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Permits to build single-family houses and rental apartments declined by double-digits during August, according to a monthly report from Housing First Minnesota, a trade group that represents metro builders.

During the month, builders were issued 600 single-family permits, a 15% decline compared with last year. For multifamily units — mostly rental apartments — enough permits were issued to build 458 units, a 34% decline.

The declines come after an unusually strong summer for home sales, which have generally exceeded expectations as other sectors of the economy languished.

David Siegel, executive director of Housing First Minnesota, said the declines are likely due to COVID-related declines in sales and delays in the permitting process. He said there can be a several-month lag between the sale of a new house and the approval of the building permit.

Though homebuilding was considered an essential service during the government shutdown that started in mid-March, Siegel said there was a pause in home buying that's reflected in the August declines in permits. And with many communities restricting inspections and other municipal approvals, it has been an unusually volatile — and late — homebuilding season.

"The spring selling season became more the summer selling season," he said. "Demand got pushed back."

Until August, builders were on track to outpace last year by a healthy margin. Now, single-family permits are down about 9% year-to-date and multifamily permits are lagging as well.

"Pre-COVID we were our way to an exceptional year, probably our best year in a decade," said Siegel.

According to the Keystone Report, which gathers data for Housing First Minnesota, 633 permits, including single- and multifamily housing units, were issued for a total of 1,058 units during four comparable weeks in the month of August. Lakeville issued the most permits (51) followed by Cottage Grove (45) and Otsego with 37 permits.

In addition to an unusually volatile spring sales season, homebuilders are now facing soaring lumber prices and a shortage of some materials.

Robert Dietz, the chief economist for the National Association of Home Builders, is reporting that lumber prices have been soaring since spring. Prices increased 8% just last week. As a result, the advocacy group said, the average new single-family house will cost more than $16,000 more than it would have during April.

The U.S. Census Bureau said last week that new-home sales nationwide increased 13.9% from June to July, the highest monthly figure since 2006 as home buyers tried to make up for time lost to the pandemic.

Low mortgage rates and a shortage of house listings have generally helped boost new-home sales.

House listings across the Twin Cities metro have not kept pace with demand in some submarkets, forcing some buyers to consider new construction.

They are also taking advantage of record-low mortgage rates. On Thursday, Freddie Mac said the average 30-year, fixed-rate mortgage dipped slightly from the previous week to 2.91 % for the week ending Aug. 27.

"The demand for new homes is there, as housing inventory on both the existing and new side of the market is at record lows," said Gary Kraemer, president of Housing First Minnesota. "I think what we are seeing reflected in these numbers is the lingering effect of the slowdown that occurred immediately following the introduction of COVID-19."

Jim Buchta • 612-673-7376