Residential construction in the Twin Cities area
remained slow last month compared to August of 2007, according to data released Tuesday by the Builders Association of the Twin Cities. According to the BATC’s Keystone report, the number of permits issued fell 35% this year in August compared with 2007. The number of units from those permits fell 13%.
There was some good news, though! Thanks to a few large multifamily projects, local homebuilding activity perked up slightly in August compared to July. The number of units planned for construction during August was the strongest monthly number in a year. 3,596 units, the year-to-date totals through August 2008, can’t compare to 2007’s 6,409 unit, the 9,409 of 2006, and the 11,708 units permitted in 2005.
KC Chermak, 2008 president of the Builders Association of the Twin Cities, says “We have not flooded the market with excess inventory. Our market is going to balance itself. It’s not flying at warp speed, but there is activity. The phones are ringing, things are going on. We have to feel somewhat good about new building permits, feel like they have bottomed out and are slowly coming up.”
David Bieker, president of Deephaven-based Denali Homes, made a good point not to get too excited about seeing the number rise quickly anytime soon:
“I think what we are going to go back to is more normal numbers. You can’t realistically say we are down because of the boom years. That is why they are boom years. We have to look at what is more of a normal average pace that we are going to see over the next five years.
“I don’t anticipate taking a big jump within the next five years. We are going to see a steady increase. We have had a couple of very slow years. Due to the fact that people were unable to sell existing homes, they have not entered into the market” even if they want to buy a new home.
Chermak indicated that the Fannie Mae-Freddie Mac seizure is welcome news to the construction industr, saying that "Reducing the uncertainty surrounding the mortgage industry is one more step in bringing stability to the housing industry."
Though the government takeover happened just over the weekend, mortgage interest rates have responded already. Since Sunday, rates have dipped about a half percentage point to lows seen only a couple of times this year. In some cases you can get 30-year fixed loans at rates below 5.5%. The average 30-year rate nationwide, tracked by Bankrate.com, has collapsed in the last 10 days from nearly 6.3% to just 5.8%.
How long will the rates stay that low? And how low will they go? With so many other variables in the market, its hard to tell. Now might be the time to lock-in your rate!