The Minnesota housing market has a lot going for it right now. Across the state there is low unemployment, wage growth, and job growth, which is leading to growth in new residential construction. Here’s what Mark Gianopulos, Metrostudy’s Midwest Region Director had to say about the future of Minnesota residential construction.
1. Growth Ahead
With all of the positive economic signs we’re seeing in Minnesota, you can expect to see new home development. The Minnesota market has all of the golden signs we like to see. New construction has steadily grown for the last 18 months. At the end of 2016 we were up 16 percent, we’re up about 16 percent in 2017.
2. More Attached Housing
We’re predicting townhomes and condos will become more of a factor in the market. At one time, the majority of units in Minnesota were attached homes, but for the past few years, attached housing has made up only 15 percent of the market. State law allowing attorneys to go after homebuilders without recourse has thrown a damper on condo and townhome development. A new law passed during the 2017 legislative session should help solve this issue, and we should see a boost in townhome development in 2017. It will give Minnesota much needed lower priced units and bookend the market.
3. Millennials Will Prove They’re Not So Different
Millennials really are an interesting group. People think they are so different, but they really are more similar than we think to every other generation. They want the same things. The one difference, they are the reluctant adults. They need more of a push to be more responsible. It takes them being pushed a little more into buying the home. For many of them it takes being married, with the second kid on the way before they think of buying a home. Life happens and they get pushed into it. We are definitely seeing more of them get that push and new desire to finally buy a home.
4. Price Points Will Continue to Have an Impact
Price points are a problem in the Twin Cities market. Of all the Midwest metro markets, the Twin Cities is by far the most expensive. For the first quarter of 2017 the median price of a new detached home was $410,000. With household incomes barely above other markets, it makes it difficult for homebuyers. That’s the biggest headwind in Minnesota’s housing market. If you can control the price point, you’ve got great growth ahead.
5. Labor Problems Ahead
While Minnesota’s low unemployment rate in general is a big plus for the housing market, it has the potential to hold back new construction. It’s becoming increasingly more difficult to find labor with employment as low as it is. Even just office labor. In order to ramp up for housing starts you’ve got to have the support team behind it.
Metrostudy, a Hanley Wood company, maintains a comprehensive database of national housing market information.