Twin Cities homebuilders expect a return to growth in 2015, though the growth may be tepid.
Despite an improving economy and a steady drop in unemployment, the number of new houses built in the Twin Cities fell 8 percent last year. First-time buyers still don't seem ready to jump in, though real estate agents and builders say they're encouraged by the sight of "move-up" buyers looking for more expensive homes.
"We're definitely getting the move-up buyer," said Carole Griffith, a real estate agent selling homes at the Spirit of Brandtjen, a high-end subdivision in Lakeville.
"It's anyone from young professionals, young families. We're also seeing a strong presence with empty nesters. That rambler buyer, one-level living is becoming pretty strong."
Griffith and her husband Tom are using a Spirit of Brandtjen model home as a temporary office as they try to sell it and others in the neighborhood. Listed for $650,000, it includes four bedrooms and a media room. Next door, electricians and plumbers are finishing work on a new rambler. On the other side of the model home sits a stack of roof trusses and lumber ready for the next project.
Tom Griffith says construction began on this subdivision in 2006, just before the market collapsed. The company originally planned around 2,200 homes, including many townhouses aimed at first-time buyers. About 400 have been completed and sold, and around 40 more will go up just this year.
Data show the high-end market for new homes is bouncing back. Most of the houses going up in the Twin Cities are in the $450,000 price range, said Chris Huecksteadt, Midwest regional director for the real estate research firm Metrostudy.
After years of overbuilding, Huecksteadt expects a return to growth this year as that inventory is sold. Still, he says the growth will not come in starter homes, which just aren't economically feasible for builders to build and remain out of reach for many potential first-time homebuyers.
The absence of those young buyers remains a concern even as the market recovers.
Minnesota Management and Budget predicts household formations will pick up in the coming years. But Libby Starling, a regional research manager at the Metropolitan Council, says that may not necessarily translate into home buying.
Twenty- and 30-year-olds today are less eager to own a house than they would have been a decade or two ago, she said. Starling blames increased student debt and lingering fear from the housing bust.
"What we're seeing is more interest in renting rather than moving in to homeownership," Starling said. "The nation as a whole is beginning to see these trends across the board."
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