been Minneapolis, with 1,021 new units, predominantly rentals, followed by Rosemount with 779 new units.