Booming sales of attached housing expected to continue

Townhouse, quad home, cluster home, manor home or patio
home -- attached housing long has been an affordable
entry point for first-time buyers.
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By Neal Gendler - Star Tribune - January 18, 2003

Attached housing rose from a supporting role to stardom on the
residential construction stage last year.

In its various styles -- townhouse, quad home, cluster home,
manor home or patio home -- attached housing long has been an
affordable entry point for first-time buyers and an efficient
form of amenity-laden living for financially secure retirees and
downsizing empty-nesters.

But in 2002, attached housing reached 44 percent of the units
planned in the Twin Cities area, and builders expect heavy demand
to continue this year.

Builders drew 10,631 residential construction permits last year,
less than 1 percent fewer than in 2001, according to the Keystone
Report, which tracks 70 percent of the 11-county metropolitan
area for the Builders Association of the Twin Cities.

But those permits were for 17,134 units -- nearly 5 percent more
than in 2001 and the most in 15 years.

In 2001, attached housing accounted for 42 percent of the
new-home market, up from 37 percent in 2000.

With mortgage interest rates at their lowest level in decades,
people of modest income have been able to buy homes despite
higher prices, and those with greater incomes have been able to
buy bigger houses or add more options.

Attached housing is helping to satisfy pent-up demand, said Bob
Swanick, regional vice president of Orrin Thompson Homes. The
company's sales of all types of homes were up 11.2 percent last
year.

"Every product line has benefitted by the low interest rates," he
said. While other industries sagged, home building boomed.

The same was true nationally. On Monday, the National Association
of Home Builders (NAHB) estimated that 1.69 million new homes
were started in 2002, the highest number in 16 years.

"Builders are running darn close to capacity. It's a wonderful
problem to have," said Craig Plekkenpol, 2002 president of the
Twin Cities association.

A less-wonderful problem is the diminishing supply of metro-area
land available for development, which has sent lot prices
soaring. That pushes up new-home prices. The value of homes from
2002's permits totaled $2.69 billion, about $208.7 million more
than in 2001 but more than $1 billion higher than in 1997.

When builder Curt Swanson's Ed Swanson Homes built in Maple Grove
two years ago, lots averaged $75,000, he said. His 120 sites for
building Seven Greens in Plymouth now average $125,000. He said
his firm has built hundreds of homes in the $200,000-to-$300,000
range in Maple Grove during the past 15 years, but "when we got
this land, it dictated higher numbers." Single-family homes in
Seven Greens range from $500,000 to $800,000 and two-family homes
from $400,000 to $500,000 per unit -- and he has a waiting
list.

Those prices are pretty steep for many home buyers, even in the
metro area, where the median household income is $76,700, meaning
that people at or above that level can afford more than the
area's median home price of $190,000.

Although many builders also work at the lower-price end of the
spectrum, some Twin Cities-area buyers are finding single-family
home prices beyond their reach or comfort. That has helped drive
demand for attached housing, which uses less land per unit than
single-family housing.

Builders don't expect the good times to end this year.

The NAHB expects national housing starts to decrease about 3.5
percent this year, but that would mean 1.63 million new homes,
which NAHB chief economist David Seiders said are "excellent
numbers" in historical context. He said the estimated 976,000
new-home sales in 2002 will set a record, and sales this year
should be the industry's second-best.

Swanick said Orrin Thompson expects sales to be 13 percent above
2002, despite his expectation of higher interest rates.

"It looks to us like there's going to be more of the same,"
Plekkenpol said.

All the recent construction has helped create a large inventory
of existing homes, he said, giving consumers "the widest array
and best array of housing options they ever have had."


-- Neal Gendler is at ngendler@...
© Copyright 2003 Star Tribune.
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