In another promising sign for the Twin Cities real estate market, a recent report indicates that builders started work on more local homes during the fourth quarter than they have during the last three months of any year since 2007.

Construction on a total of 1,344 new Twin Cities homes began last quarter, up 57 percent from the same period in 2011, when 855 homes were started, according to a quarterly report by Houston-based housing data and consulting firm Metrostudy.

Ryan Jones, director of Metrostudy’s Twin Cities division, told Twin Cities Business that the growth in new home construction is a direct reflection of growing demand in the strengthening market.

“New home starts are a strong indication of where the local home building market stands, but it’s also indicative of stronger consumer confidence,” he said, adding that such data can be more reflective of the local market than other benchmarks like permit data, as permits may be awarded for projects that never materialize.

The fourth quarter marked the third consecutive quarter in which the Twin Cities housing market surpassed 1,000 new home starts, according to Metrostudy. New home construction remains well below its 2005 peak, but Jones said it’s “unfair to today’s market” to directly compare the two, as that peak was “not a natural occurrence,” and the glut in the market contributed to the crisis.

Barring any catastrophic economic events, the local housing market should continue to see an improvement in its pace of new home construction in 2013, Jones said. Recent data is indicative of “real” market growth, he added, as the buyers driving demand are actual homeowners, rather than investors looking to profit from a depressed market, and the numbers aren’t driven by a temporary force, such as a tax incentive.

At the end of 2012, there were 2,309 new housing units in inventory, up 25 percent from the prior quarter, according to the report. Of that inventory, 72 percent is under construction, 19 percent is finished but vacant, and 9 percent comprises model homes. Increased inventory is a welcome sign; by the end of last year, the the supply of homes for sale in the Twin Cities hit its lowest level in a decade, according to a report by Minnesota Public Radio.

There are currently 25,268 vacant developed lots throughout the Twin Cities, representing a decline of 9 percent compared to last year—and the lowest figure since late 2007, according to Metrostudy. Increased demand for new homes has driven buyers to purchase vacant developed lots, Jones said.

Meanwhile, the growth in new construction is just the latest in a series of positive indicators for the housing market.

The median sales price for Twin Cities homes climbed more than 18 percent to $172,550 in December, according to data from the Minnesota Association of Realtors. For all of 2012, closed sales jumped 17.4 percent and the median sales price rose 11 percent.

And the number of residential housing permits issued in January were up almost 70 percent compared to January 2012, according to recently released data from the Builders Association of the Twin Cities. The growth continues a trend seen throughout 2012, when the year ended with nearly twice as many permitted units as seen the prior year. The continued growth “sends a strong signal that housing is on the rebound,” the association said.

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