Rochester Home Building is Good, Going To Better

Posted on February 8, 2012


John Eischen: Local home-building climate is good, and getting better

Posted: 02/07/2012 7:33 AM

There has been some discussion on the low number of permits pulled for new single family homes in the city of Rochester in 2011. However, just looking at one statistic does not tell the complete story of construction activity within Rochester.
The remodeling market in Rochester in 2011, while down slightly for the year, saw a 10 percent increase in permit activity in the last quarter of 2011. There were more decks built, basements finished, and additions put on homes during the last three months of 2011 than in the same period in 2010. This trend follows at the national level as well. According to the National Association of Home Builders (NAHB) Remodeling Market Index, professional remodelers saw remodeling conditions rise to their highest level in five years during the fourth quarter of 2011. NAHB Chief Economist David Crowe says, “We expect a modest growth in remodeling activity to continue throughout 2012.”

Last year saw a 14.6 percent increase over 2010 in the number of commercial new construction permits pulled in Rochester. But again, that single statistic does not tell the complete story.

Within those permits are new Mayo Facilities, a new Lourdes High School, a new MnDOT facility, a new McDonald’s, and a new four-story hotel, to name a few. Another interesting fact is the number of those permits that are for “fit ups.” These types of permits are for construction of new offices within existing buildings that just a short while ago sat empty. And it’s not just new construction showing positive signs, but word of future projects coming to our community.

New business developments breaking ground, national chains announcing that they are coming to town, and new grocery stores all point to the fact that businesses are investing in Rochester. This is a sure sign of good things to come for our community!

The increase in commercial projects and the outlook for future projects mean one thing: jobs. Where there are jobs, there will be a need for homes.

When looking at fourth quarter 2011 versus the same period in 2010, single family permits show a 10 percent increase. While that increase does not signal a return to a completely healthy single family construction industry, it is a positive sign that things are improving.

NAHB recently released its NAHB/First American Improving Markets Index (IMI). The IMI identifies areas that have shown improvement from their lows in housing permits, employment, and house prices for six consecutive months. Rochester is on that list.

“While many of the markets… are far from fully recovered, the index points out where employment, home prices and housing production are no longer retreating…,” said NAHB Chief Economist David Crowe. “This is a sign that a large cross section of the country is starting to turn the corner as local economic conditions stabilize.”

Why should we as a community be concerned with a healthy construction industry? Well, just as home ownership provides many benefits to individual families, it also benefits the community. According to the NAHB, whenever new homes are built, new jobs are created and a permanent source of ongoing revenue for local, state and federal government springs to life.

Just consider: Building 100 average single-family homes creates 305 jobs and generates more than $23 million in wage and business income, as well as $8.9 million in taxes and revenue for state, local and federal governments. The employment impacts are broad-based, extending far beyond the construction workers employed directly to build the homes.

Jobs are generated in the industries that manufacture and supply the many products that go into building the home. They are also created when real estate agents, lawyers and brokers provide services to home builders and home buyers. And the benefits don’t stop there.

When 100 families move into new homes, they spend $740,000 more than usual on appliances, furnishings, and property alterations, creating a further economic stimulus. In normal economic times, 17 percent of the nation’s economy relies on housing.

Rochester is a growing and vibrant community and that growth will continue into the future. I applaud the council members of the city of Rochester for creating the Permit and Development Task force, chaired by Jerry Williams. The task force worked closely with city staff and has identified areas that will help create a more efficient process, a process critical to Rochester’s future growth.

We need to be poised to enable future development and construction by having a system in place which benefits not only the builders and developers, but the community as a whole. Rochester is a wonderful community in which to live, work and play. And a Rochester with a healthy construction industry has a healthy local economy.

Now is a great time to build; I know some people who can help.
Dan Kingsley, The Real Estate Ranger-507-990-1721 or you on your next Real Estate Mission!