Improving economy, low interest rates cited as reasons
Judging by the development plans sitting on Stillwater Community Development Director Bill Turnblad’s desk, it appears the local residential housing market is heating up again.
“I have nine developments on my desk in various stages of planning, in the concept, preliminary plat and final plat stages,” Turnblad said. “Five are in the pre-application stage and four are upcoming.”
Which means that there could be more construction in Stillwater very soon. It’s a change from 2007, when Turnblad said most of development in Stillwater came to a standstill after the housing slump. He thinks developers have decided that now is the time to start building again.
“The interest in new construction is definitely up because the inventory of existing homes has diminished and people are looking for other options,” Jon Whitcomb of Greystone Commercial, one fo the developers involved in the increase said. “Right now a lot of people are in a bidding war and for them, new construction is the way to go. For the last six years, there have been more options available for people and they weren’t as drawn to new construction.”
Whitcomb added that what’s happening on the local and national building scene is that the need for developing lots has increased because there hasn’t been development in five or six years. He added that 2006 was the last time a large number of lots were developed and the new economic atmosphere is helping create opportunities and inventories for new homes.
According to Edina Realty realtor Travis Peltier, there’s currently about a four-month supply of inventory at this time.
“New construction really doesn’t have an impact on a buyer or sellers market but right now we’re in the balanced to slightly sellers market at this point,” Peltier said. “We do have a lack of inventory right now in the Twin Cities metro area. Right now we have a 4-month supply of inventory. A 3.5-month supply of inventory is a sellers market and anything that’s 8 or more months is a buyers market. New inventory can continue to keep the balance from shifting one way or the other.”
Overall though, Peltier said addition of new housing is beneficial since it’s good for the economy and impacts community growth and business and improves services.
Adam Nyberg of the Stillwater Coldwell Banker Burnett office said area home sales have increase “substantially” this year over the same period last year. Nyberg added that the local housing market starting picking up “steam” in 2012.
“Now is a good time to sell,” he said. “It’s also a great time to buy because interest rates are still low.”
Jennifer Wagenius, director of Washington County’s Department of Property Records and Taxpayer Services, said her department saw an increase in property-related filings in 2012 and is on pace to see slightly higher filings this year. She added that 5,833 deeds for residential and commercial properties were filed in the county last year.
“Right now, we’re on target to have a similar number of deeds recorded that we recorded in 2012,” she said.
Meanwhile, developers are deciding now is a good time to begin the tedious and sometimes risky process of getting developments approved and under construction.
“Typically developers enter the development process when they think the timing is right,” Turnblad said. “Some of the lots are sitting in inventory but it’s collecting interest and financially people have to look for a place and put money down to hold the land so the landowner can’t sell it from under you. Then the developer meets with the city staff and engineer, city planners or others and works from there to come up with possibilities of what it looks like.”
The next steps include going through various commissions, having neighborhood meetings, creating a preliminary plat, putting in systems needed to serve the homes and then doing a final plat review, when the land gets contracted to the developers and builders and construction can begin.
“It’s a lot of hours and angst for the developers,” Turnblad said. “They have to include roads, streets and sewer and water all up front before they can sell the lot and the banker needs to know they can sell enough. The developer needs to know that they can make a profit. What happens a lot is that a developer has a relationship with a builder who can work on the land and sometimes helps make ends meet. If they didn’t have that they’d need to sell the land for more than they would so a lot of risk is involved.”
Turnblad says that throughout the process, the city is concerned with the quality of the homes so some extra steps are added to the review process.
“(The process) varies from city to city. We try to be development neutral and keep it as quick as we can without sacrificing design quality. The developer is interested in creating a community and making a living out of it. The city’s interest is more long-term. We’re more cautious of quality and design which sometimes dissuades some developers,” Turnblad said.
When it comes to the current projects on Turnblad’s desk, he’s pleased that they serve a variety of families and populations. The projects include single family homes, townhomes and senior housing units.
“It will be nice to have various options for life cycle housing in the city so I’m pleased with the mix,” Turnblad said.
He added that there isn’t expected to be a major population increase from the development plans.
“There will be some growth in population but it won’t be dramatic. We’ll cater to new younger families and empty-nesters and folks who want to see some growth will see some. It’s not really a rapid development here either. We have 15, 28, 30 and one has 100 lots but that’s a townhome population. There are nine but none are huge. What we have is a history of inventory and it’s not a glut by any means.”
Going forward Whitcomb said he hopes to see a healthy growth.
“I hope there’s a healthy uptick in supply, healthy from the standpoint that some of what we had in 2003-2006 was too much speculation and speculation on developed lots supplying inventory aren’t sure to sell. What I hope for moving forward is a healthy supply of product quality, consumers with few vacant lots, and little over-supply or lack of demand. If there’s too much supply it effects the value and lowers prices like if you have too many iPhones on the market the price drops. What buyers need to know is that there will be an increase in offerings, options and locations with new places to build homes It’s also a good time to sell now that we’ve reached that balance of inventory.”