Mortgage Rates Increase Outpace Value

The rise in mortgage payments is eclipsing therise in property value. The typical mortgage payment in August 2018 was up15.4 percent, or $118 a month, from a year earlier, even though home values gained just 6.5 percent in that same period.

The combination has sparked concerns over a housing market slowdown. Since the Federal Reserve started to raise short-term interest rates in 2015, long-term interest rates – including mortgage rates – have remained surprising low. They had withstood the Fed rate hikes through 2018 without moving much until this fall.

If the labor market and inflation continue as expected, analysts predict the Fed will hike rates twice in the first half of 2019.

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Location Motivates Homebuyers

A survey from Meyers Research shows that of the top motivations in the U.S. to buy a home, number one is location. Meyers Research explains that consumers are looking for a location within distance from a central business district that includes a walkable lifestyle within the community. The data shows that the community needs to match the homebuyers ideal lifestyle.

The second biggest motivator is home design followed by price and safety.

“Of the top motivations to move, home design is ranked second, and is the only thing homebuilders can control,” said Mollie Carmichael, principal at Meyers Research.

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Consumer Housing Trends Report Reveals Preferences of New Construction Buyers

A consumer housing trends report by Zillow Group revealed features that are most important to new construction buyers during their search process.

For new construction buyers in the U.S., a safe and walkable neighborhood trumps being near family and friends, according to the Zillow Group New Construction Consumer Housing Trends Report 2018. Of the homeowners that purchased new construction homes, 88 percent found it very or extremely important that the neighborhood felt safe, 57 percent found it very or extremely important that the neighborhood is walkable, and 47 percent said living close to family and friends is very or extremely important.

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New Federal Water Rule Definition Released

New Federal Water Rule Definition Released

After months of waiting, the Environmental Protection Agency and the Department of the Army released a new definition for the Waters of the United States (WOTUS) Rule. The WOTUS Rule, which gives the EPA and the Army Corps of Engineers the ability to protect “navigable waterways,” has long been a source of frustration for the housing industry due to the costly federal permits to build on or modify lands near covered waterways.

“Our proposal would replace the Obama EPA’s 2015 definition with one that respects the limits of the Clean Water Act and provides states and landowners the certainty they need to manage their natural resources and grow local economies,” said Andrew Wheeler, the acting administrator of the EPA.

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New Survey Reveals Direness of Construction Labor Shortage in Minnesota

It’s well known that the construction industry is experiencing a labor shortage, but a new survey conducted by Housing First Minnesota on behalf of Project Build Minnesota reveals the depth of the issue. Of the more than 225 construction firms that responded to the survey, 88 percent reported that they have experienced a labor shortage in the past 12 months, with 63 percent of respondents reporting the labor shortage has caused their firm to actually turn away business.

“The results of this survey confirm that the labor shortage is now contributing to Minnesota’s housing shortage and housing affordability problem,” said David Siegel, executive director of Housing First Minnesota and Project Build Minnesota board member. “We must take action now to alleviate the labor shortage before this issue worsens. Gov. Dayton has called on our industry to build 300,000 new homes by 2030, and that will be exceptionally difficult if we don’t address this labor shortage.”

Respondents reported (72 percent) that not only were they unable to find workers, their new hires are now less prepared for the job than they were a decade ago.

Siegel acknowledged that the task of introducing youth to our industry will not be easy. “For far too long, we’ve pushed all of our state’s youth toward four-year colleges. It’s time to return to a conversation about the importance of skilled trades,” he said. “With the loss of technical education programs in our schools, young people simply are not being exposed to the jobs in the construction industry as they were previously.”

The survey also revealed that many companies (80 percent) are raising wages to attract new workers and some companies (43 percent) are also offering a bonus to employees for referrals.

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Development Following Harstad v. Woodbury Decision

Cities Retain Many Infrastructure Funding Options

In the four months since the Minnesota Supreme Court’s landmark decision in the Harstad v. Woodbury case, cities have repeatedly suggested that developers aren’t “paying their way” in new residential developments.

The development community has responded by indicating such is not at all the case. In fact, developers cite the myriad of fees they presently pay as one of the fundamental challenges to affordability.

And the court case made clear that cities continue to have a wide array of infrastructure funding mechanisms at their disposal, most notably area-wide assessments, bonding for projects, paying out of the city’s budget, or denying projects as premature.

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Let's Fix It

Let's Fix It

As we transition into the new year, the opportunities and challenges facing the housing industry are remarkable. On the plus side, our economy is strong, employment is steady and demand for housing remains on the upswing. Those positive housing market attributes are balanced with challenges, including a 10-year low in housing affordability, steep regulatory costs placed on new homes and a workforce that is not replenishing at a healthy rate.

The Governor’s Task Force on Housing provided key conclusions in its final report, which was released last August. Key recommendations include building 300,000 homes by 2030, driven primarily by the private market; establishing formal review of regulatory cost drivers; and prioritization of housing as a key building block by policy makers.

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Legislative Preview: Housing Emerges as Top Tier Issue

Legislative Preview: Housing Emerges as Top Tier Issue

When the legislature gavels in to begin a new legislative biennium, many issues are on the docket waiting to be addressed. Housing affordability is poised to be one of the key issues.

As the price of housing, from rentals to single-family homeownership, continues to increase across Minnesota, more families are impacted by the increasing burden of housing affordability and our region’s competitiveness is at risk.

In a stark reminder of the housing market challenges, home affordability in the Twin Cities metro area hit another decade-low in October 2018, according to the Minneapolis Area Association of Realtors’ (MAAR) latest survey released in November 2018. A combination of rising interest rates, rising construction costs, slow wage growth and low inventory has exacerbated the issue.

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2018 Housing Report Card: Good, But Needs Improvement

2018 Housing Report Card: Good, But Needs Improvement

Housing Affordability Issue Continues to Grow

According to the 2018 single-family permit numbers, Minnesota homebuilders had their second-best year in a decade. But, those numbers seem more disappointing coming off 2017, which was the best year for new housing construction since the Great Recession.

Minnesota single-family permits were down 3 percent year-to-date through October, but according to the Minneapolis Area Association of REALTORS (MAAR), new construction pending sales through October were up 7.8 percent.

While some indicators point to the existing housing market shifting from a seller’s to a buyer’s market, the inventory of homes for sale is still at record lows. Therefore, prices continue to rise, homes are selling in less time and sellers are yielding a higher share of their list price.

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Letter From the President

Letter From the President

What an end to the summer! In a period of just a few weeks in August, a landmark Minnesota Supreme Court decision was issued and Governor Dayton’s Task Force on Housing issued its final report. These were big steps forward — both of which will positively impact growing the housing conversation.

In Harstad v. Woodbury, the practice of requiring unauthorized and unrelated conditions development contracts and calling them ‘voluntary agreements’ was struck down by the high court. The court’s clear ruling on this practice is a major victory for homeowners. Development does, must, and will continue to pay its own way by building out infrastructure to support development projects. But the all-too-common practice of requiring additional fees and requirements on top of these has now been ruled illegal. Look for full coverage of the Harstad case throughout this issue.

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Governor’s Task Force Report: More New Housing Needed

The Governor’s Task Force on Housing Affordability released its report titled “More Places to Call Home: Investing in Minnesota’s Future” on Aug. 21. Leading the recommendations included in the report is a call to build 300,000 new homes by 2030, create a regulatory review panel and address the industry- wide labor crisis.

“The Governor’s Task Force on Housing took an important first step in identifying the shortage of new housing production, our need to evaluate regulations, and the construction labor shortage which threatens our ability to solve our housing affordability crisis,” said David Siegel, executive director of Housing First Minnesota. “We are especially pleased with the emphasis to support and strengthen homeownership. “Throughout the Task Force process, Housing First Minnesota advocated for solving our housing supply challenges by increasing affordability across the housing market.

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“We are pleased to see the Task Force embrace the core of this approach, which begins with evaluating regulations and land policies to directly address affordability. “The hard work of addressing the cost drivers impacting housing affordability now enters a new phase. As the leading voice for homebuilding and remodeling, Housing First Minnesota is pleased to see other stakeholders ready to join us in addressing this critical challenge facing all Minnesotans.”

Housing First Minnesota staff attended meetings of the task force and homeownership work group during the first half of the year and sent a letter to the task force in June, saying that addressing Minnesota’s low housing inventory is critical to solving the housing affordability crisis.

Project Build Minnesota Marketing Efforts Extend Reach

Project Build Minnesota Marketing Efforts Extend Reach

The Project Build Minnesota website is yielding impressive results despite only having been actively in the marketplace for four months. As of this writing, the website has on average 45 user visits per day (which will bring 16,000 visits per year). Visitors spend approximately two minutes on the website, and two-thirds of the visitors are from the Twin Cities metropolitan area.

The most visited page on the website is “the trades” with 4,017 views in May and June. The Project Build Minnesota social campaign is also revving up, with regular posts being boosted on Facebook. There are 300 likes as of early August and the number is rising steadily. Through our Facebook posts, we’ve reached 49,155 people and had 1,336 post engagements.

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New Construction Stormwater Permit Now in Effect

New Construction Stormwater Permit Now in Effect

The Minnesota Pollution Control Agency (MPCA) released the fnal 2018 Construction Stormwater Permit on July 25. The 2018 Permit, which went into effect on Aug. 1, includes changes requested by Housing First Minnesota.

In May, Housing First Minnesota sent a letter to the MPCA seeking changes to five items, including several provisions that would have expanded enforcement actions under the new Permit, with MPCA making each of the requested changes.

One difference between the earlier draft and the final permit, however, concerns industry experts. In April 2017, Housing First Minnesota requested the repair timeframe be increased, a change that was included in the draft version of the permit released in April 2018. Instead of increasing the repair time frame to “BMPs prior to the next anticipated rain event or within three (3) calendar days whichever comes first” as planned, the MPCA reverted to the existing language of “by the end of the next business day after discovery” in the final 2018 Permit.

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Housing First Minnesota Leads in Providing Industry Input on Building Code Report

Housing First Minnesota Leads in Providing Industry Input on Building Code Report

Following the June 26 meeting of the Construction Codes Advisory Council (CCAC), the Department of Labor & Industry (DLI) released a report that included comments and concerns voiced by the CCAC members regarding the initial technical review of model code changes earlier this year. The report also included comments submitted by organizations following the release of the Technical Advisory Group (TAG) Reports in mid-May.

Of the 10 organizations either submitting comments or co-signing letters, Housing First Minnesota’s comments stood out for several reasons. In a memo submitted by Housing First Minnesota’s regulatory affairs manager, the organization outlined its longtime goal of housing affordability being given equal consideration to safety and durability. Housing First Minnesota was also the only group to submit comments on multiple TAG reports and to call for not adopting the 2018 International Energy Conservation Code (IECC) for residential construction due to concerns about affordability.

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