Homebuilders wrapped up the year with good news. Housing First Minnesota reports metro builders pulled permits for 401 single-family homes in December, which is a 51% increase from last December.

“Our year ended fairly strong,” said Art Pratt, the president of construction operations for Pratt Homes. “We’re seeing things return to what I would like to call normal, what we saw before COVID.”

Pratt Homes has been building villas in Woodbury, which had the highest number of permits issued in December. Rosemount saw the second-highest number of permits, followed by Blaine.

Pratt told 5 EYEWITNESS NEWS dropping interest rates and lifestyle changes seem to be driving the increase.

“We’re seeing the most demand for villa lifestyle-type homes,” said Pratt. “It’s an empty-nester style home where maybe the kids are grown, in college or out of college and they don’t necessarily want to mow their lawn anymore or shovel their snow.”

Home building has been on a roller coaster over the last five years. It increased in 2020 and 2021 before dropping off in 2022. Housing First Minnesota data shows the number of single-family and multi-family permits pulled last month, 412, is closer to the 451 permits pulled in December 2019. 

“The first half of 2023 was a slow climb, and in the back half of 2023 we made up all of that deficit,” said James Vagle, CEO of Housing First Minnesota.

Overall, however, the total for the entire year still lags pre-pandemic levels. The data shows there were 6,446 permits issued in 2019 and only 5,692 issued in 2023.

“From what I see from the 2019 to the 2023 pace is we need to maintain that pace but increase it pretty substantially to get at the supply,” Vagle said. “We need more of everything — apartments, condos, villas, single-family homes.”

He said there’s a shortage of about 60,000 to 90,000 units currently. Multi-family construction also saw a decrease in December, with 59% fewer units compared to this time last year.

“The interest rate dynamic is different for multifamily projects,” explained Vagle. “I think that’s part of the difference. I also think there is a different dynamic for risk for developers that are building multi-family and you’re seeing single-family homes pacing above multi-family now.”

He also said due to the longer building timeline for multi-family projects, data can lag behind.

Pratt is optimistic about the trend he’s seeing right now.

“We’ve got a lot of pent-up demand, and if we see [interest] rates continue in the trend, which is downward, I think most builders around the Twin Cities are going to have a lot of success in the next year or two,” said Pratt.