New home construction in FL returns to pre-recession levels
New home construction in Forest Lake is nowhere near its heyday of the early 2000s. Total permit valuation, including remodels, neared $91 million in 2003. The next year, 260 new home permits rolled through the city’s building inspection office.
Compared to the paltry numbers starting in 2008, however, Forest Lake could be called a boomtown these days.
House frames are rising in developments that stalled years ago, while developers are readying lots for construction as fast as they can in newer residential areas. Whether it’s a sign of a city poised to capitalize as the region sits on the cusp of significant growth or it’s simply due to improving housing indices seen nationwide, the local market is heating up.
“It seems to keep rolling,” said Community Development Director Doug Borglund.
Construction took a dive when the credit market “blew up” in 2008, Borglund said.
It’s a different story today. Nationally, new home sales recently hit a five-year high. The housing market in the Twin Cities region is well on the path to recovery, as well. The number of single-family permits issued in July was the highest of any month since June 2007, according to the Builders Association of the Twin Cities.
The resurgence is most obvious in the Headwaters Development in southwest Forest Lake, where entire blocks of new construction are reaching toward the sky. Ontario-based Mattamy Homes purchased the land last year and has quickly gone to work. The home builder originally planned to develop 29 lots this year and 35 in 2014. Demand has dictated otherwise, as Mattamy has already developed all 64 lots.
“It’s been a pleasant surprise,” said Steve Logan, Mattamy’s division president in Minnesota. “Yes, the demand has been greater than we anticipated.”
In its first six months of operation, February through July, Mattamy sold 22 homes. Four have been closed on, while construction is underway on 16. Houses in the community feature three to five bedrooms, 2 1/2 to 3 1/2 bathrooms and three-car garages and range from approximately 1,800-3,800 square feet. Prices start around $250,000 to $275,000.
“Buyers are feeling more comfortable in purchasing a home,” Logan said. “Consumer confidence is up and the overall market conditions have improved.”
The second-busiest area this year is Hawthorne Heights, located off Goodview Avenue south of Forest Lake High School. About a dozen permits have come through from the development, which will soon fill out to completion as only one lot was left at the end of July.
Highland Bank obtained the land through foreclosure in 2009 and has worked with a handful of builders since then. The development consists of about 20 townhomes and 45 single-family residences.
“It has moved along at kind of the pace we would expect and probably a little bit better than the overall market,” Highland Bank CEO Rick Wall said.
Highland Bank has eight locations in the Twin Cities region. Wall said he recently heard from builders who are becoming concerned with a lack of space to build in high-demand areas inside the Interstate 494 ring.
“That’s a conversation you haven’t heard since 2008,” Wall said.
Al Maas owns Meadowcroft Homes, one of the builders in Hawthorne Heights. The Burnsville developer is also behind Forest Hills Farm, a high-end housing community located on the southeast corner of Third Lake in the Forest Lake chain of lakes. Originally the Kenneth and Cora Johnson farm, Forest Hills Farm sits on 73 acres of trees and hills. With a private beach and boat dock accessible from lots measuring nearly an acre each, homes are priced between $500,000 and $700,000.
The development came on board in 2007, just in time for the economic collapse. The situation is just now turning around, Maas said. He recently oversaw the development’s third closing in two months. Overall, six of 23 lots have sold, and construction is underway on a new house to be put up for sale.
“Everything has just gotten much better,” Maas said of the housing market.
Noise from hammers and saws is also filling the air at The Landings at Summerfields, a townhome development off Everton Avenue south of Highway 97.
The project has been picked up this year by local realtor and custom builder Jaren Johnson. The Landings were started in 2003 by a developer who hit bankruptcy in 2010. Johnson’s Guidance Homes is nearing completion on one four-unit building. Three of the units sold while being framed. Johnson plans to construct another building this year and two more in 2014.
As a custom builder, Johnson can work with buyers and be flexible with the floor plan. The townhomes are generally geared toward retirees and units will be priced around $300,000.
Existing home market
The market for existing homes is also heating up. Home prices are up nearly 15 percent from a year ago, said longtime Forest Lake real estate agent Barb Goerss.
“It seems like things have really taken off,” she said, noting also that the percentage of foreclosure and short sales is dropping.
Statewide, closed sales in June reached a level not seen since 2010, according to the Minnesota Association of Realtors.
Goerss has sold homes in Forest Lake for 32 years and recalls interest rates spiking to 18 percent. So while rates are on the rise, 4.5 percent is still an incredible deal, she said.
“It’s the best of both worlds for buyers: affordable prices and great interest rates,” she said.
Goerss said lenders are keeping money flowing, though borrowers may need better credit than before the market crashed.
Highland Bank’s Wall said loan-to-deposit ratios are the lowest they have been in years.
“Overall, banks are eager and anxious to lend money right now,” he said.
Wall did note that some lending practices have changed, and for the better, as lenders have learned their lesson.
“The super easy money is gone and probably won’t be back for a long time,” he said.
Goerss, who runs the Goerss Home Team within Keller Williams, said she is seeing many existing homeowners moving up to a better house. Maas has noticed the same trend.
“That’s been tough in the past,” he said. “They want to buy but they can’t sell their current home.”
Platting to come
Regarding home construction, Goerss said space remains in Forest Lake. She expects development to fill out the Chisago City and Lindstrom area, as well, pointing to the Liberty Ponds development south of Highway 8 as an example.
“It will again start making sense for developers to plat,” she said. “That’s something we haven’t seen in a few years.”
The supply of single-family lots with streets and utilities established is limited in Forest Lake, City Administrator Aaron Parrish said. Platting in Headwaters will be key to additional growth.
Supporting the cost of the related infrastructure will be a tough challenge for the city, Parrish said. However, he feels it is an important bridge to cross because the demand will exist.
“Our greatest assets related to housing development are a strong supply of land that can be served by infrastructure, the ability to accommodate a variety of housing types, natural resources, connections to transit, parks, great schools and easy access to both Minneapolis and St. Paul,” Parrish said.