Housing Industry News Vol. 6 Issue 3 - June 2022 by Housing First Minnesota

VOL. 6 ISSUE 3, JUN. 2022

THE MINNESOTA HOUSING INDUSTRY NEWS SOURCE BY HOUSING FIRST MINNESOTA • HOUSINGINDUSTRYNEWS.ORG

Without any substantial housing policy changes signed into law this year, Minnesota homebuyers will continue to face one of the worst available for-sale inventories in the country.

Zoning modernization stalls as legislature and governor unable to reach final deal With one week remaining in the 2022 legislative session, Gov. Tim Walz, House Speaker Melissa Hortman and Senate Majority Leader Jeremy Miller announced a framework agreement on the front lawn of the State Capitol. The agreement was to utilize the largest state surplus in history with a combination of $4 billion toward a tax bill and a $1.4 billion capital investment bill. It also includes additional spending of $1 billion in education, $1 billion for health care and human services, and $450 million for public safety. Additional investments are to come from a $1.32 billion pot. Left on the bottom line is $4 billion to help the state manage future economic uncertainty. The three leaders then asked the chairs of committees and commissioners to work on the finer details of the legislative language. The final week of session included many long nights and tough negotiations from

these legislative leaders. But the Senate GOP and House DFL were unable to bridge the rather large gaps between their respective omnibus bills, only finding agreement on a handful of subjects, before the clock struck midnight on the constitutionally mandated final day of session. With very few items reaching a final consensus, much of the record $9.2 billion surplus will remain unutilized, unless a special session is called by Walz to try to finish the negotiations. Ultimately, the housing legislative language and funding proposals that were in play had a similar fate as other subject matter with no final agreement. Throughout the course of the legislative session, each chamber had a radically different focus with the GOP-led Senate identifying homeownership opportunities as their priority and DFL-controlled House spending a majority

of their committee time and efforts on state government funding and landlord/tenant legislation. “The legislature had a good opportunity to begin the modernization of our housing approval process, so the collapse of a global deal is disappointing,” said James Vagle, vice president of advocacy at Housing First Minnesota. “On the issue of housing supply and homeownership access, the challenges won’t resolve themselves; regulatory roadblocks have to get lifted.” Without any substantial policy changes getting signed into law this year, Minnesota homebuyers will now continue to face one of the worst available for-sale inventories in the country, the largest homeownership gap in the country and the most expensive new housing in the Midwest. CONTINUED >> PAGE 6

INSIDE THIS ISSUE

Minneapolis Fed survey reveals growing challenges in construction PAGE 5

Rising interest rates pose challenges for homebuyers PAGE 10

Homebuilding industry honors spring award recipients PAGE 12

Minnesota Supreme Court to review Burnsville park fee case The Minnesota Supreme Court announced it will review the Puce v. Burnsville park fee suit following the city of Burnsville’s appeal of a February Court of Appeals victory for project applicant Almir Puce. At a mid-January 2019 meeting, the Burnsville Planning Commission voted 4-1 to approve Puce’s commercial project with 17 conditions, one of which was the payment of a $37,804 park fee. Puce asked the city to waive the fee as the proposed three-phased development that included a proposed auto dealership and bakery would not result in the need for more parks. CONTINUED >> PAGE 4 HOUSING INDUSTRY NEWS

| 1

2960 Centre Pointe Drive Roseville, MN 55113 HousingFirstMN.org

PRSRT STD U.S. POSTAGE PAID PERMIT # 93652 TWIN CITIES, MN

PRESIDENT’S NOTE

The growing urgency for action on housing The legislature convened in January and adjourned in May without finding an agreement on the inventory and homeownership crisis facing Minnesota. Housing is just one of the major issues facing our state, but it’s on the short list of issues that impact everyday Minnesotans and the competitiveness of our state. A growing coalition of stakeholders, ranging from think tanks to data companies to universities and a myriad of business groups, aligned behind legislation aimed at lifting housing affordability roadblocks. All segments of the housing industry benefit from roadblocks being lifted, as this paves the way for greater affordability and the reintroduction of new starter homes in Minnesota. Adding these choices to our housing menu makes all of our housing market stronger, benefiting all of us. There was progress made on these efforts in the Minnesota Senate, which brought zoning and planned unit development modernization all the way to the final hours of the session.

HOUSING INDUSTRY NEWS

However, global negotiations with the House and Senate on the housing bill stalled on that final day of session. We all know these agreements are difficult, but another year without modernizing how we approve housing will come at a price for homeowners and our industry. Our development and building cycle takes years in many cases, so the lack of action in 2022 ripples into the future. As an industry, we must stay at the table and work to find common ground that can help bring our housing market into a new era. We can debate how we got here, but the most important thing is to focus on how we can fix this going into the future. Housing is the centerpiece of a strong Minnesota, so let’s pull together and find ways to expand homeownership opportunities to all Minnesotans.

June 2022, Volume 6, Issue 3 PUBLISHER Janice Meyer Janice@HousingFirstMN.org EDITOR Katie Elfstrom Katie@HousingFirstMN.org GRAPHIC DESIGN Emily Doheny ACCOUNTING Janice Meyer ADVERTISING SALES Brad Meewes Kori Meewes CONTRIBUTING WRITERS Katie Elfstrom Katie@HousingFirstMN.org

Onward, James Julkowski 2022 Housing First Minnesota President

Nick Erickson James Julkowski 2022 President, Housing First Minnesota

Nick@HousingFirstMN.org

Mark Foster

Mark@HousingFirstMN.org

Kristen Ober

Kristen@HousingFirstMN.org

Kate Wigley Kate@HousingFirstMN.org

HousingIndustryNews.org

James Vagle

James@HousingFirstMN.org

Stay up to date on the latest housing news. Subscribe to our blog at HousingIndustryNews.org

Housing First Minnesota Janice Meyer, Interim Executive Director

Advertising For advertising information, rates, editorial calendar and production specifications, contact: Brad Meewes at 651-269-2399 (Brad@HousingFirstMN.org) or Kori Meewes at 612-801-9874 (Kori@HousingFirstMN.org)

James Julkowski, President

News Tips Have an idea for a story for our next issue? Contact Editor Katie Elfstrom at Katie@HousingFirstMN.org or send your story to Info@HousingIndustryNews.com

Be a part of the growing housing movement in Minnesota. Twitter: Follow us @HousingFirstMN Facebook: Facebook.com/HousingFirstMinnesota

Housing Industry News is a publication of Housing First Minnesota. Housing Industry News is published and distributed six times per year to housing industry professionals and others associated with the homebuilding industry. Neither the advertisers, nor Housing First Minnesota, will be responsible or liable for misinformation, misprints, typographical errors, etc., herein contained. For address change information, contact Housing First Minnesota. Suggestions, ideas and letters are welcome. HOUSING INDUSTRY NEWS 2960 Centre Pointe Drive Roseville, MN 55113 info@HousingFirstMN.org www.HousingFirstMN.org Housing Industry News is published by Housing First Minnesota Entire contents copyright 2022 All rights reserved

F I R ST - T I M E H O M E B U Y E R

$10K

Housing First Minnesota is the voice for homebuilders, remodelers and all who are dedicated to building safe, durable homes at a price Minnesotans can afford.

Giveaway The Parade of Homes has a proud legacy of providing homeownership opportunities in our state. In our continued commitment to expanding the opportunity for homeownership for everyone, everywhere in our state, we’re pleased to have launched the Parade of Homes First-Time Homebuyer $10K Giveaway!

Thank you to our generous donors for making this possible

Housing First Minnesota is dedicated to advancing the American dream of homeownership for Minnesotans and is the leading resource for housing-related issues in Minnesota. This advocacy work has never been more important. The housing industry remains under intense regulatory and political pressures that impact Minnesota homeowners’ ability to buy, build and remodel their dream home. Housing First Minnesota supports reasonable policies, regulations and protections, but our call for affordability for families is a voice that must be heard. Learn more at HousingFirstMN.org.

HOUSING INDUSTRY NEWS

THE HOUSING BEAT

Across the country, there is much talk about housing HERE ARE SOME OF THE LATEST QUOTES ON THE STATE OF THE INDUSTRY:

As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation.” SAM KHATER FREDDIE MAC

Ongoing builder efforts to add new homes and make up for a decade of underbuilding, will also help add much-needed supply and bring more balance back to the housing market.”

You have to build single-family units on lots that are bigger than the market wants. This is not a free market choice. It's a government-imposed rule.” ROBERT DIETZ NATIONAL ASSOCIATION OF HOME BUILDERS

DANIELLE HALE REALTOR.COM

Government officials at all levels will need to be willing to move beyond NIMBYism and toward a YIMBY (yes in my backyard) mindset if we ever hope to overcome vetocracy and get America building again.” ADAM THIERER MERCATUS CENTER AT GEORGE MASON UNIVERSITY

We are facing a housing crisis that’s touched most communities across the country, pushing housing affordability to the center of the conversation for many.” MANNY GARCIA ZILLOW

For decades, exclusionary zoning laws— like minimum lot sizes, mandatory parking requirements and prohibitions on multifamily housing—have inflated costs and locked families out of areas with more opportunities.” SUZANNE CLARK & BRIAN DEESE U.S. CHAMBER OF COMMERCE & WHITE HOUSE NATIONAL ECONOMIC COUNCIL

14 Lumber Yards Across MN & WI

Providing our customers with construction solutions, quality building materials and superior service

DRAFTING & DESIGN

WINDOW SERVICES

CABINET DESIGN

WALL PANELS

COMMERCIAL SERVICES

Get a quote today, visit www.abc-clc.com Andersen® is the #1 trusted and recommended window and door brand* *2020 Andersen brand surveys of U.S. contractors, builders & architects “Andersen” and all other marks where denoted are trademarks of Andersen Corporation. ©2021 Andersen Corporation. All rights reserved.

HOUSING INDUSTRY NEWS

| 3

REGULATORY AFFAIRS

Housing groups call on MDH to abandon lead paint push, 2023 National Electrical Code update Four of Minnesota’s leading housing advocacy groups called on the Minnesota Department of Health (MDH) to abandon its attempt to take local custody of the Environmental Protection Agency’s (EPA) Lead Renovation, Repair and Painting (RRP) Rule. The letter, signed by the leadership of Housing First Minnesota, the Minnesota Realtors®, Minnesota Multi Housing Association and Central Minnesota Builders Association, notes that in six years, MDH has struggled to complete the rule-making process and assemble a workable version of its Minnesota-specific rule. “At present, the Department has failed to demonstrate the need for a Minnesota-specific rule,” stated the letter. “Significant concerns remain over the enforcement intentions and the impact the misplaced emphasis on clerical items will have on Minnesotans. The Minnesota Department of Health has spent nearly six years on the proposal without presenting a rule that meets the statutory requirements. The proposal has not achieved a base level of workability by interested parties. As such, we respectfully request that the Department of Health retain the current EPA Rule here in Minnesota.” Housing groups have long pressed MDH on a direct adoption of the EPA rule to end the pursuit of a costly

Minnesota-specific rule, according to Nick Erickson, director of research and regulatory affairs for Housing First Minnesota. “We’ve made numerous requests to urge direct adoption of the EPA rule, going as far as submitting two rewrites to MDH,” said Erickson. A separate technical memo sent by Housing First Minnesota outlined concerns with specific provisions of the latest proposal. Housing First Minnesota’s memo also referenced the failure of MDH-sponsored legislation this past session, which is needed to complete the rule adoption process. The group’s memo said that MDH’s RRP proposal lacks legislative support, in addition to industry support, and should therefore be abandoned. 2023 National Electrical Code nearing completion At its June convention, the National Fire Protection Association (NFPA) will review the 2023 National Electric Code (NEC). This is the third major step before the NFPA issues the new version of the NEC later this year. Following the issuance of the 2023 NEC, the Board of Electricity is set to begin its rule-making process to adopt the latest version of the NEC as Minnesota’s electrical code.

CONTINUED FROM PAGE 1

End of drought brings more emphasis on stormwater practices Between the winter snowmelt and heavy spring rain, the drought has ended in Minnesota. As of mid-May, only a small portion of the state is classified as “abnormally dry.” As the housing industry enters the wettest months of the year, Housing Industry News is providing a reminder on stormwater compliance. Best management practices (BMPs) are practices, techniques and measures that prevent or reduce water pollution from nonpoint sources by using the most effective and practicable means of achieving water quality goals. BMPs include, but are not limited to, official controls, structural and nonstructural controls, and operation and maintenance procedures. Common construction stormwater violations include:

Minnesota Supreme Court to review Burnsville park fee case At a late-January 2019 meeting of the Burnsville City Council, Puce again objected to the payment of this fee. In February 2019, the city reduced the proposed fee to $11,700. The city had no plan for new parks and no evidence that this development would cause a need for a new park, as a home currently existed on the property. Puce then sued the city. The city of Burnsville won in the initial hearing held in District Court. The Court of Appeals subsequently reversed the Dakota County District Court ruling, noting, “In this case, there is nothing in the record that is an ‘individualized determination’ concerning the ‘nature and extent’ of ‘the impact of the proposed development,’ let alone an ‘effort to quantify’ that impact. . . . Accordingly, there is not a rough proportionality between the park-dedication fee and any need for the acquisition and development or improvement of parkland as a result of the City's approval of Puce's development application." In the Minnesota Supreme Court’s filing accepting the appeal, the Court also granted the League of Minnesota Cities’ request to file an amicus (friend of the court) brief. No hearing date has been set. The decision on this case could have rippling effects on park fees and development in Minnesota.

With wet months ahead, builders are advised to update their stormwater plans.

Missing or inadequate soil stabilization. Without proper stabilization, the soil is vulnerable to erosion. Missing perimeter controls. When perimeter controls are missing, stormwater carries sediment off-site and into the waters of the state. Missing or inadequate inlet protection. Missing or inadequate inlet protection allows sediment to enter the storm sewers and/or water bodies. BMPs not contained. Unmaintained BMPs do not function properly and allow sediment to escape and enter the waters of the state. Vehicle tracking. Without a tracking BMP, vehicles track sediment onto paved surfaces. Being ready for Minnesota’s wet months means keeping your job sites ready for rain events and inspections. Ensure that you have a Construction Stormwater Permit and Plan if one is needed. Remember to inspect your site within 24 hours of rainfall greater than ½ inch. Repair, replace or supplement all nonfunctional BMPs by the end of the next business day after the discovery, or as soon as field conditions allow access unless another time frame is specified by the MPCA.

Minnesota Supreme Court announced it will review the Puce v. Burnsville park fee suit.

TOUGHER THAN THE ELEMENTS Stands up to storms and harsh weather Water resistant to protect against swelling, warping and cracking; also resists mold damage ®

James Hardie fiber cement products are Engineered for Climate . For Won’t be eaten by animals or insects ®® uncompromising performance, our HZ5. For siding and trim are specifically James Hardie fiber cement products are Engineered for Climate ® designed to resist shrinking, and cracking even after of wet uncompromising performance, our HZ5 siding and trimswelling are specifically Fire years resistant ® ® James Hardie® fiber cement products are Engineered for Climate®. For or freezing conditions. A James Hardie exterior can help keep your homes designed to resist shrinking, swelling and cracking even after years of wet James Hardie® fiber cement products are® Engineered for Climate®. For uncompromising performance, our HZ5 and trim specifically James Hardie® fiber cement products are®siding Engineered for are Climate . For ® or freezing conditions. A James lookingHardie beautiful longer no matter whathomes nature brings. Helps reduce time and money spent on exterior can– help keep your uncompromising performance, our HZ5 and trim specifically James Hardie fiber cement products are®siding Engineered for are Climate . For designed to resist shrinking, swelling and cracking even after years of wet ® ® uncompromising performance, our HZ5 siding and trim are specifically maintenance ® Engineered for Climate . For looking beautiful longer – no matter what nature brings. James Hardie fiber cement products are designed to resist shrinking, swelling and cracking even after years of wet uncompromising our HZ5 siding and trim are specifically ® performance, ® or freezing conditions. A James Hardie exterior can even help keep your homes ® cracking designed to resist shrinking, swelling and after years of wet James Hardie fiber cement products are Engineered for Climate . For uncompromising performance, our HZ5 siding and trim are or freezingtoconditions. A James Hardie exterior can even help keepspecifically your homes designed resistlonger shrinking, and cracking after years of wet ® Achieve instant curb appeal and lasting character. looking beautiful no swelling matter nature brings. or freezing conditions. A–James Hardie exterior can helptrim keep your ® ®homes Contact a sales representative: uncompromising performance, ourwhat HZ5 siding and areyears specifically designed to resist shrinking, swelling and cracking even after looking beautiful longer – no matter what nature brings. James Hardie fiber cement products are Engineered for Climate .ofForwet or freezing conditions. A James Hardie exterior can help keep your homes Visit jameshardiepros.com looking beautiful longer no matter what brings. Kevin Morel | (612) 323-6358 Contact ®nature designed to resist shrinking, swelling and cracking even after years of wet a sales representative: or freezing conditions. A– Hardie can help keep your homes uncompromising performance, our what HZ5exterior siding and trim are specifically looking beautiful longer –James no matter nature brings. kevin.morel@jameshardie.com Kevin Morel | (612) 323-6358 or freezing conditions. James Hardie can help keep your homes looking beautiful longer –Ano matter what nature brings. designed resist shrinking, swelling andexterior cracking even after years of wet Contact ato sales representative: kevin.morel@jameshardie.com looking beautiful longer – no matter what nature brings. Contact a conditions. sales representative: or freezing A323-6358 James Hardie exterior can help keep your homes © 2019 James Hardie Building Products Inc. All Rights Reserved. AD1511-MDW-03/19 Kevin Morel | (612) Contact a sales representative: Kevin Morel | (612) 323-6358 Contact a sales representative: looking beautiful longer – no matter what nature brings. kevin.morel@jameshardie.com © 2019 James Hardie Building Products Inc. All Rights Reserved. AD1511-MDW-03/19 Kevin Morel | (612) 323-6358 ®

HOUSING INDUSTRY NEWS

Contact a sales representative: kevin.morel@jameshardie.com Kevin Morel | (612) 323-6358 kevin.morel@jameshardie.com Contact a sales representative: Kevin Morel | (612) 323-6358 © 2019 James Hardie Building Products Inc. All Rights Reserved. kevin.morel@jameshardie.com © 2019 James Hardie Building Products Inc. All Rights Reserved. Kevin Morel | (612) kevin.morel@jameshardie.com © 2019 James Hardie Building Products323-6358 Inc. All Rights Reserved. Contact a sales representative: © kevin.morel@jameshardie.com 2019 James Hardie Building Products Inc. All Rights Reserved. Kevin Morel | (612) 323-6358 © 2019 James Hardie Building Products Inc. All Rights Reserved. kevin.morel@jameshardie.com © 2019 James Hardie Building Products Inc. All Rights Reserved.

AD1511-MDW-03/19 AD1511-MDW-03/19 AD1511-MDW-03/19 AD1511-MDW-03/19 AD1511-MDW-03/19

AD1511-MDW-03/19

FEMA seeks more I-Codes input The Federal Emergency Management Agency (FEMA) released a new building code strategy in mid-April. The federal government’s disaster response agency outlined three goals integrating building codes and standards across FEMA, strengthening nationwide capacity for superior building performance and driving public action on building codes. FEMA seeks internal agency alignment of priorities and practices across all of FEMA’s programs related to building codes, according to a press release. This would act as a guide, both inside and outside of the agency, to promote consistency and the value of building codes toward disaster mitigation. FEMA Administrator Deanne Criswell described hazard-resistant codes as “a cornerstone of loss reduction,” that “save property, but more importantly, they save lives.” The move was praised by the International Code Council, which creates many of the model building codes, including the International Codes (I-Codes). “The role of modern building codes has become increasingly important as we strive to keep communities safe, resilient and affordable,” said Dominic Sims, chief executive officer of the International Code Council. “The Code Council commends FEMA for their dedication to establishing a comprehensive and consistent national strategy towards the implementation, adoption, and effective enforcement of hazardresistant building codes.”

Project Cancellations Residential Industrial Commercial Infrastructure & heavy 0

100

Source: Minneapolis Federal Reserve Survey

Minneapolis Fed survey reveals growing complications in construction The overall construction environment for the region remains a challenging one. In the Minneapolis Federal Reserve’s latest survey of construction organizations in their ninth district, construction firms reported that while revenue trends remain positive, overall challenges are growing and concerns are increasing. The survey revealed that while construction firms expect more cancellations this year, they also expect sales to be stronger than last year. When the firms were asked about sales and activity 40% of respondents reported that they expect sales and revenue to be somewhat higher than during the same period last year. Only 21% believed that sales and revenue would be lower than this time last year. When it comes to projects being canceled, 56% of construction firms responded that they have seen no change in cancellations, while 31% reported cancellations have increased somewhat. That’s an 11% increase from the 20%

who reported an increase in cancellations in the Fed’s fall survey. Delays continue to plague the industry with 67% of firms surveyed reporting an increase in project delays. Of the construction sectors involved in the survey, residential construction firms reported the highest amount of delays. In all, 74% of respondents reported that it is moderately to extremely difficult for their firm to buy and receive critical supplies for their operations in a timely fashion. With the delays also comes price increases. Of those surveyed, 40% reported that they have seen a greater than 25% increase in wholesale prices from vendors. According to the Minneapolis Fed, wholesale and retail prices are rising more steeply in construction than any other sector. Despite the increase in cancellations, prices and delays, construction firms continue to be optimistic about the next six months for the industry with 50% of respondents reporting that they are somewhat to very optimistic.

HOUSING INDUSTRY NEWS

| 5

HOUSING ON THE HILL CONTINUED FROM PAGE 1

Zoning modernization stalls as legislature and governor unable to reach final deal The median new single-family home in Minnesota is nearly $475,000, which is over $100,000 more than the median in neighboring Wisconsin, according to data from Zonda. Industry experts point to increased material and labor costs which impact home prices across the Midwest. Adding to those challenges are inventory woes and, in Minnesota, land and regulatory costs unique to the region. A special session could be called to revisit the major legislative issues but the likelihood of one in an election year is low. Whether in special session or in the next session January, industry leaders believe this issue will again be a top issue.

What was accomplished at the Capitol? Since this legislative session was a supplemental year, rather than a budget year, the legislature was not required to do much. However, they were able to find agreement on a few major ticket items that Walz signed into law. • $2.7 billion was authorized to pay back the federal government and replenish the unemployment insurance trust fund. Large and small businesses across the state saw a temporary increase in what they owed starting on March 15. However, applicants were able to apply for either a refund or a credit toward their next bill. • As part of a package deal with the unemployment trust fund replenishing, $500 million in “hero pay” was allocated to frontline workers that continued in-person work during the beginning stages of the pandemic. More details on who qualifies and how to apply can be found at frontlinepay.mn.gov. • The omnibus liquor bill included expanded growler sales. • Drought relief and broadband dollars for communities across the state were allocated. • Approximately $300 million will be distributed as part of an opioid settlement.

A proposal by the city of Dayton would put a 400-unit-per-year cap on new housing.

Dayton examines limiting development amidst housing inventory crunch The city of Dayton is examining a new growth management plan for the city. The proposal released earlier this spring would increase side setbacks 33% in its R-3-zoned area and place a cap on new home growth at 400 units per year. In a letter to the Dayton Planning Commission, Housing First Minnesota questioned the constitutionality of the proposal, which it called “truly unconscionable.” “The arbitrary caps on the number of homes per project, and a cap on the total number of new homes in the city annually, run counter to the consensus analysis from housing experts and economists who have unanimously concluded that we need a surge of homes across Minnesota for the next decade-plus,” stated Housing First Minnesota in its letter. “The City already has a Comprehensive Plan that provides for the needed infrastructure necessary to accommodate growth in Dayton. The City should follow its plan and make adjustments, as necessary, to accommodate growth.” According to Housing First Minnesota, the proposal “not only harms Minnesota’s housing market, it also impacts existing property owners in Dayton whose land is available to meet the desperate shortage of homes in Minnesota.”

The Fine Art of Creating Exceptional Exteriors. Replace. Repair. Restore.

Roofing Siding Windows Gutters Metal License #BC751852

MN HIN Half Page Apr22.indd 1

HOUSING INDUSTRY NEWS

For your complimentary consultation, connect with us: 763-298-9047 www.allstartoday.com

3/9/22 12:21 PM

They say mastering a craft takes 10,000 hours. How does 97 years sound? We’ve been innovating for a very long time at Pella.® It’s an obsession that’s led us to over 150 patents throughout our history. We offer a full line of beautifully crafted windows, patio doors, and entry doors in a wide variety of styles to ﬁt every design taste and budget. With dedicated window experts, showrooms across the region, and service after the sale, your local Pella team is ready to help you master your next project. PELLA WINDOWS AND DOORS PERFECTLY BEAUTIFUL

pro.pella.com

Southern Minnesota

Twin Cities Metro Area

Central & Northern Minnesota

Wisconsin, North & South Dakota

Mankato, MN | 612-237-6392

Plymouth, MN | 952-915-6080

Brainerd, MN | 701-281-1390

Eau Claire, WI | 715-836-9301

Rochester, MN | 507-285-1200

Woodbury, MN | 651-704-9939

Duluth, MN | 763-443-6291

Fargo, ND | 701-281-1390

MINNESOTA'S LEADER IN PROVIDING

PREFABRICATED BUILDING MATERIALS

A PPROVEN ROVEN COMPONENT COMPONENT SYSTEM. SYSTEM. WITH OVER 40 YEARS DEDICATED TO LEADING INDUSTRY STANDARDS, WE HAVE PERFECTED THE PROCESS OF PROVIDING PREFABRICATED BUILDING MATERIALS FOR FRAMING CONSTRUCTION.

WALL & FLOOR PANELS | TRUSSES | EWP PACKAGES | LOOSE LUMBER PACKAGES | ONSITE INSTALLATION

HOUSING INDUSTRY NEWS

| 7

MARKET REPORT

Housing market report

State of Minnesota

Homebuilding stays strong despite headwinds

Moorhead

SOURCE: CITY OF MOORHEAD

1,672

Duluth

109

Year-to-Date Single-Family Construction Select Cities Through April 2022 SOURCE: U.S. CENSUS

SOURCE: U.S. CENSUS

St. Cloud

Homebuilding activity in the Twin Cities, especially in the multifamily sector, remained robust throughout the spring months. However, swelling interest rates, inflation concerns and other construction headwinds clamped down on the intense market demand. More buyers are starting to pause their home search as the median sales price continues to break records.

SOURCE: CITY OF ST. CLOUD

Twin Cities

3,373

Mankato

SOURCE: U.S. CENSUS

Rochester

194

SOURCE: U.S. CENSUS

SOURCE: U.S. CENSUS. HOUSING FIRST MINNESOTA COLLECTED THE ABOVE PERMIT INFORMATION FROM AVAILABLE PUBLIC RESOURCES.

APR. 2022

+10%

APR. 2022

$370,000

$340,000

APR. 2021

+11.5%

$336,250

Minnesota Construction Employment Past 5 Months SOURCE: DEED

$305,000

Y-Y Change

2021

$336,250

$305,000

Twin Cities Median Sales Price

Minnesota Median Sales Price

SOURCE: MINNEAPOLIS REALTORS®

SOURCE: MINNESOTA REALTORS®

Twin Cities Construction Employment Past 5 Months SOURCE: DEED

United States

South - 87

West - 90

Midwest - 84

Northeast - 79

Regional Remodeling Market Indices, 2022 Q1 SOURCE: NAHB

The Overall Remodeling Market Index is calculated by averaging the Current Marketing Index and the Future Market Indicators Index. Any number over 50 indicates that more remodelers view remodeling market conditions as higher than the previous quarter. Results are seasonally adjusted.

HOUSING INDUSTRY NEWS

Employment Update Minnesota’s unemployment dropped slightly on a seasonally adjusted basis to 2.2% in February, according to the Minnesota Department of Employment and Economic Development. This is compared to the March rate of 2.5%. The national unemployment rate remained unchanged in April from the previous month at 3.6%. Construction in Minnesota recorded a 4% employment reduction, or 4,988 fewer jobs, since April 2021.

Consumer sentiment toward homebuying plummets It appears rising interest rates pushed consumers over the edge when it comes to whether it is a good time to buy a home. According to Fannie Mae, the Home Purchase Sentiment Index® (HPSI) decreased by 4.7 points to 68.5 in April, its lowest level since May 2020, as surveyed consumers expressed

heightened concerns about housing affordability and rising mortgage rates. All six of the index’s components decreased month over month, with a survey-high 76% of consumers indicating that they believe it’s a bad time to buy a home, up from 73% last month. In April, the HPSI fell to its lowest level since the first few months of the pandemic, as consumers continue to report difficult homebuying conditions amid the budget-tightening constraints of inflation, higher mortgage rates and high home price appreciation,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. As one could expect in this competitive market, entry-level homebuyer’s sentiment toward purchasing right now took an

even bigger hit. According to Fannie Mae, an even larger share of younger respondents (ages 18 to 34) reported that it’s a “bad time to buy a home.” “The current lack of entry-level supply and the rapid uptick in mortgage rates appear to be adversely impacting potential firsttime homebuyers in particular,” said Duncan. “The benefit of the recent past’s historically low mortgage rate environment appears to have diminished, and affordability is poised to become an even greater constraint going forward. This sentiment is consistent with our forecast of decelerating home sales through the rest of 2022 and into 2023.” Year over year, the full HPSI is down 10.5 points from 79 in April 2021 to 68.5 in April 2022.

Home Purchase Sentiment Index

Source: Fannie Mae Home Purchase Sentiment Index® - April 2022

FLEXIBLE AND SIMPLE

A Construction Loan for Builders & Buyers

With a One-Step Construction Loan from Old National, your clients can manage the entire home financing process with one application. That means less hassle and more peace of mind for everyone involved. • Convenient one-time closing • Rate locked at application to avoid rising rates during construction • Interest-only payments during construction period, up to 12 months • Variety of rates and terms available • Conforming and jumbo loan amounts available To learn more, our mortgage experts are ready to help. Steve Dobin Mortgage Sales Manager, SVP NMLS #488964 612-656-3443 Steve.Dobin@oldnational.com Apply online: oldnational.com/dobin Dillon Borowicz Mortgage Sales Assistant NMLS #2305484 612-656-3778 Dillon.Borowicz@oldnational.com

oldnational.com/mortgage

SCAN TO LEARN MORE

Subject to credit approval. Property insurance required.

HOUSING INDUSTRY NEWS

| 9

MARKET REPORT

Building material costs impacted as demand falls from inflation The price of construction materials for new homes continues to escalate going into summer. On top of already volatile supply chain effects still lingering from the COVID-19 pandemic, material costs are now starting to be impacted as inflation impacts most sectors of the economy. In 2021, the price of construction-related materials rose 15.9% throughout the year. Since the beginning of 2022, prices have continued that trend. Building materials prices increased 2.4% in February, 1.9% in March, and 0.5% in April, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. As mortgage rates continue to increase and overall inflation concerns rock the economy, demand for housing is beginning to soften. As a result, some material prices reflect this new decreased demand level. Prices of softwood lumber continued to climb throughout the early spring months. Now, lumber costs are beginning to deescalate as housing demand softens. The PPI for softwood lumber fell 15.6% in April. This price relief comes after a volatile two years of prices, with increased costs adding up to an estimated $18,600 to the price of a new home, according to the National Association of Home Builders (NAHB). “Lower single-family construction starts in April reflects our recent builder surveys showing notably weaker confidence in the single-family market, as rising mortgage rates and building material construction costs are driving more potential buyers out of the market,” said Jerry Konter, chairman of NAHB and a builder and developer from Georgia.

Month-over-month gypsum product prices were unchanged in April. However, they have increased 23.5% overall since January 2021. Steel mill product prices rose 2.4% in April, which is the first monthly increase in price so far in 2022. The price of steel skyrocketed 128% in 2021, according to NAHB. Material delays continue to lengthen the construction process.

Wait time for new homes increases

Lumber costs are beginning to deescalate as housing demand softens due to rising rates.

Rising interest rates pose challenges for homebuyers In response to growing concerns regarding inflation, the Federal Reserve has been steadily increasing federal funds rates throughout the first half of this year. Since the beginning of the year, rates have increased more than 2%. Now, the Fed has announced an additional rate hike, the largest rate increase in over two decades. In early June, rates were increased half a percentage point. For

The timeline for new home construction is becoming noticeably longer in many parts of the country. This slowdown comes at a time when new homes are in high demand as the inventory of available homes for sale shrinks to a historic low. Almost two years of supply chain disruptions prompted by the COVID-19 pandemic caused builders to not receive needed materials on a timely basis, leading to multiple project delays. Delayed deliveries of materials like lumber, appliances, windows and garage doors all contributed to lengthened construction timelines of new homes. With each delay, the time until the home was ready for move-in continued to grow. Now, these material issues coupled with growing concerns over inflation, increases in mortgage rates and lack of available lots are delaying the timeline of residential construction even more. Additionally, construction companies are having difficulties finding available skilled laborers. According to an Associated Builders and Contractors (ABC) analysis of data from the U.S. Bureau of Labor Statistics, the construction industry documented 449,000 job openings nationwide in April. This is a 5% increase from March and a 36% year-over-year increase. Employees quitting in the construction sector is up 12% from this time last year. “The desperate search for skilled construction workers persists,” said Anirban Basu, ABC’s chief economist. “The number of available, unfilled construction jobs continues to expand.” Despite these construction headwinds, new homes are in high demand in many areas of the country. Existing home listings are still at an all-time low and there is a strong market demand for more supply. Many builders have waiting lists of buyers eager to buy a new home, despite longer wait times.

the first week of May, a 30-year fixed-rate mortgage sat at an average 5.27%. This is compared to 2.96% rate at the same time last year. According to Freddie Mac, these are the highest rate levels since 2009. “While housing affordability and inflationary pressures pose challenges for potential buyers, house price growth will continue but is expected to decelerate in the coming months,” said Sam Khater, Freddie Mac’s chief economist. These rate increases are already having an effect across multiple sectors of the economy and are having a notable impact on housing market activity. Increases to conventional mortgage rates means higher monthly

payments and therefore less buying power. With home prices already reaching record highs throughout most of the last year, many buyers are feeling these payment increases even more so. As a result, many buyers, especially first-time buyers, are putting a pause on their home search. The segment of adults planning to buy a home in the next 12 months fell for the third straight quarter down to 13%, according to the National Association of Home Builders (NAHB). “The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” said Robert Dietz, NAHB’s chief economist.

COMMERCIAL SALES LEARN MORE ABOUT HOW OUR FLEET AND COMMERCIAL EXPERTS CAN SUPPORT YOUR BUSINESS NEEDS BY PROVIDING EXCEPTIONAL CUSTOMER SERVICE AND CERTIFIED PRODUCT KNOWLEDGE MANUFACTURER FLEET/SMALL BUSINESS PROGRAM INSIGHT LARGE SELECTION OF INVENTORY REMOTE VEHICLE DELIVERY AND SERVICE PICK-UP/DROP-OFF UP-FITTING EXPERTS

10 |

HOUSING INDUSTRY NEWS

ROSEVILLE

ADAM ENGDAHL 763-313-8501

NEW PRAGUE ALEX BURNS 952-451-9808

LAKEVILLE GEORGE MILLER 612-916-7777 ZAC OLSON 952-818-4402

MINNESOTA CONTRACTOR

Pre-License Exam Prep ONLINE COURSE

Learning Tools Provided:

According to the MN Department of Labor & Industry, 40% of those who take the Minnesota Contractor License Exam fail. One reason that may be? They didn’t take a pre-license training course.

• Video training taught by a former building oﬃcial and Minnesota building codes expert • 2020 Minnesota Residential Code Book ($110 value) • Course Study Guide • Exam Guidebook

If you know of someone wanting to become a licensed contractor in Minnesota, tell them about Contractor University’s online MN Contractor Pre-License Exam Prep course.

• Minnesota Statutes Booklet • Practice Exam with more than 175 Questions

Cost: $249

Details and registration at ContractorU.com

CONTRACTOR UNIVERSITY IS SPONSORED BY

PUT NATURAL GAS IN, GET A LOT OUT.

Xcel Energy’s FastApp tool helps speed up your natural gas hookup. It gives you access to dedicated professionals, costeffective designs and in-project timelines. Plus you’ll alwayshave a single-point contact with our construction team. For more info, visit xcelenergy.com/Builders.

9.75x6.675_MN-HINdirec_Apr2021_P01.indd 1

4/2/21 10:42 AM

HOUSING INDUSTRY NEWS

| 11

INDUSTRY IN ACTION

Twin Cities homebuilding industry honors 2022 spring award recipients Housing First Minnesota announced its coveted spring awards in April, honoring excellence in homebuilding. The spring’s awards included 19 Reggie Awards℠ for homes selected for outstanding design, construction quality and value, and 36 Trillium Awards for industry suppliers who partnered with homebuilders on Reggie Award-winning homes. Robert Thomas Homes, Inc. led the pack in the number of honors earned receiving five spring Reggie Awards. Housing First Minnesota’s annual spring awards recognize homes that exemplify the highest standards in the industry as judged by their peers during the 2022 Spring Parade of Homes. “We are pleased to highlight the exceptional work of the builders and tradespeople in the Twin Cities that continue to design and create beautiful spaces for families to call home,” said James Julkowski, 2022 president of Housing First Minnesota. “Designing and building a home is a complex process. These builders are being recognized for their exceptional capabilities to deliver homes that meet the needs of today’s buyers.” The Reggie Award has been recognized by Twin Cities’ homebuyers since its inception in 1968. Michael Lee Homes

Gonyea Custom Homes

Swanson Homes

Robert Thomas Homes, Inc.

Real Estate Law at Every Level Larkin Hoffman is proud to announce that our firm has been recognized as a leading Minnesota real estate firm in the 2022 edition of Chambers USA: America’s Leading Lawyers for Business, an annual guide identifying the top attorneys and firms in the United States. According to the publication, Larkin Hoffman’s real estate practice is “recognized for its strength in zoning and land use, as evidenced by its frequent involvement in cutting-edge projects across the region.” Peter Coyle and Bill Griffith also received top-tier rankings, respectively, for their practice in zoning and land use and Tim Stoltman and Gary Renneke were both recognized for their real estate practices. Larkin Hoffman has been a preeminent land use and real estate law firm for more than 60 years. The cost of developing new housing in Minnesota has sky-rocketed for a variety of reasons including government imposed development fees. We routinely advise clients on the best way forward when dealing with a city to help drive down the cost of new housing. We’d be please to consult with you on your next development.

Peter Coyle | pcoyle@larkinhoffman.com | 952-896-3214

12 |

HOUSING INDUSTRY NEWS

Wonder if Housing First Minnesota is a fit for you?

EXCLUSIVE OFFER for Housing Industry News readers

Do you build homes? YES

Join by July 31 with promo code ‘HINFORE22’ to waive the $95 application fee and receive two free dinner-only tickets for our sold out golf event on August 23.

Do you remodel homes? YES

Do you provide a product or service to the housing industry? YES

Do you support housing?

We have a spot for you and your business.

YES

Housing First Minnesota is an amazing community of smart, dedicated, and successful business people working together to make this industry stronger and healthier.

and industry connections, all while creating the opportunity for homeownership for everyone, everywhere in our state.

We help our members build their businesses through marketing, advocacy,

JoinHousingFirstMN.org

100% MONEY-BACK GUARANTEE We’re so confident that your business will gain value from membership that we will offer you a 100% money-back guarantee if you are dissatisfied* *If after your first year you don’t see the value of your membership, we will refund your dues! All that we ask is that you participate in two of our events.

Your Building Industry Association

HOUSING INDUSTRY NEWS

| 13

INDUSTRY GIVES BACK

New home for veterans in need completed

New Minneapolis home with an ADU offers transitional housing for veterans.

The Housing First Minnesota Foundation, build partner Lennar and the Minnesota Assistance Council for Veterans (MACV) hosted a ribbon cutting and a groundbreaking at two homes in North Minneapolis on June 14. Both projects will provide essential temporary housing for homeless veterans. The ribbon-cutting ceremony showcased the new two-story, four-bedroom home with a one-bedroom accessory dwelling unit (ADU). The home is equipped to house four veterans at a time and an additional veteran in the ADU, ideal for an individual that might need a more private living space. This home will mark the seventh home the Foundation has built in partnership with Lennar and MACV. “Through this partnership, we will have created more than 50 beds that expand the housing capacity of MACV. This tremendous work is bringing us ever closer to eliminating veteran homelessness,” said Kate Hamilton, 2022 president of the Housing First Minnesota Foundation. The keys have now transferred to MACV, who will own and operate the home and ADU going forward while providing wraparound services for the veterans living there, giving them the tools they need to get back on their feet. The Foundation estimates this one project could serve up to 640 veterans over 50 years. Across the street from the ribbon-cutting ceremony, a groundbreaking took place for the next project. This year, four Housing for Heroes homes, each with an ADU, will be completed, resulting in 20 additional beds for homeless veterans. “Most of the residents living in the homes we build stay in them for 9 to 12 months. That means each home can serve hundreds in its lifetime,” said Hamilton.

Your Source For Deck Railing Products Available Through Local Building Materials Dealers

www.absolutedist.com

14 |

HOUSING INDUSTRY NEWS

• In-Stock • Fast Shipping • Easy Installation

(800) 335 - 5909

IN THE DIRT

A quick recap of housing news and development updates

IMAGE SOURCE: PARADISE HOMES

IMAGE SOURCE: KIMT3

IMAGE SOURCE: THE DEVELOPMENT TRACKER

Modular homes continue to be difficult to build in the Twin Cities

Oronoco project for single-family homes moves forward

Northstar Center downtown plans for $200 million upgrade

As the Twin Cities continue to face a massive housing shortage, modular construction has been named as a potential partial solution, but the metro continues to create roadblocks for these builders. Modular homes can be built in 45 to 60 days and cost roughly 25% less than a conventionally built home, but most modular homebuilders don’t even market in the metro area for a multitude of reasons, including more complicated regulatory requirements and logistical concerns that come with urban areas. With several more modular companies popping up in the metro, these builders hope to help fill a much-needed spot in the market. The simplicity and lower cost of a smaller home are a huge draw for millennials and Generation Z currently left out of the housing market.

E and K Boelter Trust continues to progress toward building 29 single-family homes on 79 acres of land in Oronoco Township. A few weeks ago, Oronoco Planning Advisory Commission approved the company’s general development plan and land designation name change, despite some neighborhood controversy around the project. Despite plans to curb the slight uptick in traffic with a roundabout on Highway 31, neighbors voiced their concerns about the added traffic through public comments. The project is slated to move to the Oronoco Township Board next for preliminary plat approval.

The Northstar Center has long been a centerpiece of Minneapolis spanning three buildings and over 1.6 million square feet downtown. Originally built in 1916 and 1963 in Minneapolis’s Central Business District, this office-centric area plans to transform into much more in 2023. Partners Polaris Properties Group, Taconic Capitol Advisors, Wilson Street Hotel Group and Sherman Associates plan to transform the new space into additional office space, retail and restaurant space, hundreds of apartments, a full-service boutique hotel, a public-facing meeting and events facility, and indoor parking. Sherman Associates is developing the nearly $85 million apartment project, which will include 221 mixed-income apartments, on-site parking and other amenities. 20% of the units will be available for households earning 50% or less of the area median income, and the other 80% of the units will not have rent restrictions.

STAY INFORMED WITH THE LATEST HOUSING NEWS

HousingFirstMinnesota

@HousingFirstMN

2022 TWIN CITIES BUSINESS

NOTABLE PARTNERS IN LAW

Bill Gschwind

mncls.com · (651) 484-4412

HOUSING INDUSTRY NEWS

| 15

RAISING THE BAR. We’re not going to lie. Serving our customers and community for 125 years took some blood, sweat, and tears. Where we are today can be attributed to our exceptional team. Devotion is the name of the game and our employees have set the bar high. Deacon is a perfect example. With over four years with Lyman as a sales rep, he’s all business when it comes to customer service. He goes above and beyond daily to ensure every project runs smoothly. Deacon shared, “Working for a company with integrity and offers the best products and services is extremely important to me. I’ve spent my entire career in the industry and found a home here”. Thank you, Deacon, for your countless contributions to Lyman.

WANT TO JOIN THE TEAM? Visit LymanCareers.com & change your future today! 16 |

HOUSING INDUSTRY NEWS