COVID-19 hits residential builders: Single-family permits, multifamily units both drop.

Byline: Brian Johnson

At the start of 2020, homebuilding activity in the Twin Cities cruised along at a steady clip -- and the momentum carried into March and April even as the COVID-19 pandemic took an increasing toll on the economy.

That resilience came to full stop in May as the bottom fell out on permits for both single-family homes and apartments.

In May, the Twin Cities saw permits for 761 new housing units, down 45% from May 2019, according to the Keystone Report, which tracks permits in the 13-county metro area. The data includes permits for 396 single-family homes, down 25%, and 365 multifamily units, down 57%. The combined value of the permits, $163.3 million, is 32% below last year.

"We are now seeing some delayed effect of COVID-19 on the new-home market," Gary Kraemer, president of Housing First Minnesota, said in a statement.

David Siegel, executive director of Housing First Minnesota, said he's not surprised that the economic downturn is finally showing up in residential permits.

"You can't close down an economy and close down a state and not have an impact on your numbers," Siegel said. "I don't think it's unexpected. It's just COVID kind of catching up" to homebuilding.

Even so, market fundamentals remain strong, he said. Local builders are still getting inquiries from potential homebuyers, interest rates remain low, and there's a need for more inventory, Siegel noted.

Prior to May, the Twin Cities homebuilding sector was a bright spot in the overall economy. Through April, single-family permits were up 8% year-over-year and planned multifamily units were up 10%.

The monthly decrease in May pushed year-to-date single-family permits into negative territory for the first time this year (down 1%). Planned multifamily units are now 18% behind last year's pace.

Unlike the homebuilding crash at the epicenter of the Great Recession, home prices remain strong amid the current...