Beating Expectations

On another project in North Oaks, Michels’ company is completing a $300,000 makeover that will transform a dated kitchen, dinette, and hallway into modern, high-end kitchen complete with a butler’s pantry. He is also renovating the master bathroom on the main floor. The owners considered building a new home but there are no lots available in their neighborhood, to which they have grown attached.

Maplewood-based home builder Bacchus Homes, Inc., also has customers that are taking longer to make decisions to build, or are choosing to remodel instead. “It’s been a tough year and a half. We’ve had a few projects, but it’s still not enough to keep that momentum going forward,” says Owner Randy Bacchus. “It’s been a rebuilding year.”

Typically, the company builds 12 to 15 luxury homes a year, but Bacchus has built eight homes in the past 18 months. His remodeling business handled more of the firm’s workload, taking on projects that range from $40,000 to $350,000.

Bacchus is happy to report that things are looking up on the building front. Since the beginning of the year, the phone has started ringing again from people seeking new homes. “It seems more optimistic at this point,” he says. “Interest rates are still great. The housing market in the Twin Cities is still good, even with everything you read.”

Indeed, real estate agents and advocates are predicting an even stronger 2007. Part of those prognostications come from solid numbers, such as the statistic that new housing inventory declined 2.8 percent from the fourth quarter of 2005 to the fourth quarter of last year, according to Metrostudy, a Texas-based provider of market information to the housing industry. Declining inventory of new homes shows that buyers are purchasing the homes that were built “on spec,” or those without the buyer lined up beforehand.

Additionally, inventory under construction dropped 40 percent during the same time as builders slowed production of new homes. This continued a decline that began in the second quarter of 2006.

“We think that the market has gone through a big shift in the past 15 to 19 months,” Allen says. “It’s run its course and will start shifting back in the other direction. We’re very optimistic about the future of our market in all brackets, including the upper bracket, because our market is poised for economic growth. For the real estate market that means job growth and household growth, which also means an increasing demand for housing.”

The end result should be continued growth in the number of homes sold, and a steady increase in home prices, Allen adds. And for those who work in the high-end of the housing market, that means things should pick up right where they left off in 2006.