Housing Industry News Vol. 6 Issue 4 - August 2022 by Housing First Minnesota

in federal court PAGE 4 Inflation impact on

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The new construction sector of the housing market is seeing a cooling effect from interest rates as well. According to the U.S. Census, the number of permits pulled for new single-family homes are down 19% from this time last year. In the Twin Cit ies, metro permits for new single-family homes are down 9% year-to-date, accord ing to June data from the Keystone Report. National housing sales have reverted to pre-pandemic 2019 levels, according Zon da’s latest National Housing Market Up date. Ali Wolf, Zonda’s chief economist, says there is an argument to be made that many parts of the country have softened and weakened in response to the ongoing economic“Housingconditions.slowsquicker than the rest of the economy, because when the rest of the economy is good, interest rates go up and

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materials continues PAGE 10 Students build a solid foundation for careers in construction PAGE 12 INSIDE THIS ISSUE Closed

CONTINUED >> PAGE 6

HOUSING INDUSTRY NEWS | 1 VOL. 6 ISSUE 4, AUG. 2022THE MINNESOTA HOUSING INDUSTRY NEWS SOURCE BY HOUSING FIRST MINNESOTA •

Interest rates and affordability cause cooling effect on Minnesota’s housing market Paul rent control challenged construction home sales in June declined by nearly 14% year-over-year across Minnesota.

CONTINUED >> PAGE 4

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The League of Minnesota Cities and Housing First Minnesota have both submitted friend-of-the-court briefs to the Minnesota Supreme Court in the dispute over Burnsville’s park fees. Puce v. Burnsville , the case before the Minnesota Supreme Court, tests a 2004 law that requires individual determinations to be made when a city demands a land dedi cation fee in lieu of land. Property owner Almir Puce sued Burnsville over being charged a park fee when the city had no stated park need and the city could not state As the Federal Reserve continues to raise interest rates in an attempt to bring down 40-year-high inflation, it has had a clear impact on the local housing market. Minnesota was facing a housing inven tory and affordability crisis prior to the Fed raising rates, which was pricing many families out of homeownership. With the Fed’s efforts to increase the federal funds rate, higher mortgage rates have been the last straw for many families looking to pur chase a Closedhome.sales of homes in June de clined by nearly 14% compared to a year ago, with a total of 9,208 properties sold across the state, according to the Minne sota Realtors®. New listings of homes for sale were also down 6.4% year-over-year. With homes sitting on the market a little longer the total number of homes for sale increased, up 21.4% over last June. The market now has a 1.7 months' supply of homes for sale, which is still far below a balanced market of five months' supply of homes for sale. Even with more homes on the market, prices continue to climb as the market remains competitive. “As we look at the decline in closed sales, it’s important to remember that these numbers are relative to last June’s abnor mally heated market. What we are seeing this month is more closely aligned with historical norms for this time of year,” said Chris Galler, CEO of the Minnesota Re altors. “Still, as higher interest rates and inflation continued to play a role, many first-time buyers were sidelined. The buy ers who are successfully competing have the money to stay in the game. This dy namic is unlikely to change until we can help more buyers close the gap with tools like down payment assistance, and broadly increase construction of more affordable homes.”

Cities and homebuilders weigh in on Burnsville park fee case rates, homeownership.With home. state,according market.What altors.“Still, sidelined.The game.This assistance,and “Housing slows quicker economy,because

Housing First Minnesota James Vagle, Chief Executive Officer James Julkowski, Board Chair 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 Housingwww.HousingFirstMN.orginfo@HousingFirstMN.org55113IndustryNewsispublished by Housing First Minnesota Entire contents copyright 2022 All rights reserved INDUSTRYHOUSING NEWSHousing is key to the economic cycle 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! $Giveaway10K FIR S T-TIME HOMEBUYER Thank you to our generous donors for making this possible

and protections,

GRAPHIC DESIGN Emily Doheny ACCOUNTING Janice Meyer ADVERTISING SALES Brad Meewes Kori Meewes CONTRIBUTING WRITERS

2 | HOUSING INDUSTRY NEWS SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGINDUSTRYNEWS.ORG As we moved through summer, the challenging economic news has continued to pile up: inflation, supply chain delays, Federal Reserve rate hikes and many economic segments showing signs of weakness.Weall know that the economy is cyclical, and as we move through the back half of 2022 it is becoming clear that there are economic shifts that will impact homebuying. Demand remains strong, but buyers are slowing their pace and, in some cases, pressing pause as they evaluate interest rates and the negative news out there. This dynamic will impact market activity and many of our businesses. As we know, there are many opportunities in this market. For the first time in nearly two years, buyers have a few more options, when compared to the all-out feverish market competing for homes. We’re also seeing some improvement in the material costs and supply chain challenges. This development, coupled with a slower homebuying pace, is allowing our industry to catch up and deliver on more familiar timelines. And perhaps most importantly to our community and state, housing is the key driver on our pathway back to economic growth.So,for our industry, now is the time to do what we do best. The homebuilding industry is a collection of problem solvers, working to find ways to meet the market demand from our homebuying customers. We will need some help at all levels of government to speed this recovery, and I’m hopeful that our elected leaders will meet this moment with action to modernize our zoning and permitting processes to allow for a full menu of housing choices in Minnesota.Onward,JamesJulkowski BOARD CHAIR NOTE Go to HousingIndustryNews.org for subscriber exclusives, breaking housing news and features. Subscribe Stay up to date on the latest housing news. Subscribe to our blog at HousingIndustryNews.org 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) 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 Follow Us Be a part of the growing housing movement in Minnesota. Twitter: Follow us @HousingFirstMN Facebook: facebook.com/HousingFirstMinnesota HousingIndustryNews.org

August

Volume

issues

James Julkowski 2022 Board Chair, Housing First Minnesota Housing First Minnesota is the voice for homebuilders, remodelers and all who are dedicated to building safe, durable homes at a price Minnesotans can Housingafford.First Minnesota is dedicated to advancing the American dream of homeownership for Minnesotans and is the leading resource for housing-related 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 but our call for affordability for families is a voice that must be heard. more at HousingFirstMN.org. 2022, 6, Issue 4

Learn

Katie Elfstrom Katie@HousingFirstMN.org Nick Erickson Nick@HousingFirstMN.org Mark Foster Mark@HousingFirstMN.org Kristen Ober Kristen@HousingFirstMN.org Kate Wigley Kate@HousingFirstMN.org James Vagle James@HousingFirstMN.org

PUBLISHER James Vagle James@HousingFirstMN.org EDITOR Katie Elfstrom Katie@HousingFirstMN.org

JOHN PHELAN CENTER FOR THE AMERICAN EXPERIMENT

HERE ARE SOME OF THE LATEST QUOTES ON THE STATE OF THE INDUSTRY: If someone could afford the monthly payment of a $450,000 home at a 3% interest rate, the equivalent payment at a 6% interest rate is for a $316,000 home.”

JENNY SCHUETZ BROOKINGS INSTITUTE

CONOR SEN PEACHTREE CREEK INVESTMENTS If Americans want a fairer, more prosperous nation, zoning has got to go.”

The best way cities can make housing affordable is to have policies that increase the housing supply. Rent control restricts supply and is economic madness, as St. Paul is proving.”

ALI WOLF ZONDA

We don't need the president's Housing Supply Action Plan, we just need the taxes, fees and regulations that make affordable housing effectively illegal to build reduced.”

Across the country, there is much talk about housing

The growth of institutional investors is a symptom, rather than the cause, of extremely tight housing markets.”

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The concern comes when we realize there is a wave of tens of millions of millennials who will be looking to buy homes over the next decade. The housing market needs the construction of many more homes to meet that demand.”

THE HOUSING BEAT

St.

4 | HOUSING INDUSTRY NEWS SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGINDUSTRYNEWS.ORG that his proposed commercial project would create a need for a park. In 2020, the Dakota County District Court sided with the city of Burnsville. In February 2022, the Minnesota Court of Appeals reversed the district court ruling. The Minnesota Supreme Court then decided to hear the city of Burnsville’s appeal in the case. In its brief in favor of the city of Burnsville, the League of Minnesota Cities pointed to a 1976 Minnesota precedent, Collis v. City of Blooming ton , asking the court to focus on that precedent which deals specifically with park Housingdedications.FirstMinnesota, in its amicus brief in support of Puce outlines the legislative history of the 2004 state law at issue in this case and high lights more recent federal case law. When state law was amended in 2004, the brief states the legislature’s intent was that individual determinations were to be required for each project, including park fees. According to the brief, the precedent at the center of the case is codified in the landmark Nollan v. California Coastal Commission and Dolan v. City of Tigard cases as state law. Nollan and Dolan require the fee to be connect ed to the project and proportional to the city’s impact.

Exhibit sales open Aug. 31, 2022 Attendee registration opens Nov. 2022 BRSmn.org 2022, agement District reads.Under the ordinance that

REGULATORY AFFAIRS

CONTINUED FROM PAGE 1 Cities and homebuilders weigh in on Burnsville park fee case

The brief also connects to the 2013 Koontz v. St. Johns River Water Man agement District . These three cases are considered to be among the most impactful land-use decisions coming from the nation’s top court.

Two apartment operators filed a federal lawsuit against the city of St. Paul over its rent stabilization policy in June. In November 2021, St. Paul voters approved a rent control ordinance considered the strictest in the nation.

The Minnesota Supreme Court has not yet scheduled oral arguments for Puce v. Burnsville

The two apartment operators, Lofts at Farmers Market, LLC and Woodstone Limited Partnership, are seeking a declaration that St. Paul’s rent control program violates both the state and federal constitutions. According to the complaint, St. Paul’s rent control measure amounts to a regulatory taking and is detrimentally impacting the city’s housing market.

The Housing First Minnesota Board of Directors appointed James Vagle as Housing First Minnesota’s new chief executive officer. James previously held the role of vice president of advocacy at Housing First Minnesota. “After a comprehensive search process, the board is pleased to have found the best individual to assume leadership of our nationally recognized organization,” said James Julkowski, 2022 board chair of Housing First Minnesota. “James has a track record of visionary leadership and success. This, combined with his deep industry knowledge and institutional tenure, makes him uniquely qualified to lead Housing First Minnesota successfully into the future.” With Vagle’s experience, Housing First Minnesota hopes to strengthen efforts to bring the housing industry together to advocate for housing and homeownership in Minnesota. “I’m honored, and I’m grateful for the opportunity to lead this exceptional organization of dedicated industry leaders and talented professionals,” said Vagle. “Our work touches the lives of all Minnesotans who seek homeownership opportunities, and our work has never been more important.”

Housing First Minnesota announces new chief executive officer

“The sudden depreciation in property values, coupled with the withdrawal from the market of many significant developments that would have included affordable housing, is predicted to significantly worsen, rather than alleviate, the affordable housing crisis plaguing St. Paul,” the complaint reads.Under the ordinance that went into effect on May 1, rent increases are capped at 3% each year and cannot be indexed with inflation.

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Vagle has been with Housing First Minnesota since 2006. He holds a bachelor’s degree in political science from the University of Minnesota and is a veteran of the U.S. Navy. Vagle resides in Victoria along with his wife, Katie, and daughter, Elena. He grew up in the northwestern Minnesota cities of Mahnomen and Moorhead. Paul rent control challenged in federal court

James Vagle, CEO of Housing First Minnesota

St. Paul's rent control ordinance has been challenged as unconstitutional. region’s Canterbury Park, Shakopee, MN went into effect on May 1, rent “After a comprehensive search process, the board is pleased a track record of visionary leadership and success. This, to strengthen efforts to bring the housing industry together this exceptional organization of dedicated industry leaders along with his wife, Katie, and daughter, Elena. He grew up in the northwestern Minnesota cities of

2023 construction stormwater permit update

MPCA plans to release a draft stormwater permit in late 2022 with the final permit released in spring 2023.

REGULATORY AFFAIRS

In-person DLI meetings return The July 2022 meetings of the Minnesota Board of Electricity and the Minnesota Plumbing Board mark the first in-person meetings of housing regulators since the COVID-19 pandemic hit Minnesota in March 2020.

The Minnesota Pollution Control Agency (MPCA) has begun working on the state’s 2023 construction stormwater permit. Minnesota’s construction stormwater permit is adopted every five years and must conform to the EPA’s National Pollutant Discharge Elimination System specifications.MPCAstaff are meeting with stakeholders and reviewing how to best work federal requirements into Minnesota’s 2023 construction stormwater permit. Items that may be changed include tribal input on individual permits, dewatering changes, a stabilization time frame on larger projects and changes to stockpiles. MPCA hopes to release a draft permit in late 2022, with the final permit released in spring 2023, allowing time for training on the new requirements. For residential construction, the 2018 construction stormwater permit, which expires July 31, 2023, included only minor NPDESrequired changes. The 2023 permit is set to take effect on Aug. 1, 2023.

DLI to review model energy codes On Aug. 23, the Minnesota Department of Labor and Industry will perform its required review of the model energy codes. In July, the U.S. Department of Energy issued its determination.

Editor’s Note: Housing First Minnesota is the publisher of Housing Industry News.

2023 National Electric Code adoption At its July 12 meeting, the Minnesota Board of Electricity announced that the technical review of the 2023 National Electric Code (NEC) will kick off once the final model electrical code has been published. In advance of the NEC adoption process, Housing First Minnesota sent a letter to the Board of Electricity, recommending five procedural improvements to the adoption of the 2023 NEC as Minnesota’s electrical code. These recommendations included hosting all technical review meetings in person, the appointment of residential construction stakeholders to the technical review panel, an in-depth cost analysis, respecting the 270-day waiting period on codes and acceptance of amendments. Unlike the rest of the state's construction codes, the Board of Electricity does not typically amend the model codes. "Minnesota’s housing crisis continues to worsen, and the status quo process of decades past cannot continue,” wrote Nick Erickson, director of research and regulatory affairs for Housing First Minnesota. “Regulatory bodies must adapt to address these challenges head-on or see the state Legislature step in and adjust the process so that it works for all parties."

The Board of Electricity announced that it will be hosting inperson meetings for the two planned technical review meetings.

Work underway on 2023 construction stormwater permit; Electrical Code adoption; Board of Plumbing and Electricity back in person; Energy Code review coming

Plumbing Board examines code, statute interpretations At its July 19 meeting, the Minnesota Plumbing Board reviewed a request for interpretation on the installation of replacement appliances connected to a home’s plumbing system. The request for interpretation was limited to the replacement of an existing appliance, without the installation or replacement of a valve or new water/disposal line. The Plumbing Board also reviewed a request for interpretation from the Minnesota Water Quality Association (MWQA) on integral bypass appurtenances on residential water conditioning systems. MWQA stated that some municipalities’ interpretation required redundant systems, which cost consumers $400 in duplicative costs. The consensus of the Plumbing Board was that the integral components meet code.

6 | HOUSING INDUSTRY NEWS SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGINDUSTRYNEWS.ORG HOUSING ON THE HILL

On Aug. 9, Minnesota voters went to the polls to determine who would advance from the primary elections to the general elec tions. At the top-of-the-ticket, Gov. Tim Walz (DFL) and Dr. Scott Jensen (GOP) both easily won their primaries. Additionally, GOP-endorsed candidate Jim Schultz beat 2018 candidate Doug Wardlow handily 52%-35% in the attorney general race. In a special election to fill the seat held by late Rep. Jim Hage dorn, former state legislator Brad Finstad (GOP) beat Jeff Etting er (DFL) by four points. The two will square off again in Novem ber. Rep. Betty McCollum (DFL) and Rep. Ilhan Omar (DFL) held off primary challengers. Omar’s competitior, Don Samuels, came within two points of an upset. In the state Legislature, incumbents Sen. Mark Johnson (R-East Grand Forks), Sen. Paul Utke (R-Park Rapids), Sen. Jeff Jowe (R-Rockville) Sen. Gene Dornink (R-Brownsdale), Sen. Eric Pratt (R-Prior Lake), Sen. Gary Dahms (R-Redwood Falls), Sen. Sandy Pappas (DFL-St. Paul), Rep. Kurt Daudt (R-Zim merman) and Rep. Greg Davids (R-Preston) all held off primary challengers.

CONTINUED FROM PAGE 1 Interest rates and affordability cause cooling effect on

Eisenberg believes while homes sales will slow during a potential recession in 2023, the overall demographics stand. This means our housing market will remain under supplied unless we continue to build more homes. “The number of these younger millennials, the 29- to 33-year-old cohort, they're the largest group in U.S. his tory — bigger than any baby boomer cohort. So, there'll be a lot of home demand for these folks,” said Eisenberg. The concern is growing that as new home production slows from the current economic conditions, the market will be even more undersupplied when it recovers. Hous ing First Minnesota, the state’s trade association for the housing industry, believes rising interest rates should put pressure on state lawmakers and regulators to take action to bring down the cost of building new homes in Minnesota.“It’smore important than ever that we take a look at the regulatory challenges and outdated zoning restric tions that are driving up the cost of housing, so home builders can get back to producing more starter homes for Minnesota families,” said James Vagle, CEO of Housing First Minnesota. Minnesota’s housing market Repair. Restore. your complimentary consultation, with us: www.allstartoday.com763-298-9047

Primary ballotsdetermineelectionsNovember housing slows,” said Wolf. “And then housing can bring the economy down. But on the other side, housing rebounds quicker.”According to Zonda’s most recent division president sur vey, collected during the third week of July, 30% of builders reported demand to be slower than expected, but not worri some. Approximately 55% of respondents reported demand was both slower than expected and a cause for concern.

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Dr. Scott Jensen (GOP) and Gov. Tim Walz (DFL) challengers.very low, for a very long time. In Now, it’s finally really rising,” said Eisenberg. “This is the buy not as much inventory as there's been in the past, and it's supplied unless we continue to build more homes. tory — bigger than any baby boomer cohort. So, there'll for housing industry, believes rising interest rates should Housing First Minnesota.

connect

“You’ve reached a point where, as the monthly mort gage payment has gone up at least 40% since the begin ning of the year, there are some people who have stepped back,” said Wolf. There are signs that the pause in the housing market from interest rates is starting to rebound. Mortgage ap plications ticked up 1.2% at the end of July, according to the Mortgage Bankers Association (MBA). The slight increase came as mortgage rates dropped 0.31 percentage point from 5.74% to 5.43%. “The drop-in rates led to increases in both refinance and purchase applications, but compared to a year ago, activity is still depressed,” said Joel Kan, MBA’s associate vice pres ident of economic and industry forecasting. “Lower mort gage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity.” Kan is not the only one seeing signs of opportunity in the housing market for homebuyers. Economist Elliot Eisenberg believes mortgage rates will level out and pro vide opportunities for buyers. “The market is improving for buyers. Inventory is start ing to rise. It has been very low, for a very long time. In terms of housing units, physical units of available-for-sale inventory hit rock bottom just three or four months ago. Now, it’s finally really rising,” said Eisenberg. “This is the best time it's been to buy a house in a very long time. It doesn't mean it's a great time to buy a house. There still is not as much inventory as there's been in the past, and it's still not back up to a normal level, but it's better than it has been for two years.”

Legislators honored with Housing Leadership Awards

“As more and more homebuyers face road blocks to the dream of homeownership, these legislative leaders rose to the occasion to fight for housing affordability. We thank each of them for addressing the difficult issues driv ing up the cost of housing in Minnesota,” said James Vagle, CEO of Housing First Minnesota.Throughout the legislative session, a broad coalition of groups supported numerous transformative housing policy provisions ad dressing the roadblocks to affordable, mar ket-rate homes. These policies were discussed and advanced throughout the legislative pro cess until the final hours, including zoning modernization and increased transparency in housing costs. Like many other legislative issues which advanced to the final stages of session, major housing legislation failed to get signed into law. “Minnesota has one of the lowest inven tories of available for-sale homes, the highest new construction costs in the Midwest and shamefully, one of the worst homeownership gaps in the country,” said Vagle. “In order to address these issues, substantial reforms to im pact affordability must be addressed when the legislature reconvenes in January.”

Housing First Minnesota has named 23 Minnesota state legislators as recipients of the 2022 Housing Leadership Award. This honor recognizes legislators who worked to promote housing affordability and home ownership during the 2022 legislative session.

"Commissioner Robertson understood the import ant role the agen cy plays in keeping housing safe, afford able and attainable,” said Nick Erickson, director of research and regulatory affairs for Housing First Minnesota.Deputy Commis sioner Nicole Blis senbach will serve as temporary commis sioner through the end of the year.

Minnesota Department of Labor and Industry (DLI) Commissioner Roslyn Robertson announced her retirement effective Aug. 12. Robertson started at the agency as a student worker and worked her way up to the agency’s top position. She was appointed com missioner by Gov. Tim Walz in January 2021.

“Commissioner Robertson’s years of work to im prove workplace safety have made Minnesotans safer on the job,” said Walz. “From her work to educate em ployees about their rights to heading up the Frontline Worker Pay program, I am incredibly grateful for her decades of service and dedication to our state.”

Former DLI Commissioner Roslyn Robertson

Robertson oversaw the 2020 decision to not adopt a new residential energy code in Minnesota.

Department of Labor and commissionerIndustryretires

8 | HOUSING INDUSTRY NEWS SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGINDUSTRYNEWS.ORG West -77 South - 76 Midwest - 82 Northeast - 76 Regional Remodeling Market Indices, 2022 Q2 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. United77States marketHousingreport 7,608Year-to-DateSingle-FamilyConstructionSelectCities 119Mankato SOURCE: U.S. CENSUS SOURCE: U.S. CENSUS 267Duluth SOURCE: U.S. CENSUS Twin 5,464Cities SOURCE: U.S. CENSUS 297Rochester SOURCE: U.S. CENSUS St. 52Cloud SOURCE: CITY OF MOORHEAD Moorhead30 SOURCE: U.S. CENSUS. HOUSING FIRST MINNESOTA COLLECTED THE ABOVE PERMIT INFORMATION FROM AVAILABLE PUBLIC RESOURCES. State of Minnesota Through June 2022 Homebuilding slows going into summer MARKET REPORT Twin Cities Median Sales Price SOURCE: MINNEAPOLIS REALTORS® Minnesota Median Sales Price SOURCE: MINNESOTA REALTORS® +6.2%Y-YChange+8.6%Y-YChange $350,00 $325,000 2021 2021 $345,000 JUN. 2022 $325,000 JUN. 2021 $380,000 JUN. 2022 $350,000 JUN. 2021 Minnesota Construction Employment Past 5 SOURCE:Months DEED Twin Cities Construction Employment Past 5 SOURCE:Months DEED Employment Update Minnesota’s seasonally adjusted unemployment rate dropped to another all-time low of 1.8% in June, according to the Minnesota Department of Employment and Economic Development. This is compared to the May rate of 2%. The national unemployment rate remained unchanged in June from the previous month at 3.6%. Construction employment in Minnesota also remained flat yearover-year in June. New single-family construction in the Twin Cities is slowing as continued interest rate hikes and inflation con cerns soften homebuyer demand. June marked the second consecutive month of declining permit activity in the sin gle-family market. Homebuilders pulled 576 permits for new single-family homes in June, a 10% drop from last June. SOURCE: CITY OF ST. CLOUD

Robert Dietz, NAHB's chief economist, noted that these affordability and availability concerns are front of mind for many“Affordabilitybuyers. is the greatest challenge facing the housing market,” said Dietz. “Significant segments of the homebuy ing population are priced out of the market. Policymakers must address supply-side issues to help builders produce more affordable Homebuildershousing.”areadjusting production of new homes to meet this new market landscape. New home construction nationwide was down 3.1% in June from the previous month, according to the U.S. Census Bureau. In the Twin Cities metro, permits for new single-family homes were down 33% in July compared to the previous year.

Interest rates impact home purchasing power Builder conditionsstumblesconfidenceasmarketshift Subject to credit approval. Property insurance required. oldnational.com/mortgage 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 ApplySteve.Dobin@oldnational.com612-656-3443#488964online:oldnational.com/dobin Dillon Borowicz Mortgage Sales Assistant NMLS Dillon.Borowicz@oldnational.com612-656-3778#2305484 SCAN TO LEARN MORE FLEXIBLE AND SIMPLE A Construction Loan for Builders & Buyers Mark Gregg Mortgage SVP Mark.Gregg@oldnational.com763-204-7251#501974 Source: NAHB NAHB/Wells Fargo Housing Market Index (HMI)

As concerns around inflation grew over the spring, the Federal Reserve Bank made moves to correct the inflated economy, including raising interest rates for the first time in two years. Last year, interest rates on an average 30-year fixed-rate mortgage hovered around 3%. The average rate has jumped to almost 6% over the last 12 months. Buyers are left to grapple with the increase and what it would mean for their monthly mortgage payments. Ac cording to a new study from real estate brokerage Redfin, a homebuyer with a $2,500 monthly mortgage budget lost almost $120,000 in purchasing power since last year due to increased rates. These rate hikes, coupled with already record-high home prices from an overheated housing market, are directly im pacting how much homebuyers can afford and are causing some to pause their home search. Demand for mortgages in the first half of July was at the lowest level in over 20 years, according to the Mortgage Bankers Association. Sellers are adjusting their expectations to what is real istic for buyers in this new market dynamic. Over the last few months, the market has shown a slight shift away from what was largely a seller’s market for most of the last two years. More than one in five sellers dropped the price of their home while it was on the market in May, according to Redfin. This is the highest rate of downward price adjust ing since October 2019. The Fed indicated that this is not the last of the rate increases. In response to a new inflation report, the Fed is expected to hike rates at least once more — reportedly al most 75 basis points. After the next hike, it is expected that the Fed will slow rate increases going into the fall. Market headwinds are taking their toll on builder sen timent. Increasing mortgage rates, labor shortages and continued material challenges are proving to be roadblocks to home construction this summer, and homebuilders are feeling the effects. The National Association of Home Builders’ (NAHB) monthly confidence index reported a nearly record-level drop in sentiment in July. The index plunged 12 points to an interval level of 55, the lowest reading since May 2020. This is also the second largest decline recorded in the index’s history and the seventh straight month of decline. This index considers any reading over 50 to be of pos itive sentiment and reflects an overall confident attitude from builders. In comparison, the index stood at 80 at the same time last year. Other indicator readings measured on NAHB’s index were also down from last month. Conditions of current sales and potential buyer traffic both dropped 11 points to 50 and 37, respectively. The overall housing market is showing signs of slowing after nearly two years of frenzied activity. Buyers are in creasingly pausing their home search as they grapple with increased monthly payments due to rising interest rates and a tight inventory of homes for sale.

While remodeling activity is expected to slow down during the potential economic downturn ahead, experts predict that the long-term outlook for home renovations is bright. Todd Tomalak, principal of building products at Zonda, shared this optimism during a recent webinar. The present market conditions suggest that the decade of 2020-2030 may be considered the “golden era of remodeling," accord ing to “We’reTomalak.inaperiod that we just very well might look back at and identify as a special time for remodeling,” said To malak. “There may be a recession stuck in the middle with a cyclical slowdown, but we expect growth to resume when pricesTomalakstabilize.”predicts low-cost maintenance and repair jobs and high-cost rehab jobs may experience a slowdown over the next 18 months. He predicts that mid-priced projects — in the $7,000 to $35,000 range — will continue to expe rience a high volume of activity. Tomalak points to several factors that favor a strong run way for mid-priced remodeling activity ahead. First, the ag ing housing stock and, in particular, the number of homes between 20 and 50 years old — which he says is a prime time for discretionary projects — will lead to more mid-priced projects. In addition, he believes the number of homebuyers that settled for features in their home due to the short supply of homes for sale and competitive market, means there are many homeowners who wish to alter their spaces. “You don’t have to move the structure of the home, but there is a possibility for a refresh. We think this is going to play out in a really important way as we begin to see the market settle in the next 12-18 months,” said Tomalak. “You basically have this cohort of households that are in a home, but the quality or the match compared to prior decades is likely poorer because they had to buy whatever wasWhileavailable.”aging homes, typically homes over 50 years old, tend to drive remodeling spending on total rehab projects and structural changes, the trend is “very different for other product categories,” according to Tomalak. He notes out door projects, including patio installations, outdoor kitchen projects and decking projects, are most common in homes built between three to five years ago. Exterior projects, flooring projects, kitchens, baths, and systems and efficien cy projects tend to be most common in homes between 20 to 50 years old. "In a normal environment where there is adequate sup ply, you see a pretty tight correlation between sales and turnover, but now that we’ve got a housing shortage, it’s disconnected. It’s a prime time for discretionary projects,” Tomalak said. “What we have is a tailwind factor that we didn’t have before, the raw count of homes that are in the 20- to 50-year-old window that will have to be updated."

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Building material costs have continued their upward surge, though the pace may be slowing. According to the Bureau of Labor Statistics Producer Price Index (PPI), building mate rial costs are up 12% this June compared to June 2021. This represents a moderating pace of price increases, although material costs have increased 42% since January 2020. Industry observers have watched the fluctuations in the softwood lumber market closely, and it appears that this key measure is among the leaders in price moderation. In the same PPI release, softwood lumber was down 23% and 35% since March 2022. This is welcome news for homebuyers who have encountered large price increases in lumber. The National Association of Home Builders estimates that the spike in softwood lumber prices has added over $14,000 in costs to the average single-family home since April 2020. Beyond lumber, concrete costs have crept up and currently sit at an 11% increase compared to 2021. Paint remained flat in the most recent PPI report, while priced up over 30% since the beginning of the pandemic. Industry experts have reported that shipping and supply chain issues continue to impact prices.

Several factors favor a strong runway for mid-priced remodeling activity in the coming years. material costs in June were up 12% compared to June 2021.

Inflation impact on materialsconstructioncontinues pro.pella.com They say mastering a craf t takes 10,000 hours. How does 97 years sound? PELL A WINDOWS AND DOOR S PERFECTLYBEAUTIFUL 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. Twin Cities Metro Area Plymouth, MN | 952-915-6080 Woodbury, MN | 651-704-9939 Mankato, MN | 612-237-6392 Rochester, MN | 507-285-1200 Southern Minnesota Brainerd, MN | 701-281-1390 Duluth, MN | 763-443-6291 Central & Northern Minnesota Eau Claire, WI | 715-836-9301 Fargo, ND | 701-281-1390 Wisconsin, North & South Dakota

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Remodeling outlook optimistic despite poor economic forecast cap

-Spencer Goetzman, Goetzman

SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGINDUSTRYNEWS.ORG HOUSING INDUSTRY NEWS | 11 © 2021 Xcel Energy Inc. 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 9.75x6.675_MN-HINdirec_Apr2021_P01.indd 1 4/2/21 10:42 AM Online Continuing Education Courses Nearly 40 on-demand courses available 24/7. Courses taught by 20 top industry experts! Live Webinar Courses Resuming in January 2023 – Details Coming Soon! Contractor Pre-license Exam Prep Course Know someone wanting to become a licensed MN Contractor? We can help prepare them for the exam. “This was one of the most informative classes I have taken in recent years.”

Contracting “I am impressed. Your training is ﬁrst class in every regard. I like the range of subjects available with your online courses. The ability to pick and choose the topics rather than the decades of the annual building contractor training I have taken, with most o the same topics covered year after year, this will be my ﬁrst choice going forward.”

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Housing industry enjoys brews with business

Students build a solid foundation for careers in construction

Energy Homes

Members of the housing industry gathered this summer for Housing First Minnesota’s new series of events which bring together happy hour and business insights. The monthly Brews + Business events took place across the Twin Cities at industry-hosted sites with varied speakers and subjects for each event.

The construction of the home took place from mid-September 2021 until mid-July. The home was listed for sale in July.

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DISCOVER THE LATEST IN GREEN BUILDING! WHEN: Wednesday, Nov. 10, 2022 | 8:30 AM-Noon WHERE: Virtually, using Zoom REGISTER: MNGreenPath.org/GP-Conference COST: $49 Housing First Minnesota Member | $59 Non-Member CREDITS: Earn continuing education credits for Minnesota residential contractors and remodelers including Energy training* Builders in the Designated Green Path Builder program receive one complimentary registration *Pending

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The construction of the home took place from mid-September 2021 until mid-July. 9TH ANNUAL 8:30 AM |

Department of Labor and Industry Approval SPONSORED BY:

to Build

Presented by Dominique Boczek Caldwell, Program Manager, ICF 9:00 AM Ready to the 45L

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Lynne Jensen-Nelson of Conversion-omics Speakers & Consultants covered the topic of post-pandemic selling and shared her knowledge at the Southern Lights showroom for the June event. Morgan Molitor of construction2style shared her expertise on building a social content and SEO strategy to drive sales at the July event hosted at Studio M Interiors.

Welcome and Update on Minnesota’s Green Path 8:45 AM | Update on Xcel Energy and CenterPoint Energy

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Presented by Patrick Huelman, Associate Extension Professor, University of Minnesota MN

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Peter Coyle | pcoyle@larkinhoffman.com | 952-896-3214 Larkin Hoffman has been a go-to real estate law firm for more than six decades. We advise clients on all aspects of real estate and real estate development – including acquisition, approvals, assembly, construction, leasing, financing, development, land use, environmental regulation, property conversions and redevelopment, eminent domain and inverse condemnation, property tax appeals, and litigation. This full-service approach ensures we are able to address and manage every element of our clients’ real estate matters. BUILD TRUST

Students enrolled in the Northeast Metro 916 Career and Technical Center were able to get hands-on experience in the homebuilding process by completing the program’s 28th student-built home in North St. Paul this year. Each year, students build a single-family home thanks to a partnership with the city of North St. Paul that provides resources for the home build. Northeast Metro 916 Career and Technical Center students work in collaboration with instructor Tom Spehn and alongside subcontractors to construct most aspects of the home. St. Paul College cabinetmaking students build and install the cabinets, and Century College interior design students are responsible for many aspects of the cabinet design, color palette, flooring and Accordinghardware.totheNortheast Metro 916 Career and Technical Center, the program is the only one in the state where students get real-world experience constructing a fullsized house on site. The students spend only 10% of their time in a traditional classroom.

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SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGINDUSTRYNEWS.ORG HOUSING INDUSTRY NEWS | 13 EXCLUSIVE OFFER for Housing Industry News readers Wonder if Housing First Minnesota is a fi t for you? We have a spot for you and your business. YES NO YES NO YES NO YES Do you homes?build Do youhomes?remodel Do you provide a product or service to the housing industry? Housing First Minnesota is an amazing community of smart, dedicated, and successful business people working together to make this industry stronger and healthier. We help our members build their businesses through marketing, advocacy, and industry connections, all while creating the opportunity for homeownership for everyone, everywhere in our state. y JoinHousingFirstMN.org Do you housing?support Join by September 30 with promo code ‘HINPULL22’ to waive the $95 application fee and receive two free tickets for dinner only at our Clay Shoot on October 6. 100%GUARANTEEMONEY-BACK We’re so confident that your business will gain value from membership that we will offer you a 100% guaranteemoney-backifyouaredissatisfied* *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.

“Pulte's golf tournament is our annual reminder of how lucky we are to be operating as part of such a talented, tight-knit industry in the Twin Cit ies,” said Jamie Tharp, Minnesota division president at Pulte Group, Inc. “Our team is thrilled to have continued our sponsorship over the years and always look forward to having a great excuse for an afternoon away from the office to support a very worthy cause with partners we enjoy.”

The sold-out golf tournament raised a record-breaking amount to support the Foundation's build projects for Minnesotans experiencing homelessness.

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Pulte Homes golf tournament raises money for veterans experiencing homelessness

The Housing First Minnesota Foundation recently completed two Hous ing for Heroes projects in North Minneapolis for the Minnesota Assistance Council for Veterans. Four Housing for Heroes homes, each with an accessory dwelling unit, are scheduled to start construction this year, resulting in 20 additional beds for homeless veterans. This sold-out event featured 36 foursomes and raised a record-breaking amount to help fund the Foundation's build projects for Minnesotans experi encing homelessness.

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INDUSTRY GIVES BACK

The 12th annual Pulte Homes Charity Golf Tournament took place on July 20 at Dwan Golf Course in Bloomington. This four-person scramble event raised funds in support of the Housing First Minnesota Foundation’s efforts in building much-needed housing for homeless Minnesotans.

recap of housing news and development updates

More than two-thirds of young adults in the U.S. lived in the same area where they grew up by the age of 26, accord ing to a new study by the U.S. Census Bureau and Harvard University. In fact, 80% had moved less than 100 miles away, and 90% lived less than 500 miles away. Although young adulthood is when most cross-country migration happens, there are obvious correlations with socioeconomic status. Children of higher-income parents traveled farther away from their hometowns than children of less wealthy par ents. The study also reported that migration distances were shorter for Black and Hispanic individuals compared to white and Asian individuals. When millennials do migrate, where they moved varied by race. White millennials most often migrated to New York, Los Angeles, Washington and Denver, while Black millennials most often moved to Atlan ta, Houston and Washington. Los Angeles and New York were also the top two destinations for Hispanic and Asian millennials. Overall, the pattern of millennials staying closer to home is consistent with recent studies showing a decline in mobility for the overall U.S. population. New study finds most millennials tend to stay close to home 2 SOURCE: FINANCE AND COMMERCESOURCE: FINANCE & COMMERCE Cottage Grove apartment complex breaks ground 3 IN 484-4412 @HousingFirstMN

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Canterbury Park announced in February that it is part nering with Minneapolis-based Swervo Development Corporation to build a 19,000-person outdoor concert venue in Shakopee. The city’s planning and development director announced that the project is moving forward and will be on the Shakopee Planning Commission agenda in 19,000-person Canterbury Park Amphitheater seeks approval SOURCE: GLAMOUR (STOCKSY) quick

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Excelsior-based Oppidan Investment Co. held a groundbreaking ceremony in July for an upcoming apart ment complex in Cottage Grove. The project will include 171 market-rate units and feature studio-alcove units up to three-bedroom units. The complex will also include numerous amenities including a fitness center, community room, outdoor dog run, underground heated parking and rooftop deck. Mostly completing senior housing and in dustrial projects in recent years, Oppidan is continuing to diversify its projects. Following the completion of a market study, it determined demand for this type of housing and pivoted accordingly. The quiet neighborhood, proximity to 3M and school district, while still being close to restau rants, grocery stores and other retailers, are all draws for potential renters.

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While he hasn’t been with Lyman for long, Mitchell clearly gets it. He understands that his role, behind the scenes, is equally important as those on the front-line and brings his A game daily. Mitchell’s can-do attitude, quality of work and dedication to safety have helped him move up through the ranks in the short time he’s been here.

The sky’s the limit for Mitchell! We can’t wait to see where his career will lead him with Lyman Companies.

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One of the pillars of our success is creating a culture where customer service comes from the inside out. We’re only as good as our weakest link, so we’ve surrounded ourselves with people like Mitchell.