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Housing construction in the Twin Cities metro during February was up sharply for the second month in a row.

Builders and developers in the Twin Cities were issued 558 permits to build 946 units during February, according to data compiled by the Keystone Report for Housing First Minnesota. That included 536 permits to build single-family houses, a 32% increase over last year at the same time. Multifamily construction, mostly market-rate rentals, was down by 16% to 410 planned units.

Gains in single-family construction so far this winter have been driven by near-record low mortgage rates and a shortage of existing homes for sale at a time when many buyers are looking to trade up from their rental or starter home. The pandemic has helped fuel that demand.

"Building a new home has an increased appeal to individuals and families who have been looking to get into the market for the first time, or are finding their current home no longer fits their needs," said Todd Polifka, 2021 president of Housing First Minnesota, in a statement.

He and other builders said being housebound during the pandemic is forcing Twin Citians to re-evaluate how and where they live and in many cases that means homeowners are accelerating their plans to either upsize or, in the case of many baby boomers, to downsize to a house that fits the next stage of their lives.

"I'm ecstatic at the amount of interest I'm getting at this point," said Stuart Simek, a Twin Cities developer who is about to start site work on a subdivision in Hastings aimed at people who are 55 and older.

Lot reservations began only this week and presales won't start until spring, but he's already overwhelmed by the number of clicks he's getting on the web page for the Villas at Pleasant in Hastings. The project will have 32 houses from 1,500 to 3,000 square feet on a 10-acre site.

Simek is partnering with Ohio-based Epcon on the project and said he expects the project to sell out well ahead of schedule in less than a year. With prices that start at $400,000, single-level floor plans and compact yards, he expects the project to appeal to people looking to downsize.

"My biggest concern is our capacity to meet demand," he said. "There's a ton of demand and a lack of supply."

Simek, owner of Simek Property Group, also owns and manages more than 350 apartment units throughout the Minneapolis-St. Paul area. He said demand for urban rentals has softened, but that's not the case in many suburbs.

Marquette Advisors said last month that while the average apartment vacancy rate across the metro had increased slightly, there were several suburbs where the vacancy rate was still in the low single digits. In downtown Minneapolis, which has accounted for the bulk of the apartment construction over the past several years, the average vacancy rate is hovering near double digits.

The top cities for construction last month were Shakopee, where a 138-unit project was permitted, and Minneapolis, where Yellow Tree Construction pulled a permit to build a 77-unit project.

Jim Buchta • 612-673-7376