Home-building permits filed in the Indianapolis area fell by more than 20 percent in March compared with the same month last year. But signs show home construction both locally and nationally may be starting to pick up.
In the nine-county metropolitan area, the number of building permits filed last month fell to 372, a decline of 22 percent from March 2010, according to the latest permit data from the Builders Association of Greater Indianapolis.
Home-building activity was flat or down in every county last month except Hancock, where just 20 permits were filed. Only 15 were filed there in the same month last year.
But the 372 building permits in March represent an 80-percent increase from the previous month and the most building permits filed in a single month in the nine-county region in a year, when 476 were filed in March 2010. Building was bolstered then by generous federal tax credits geared mostly toward first-time homebuyers.
Nationally, builders broke ground last month on the most new homes in six months, giving the weak housing market a slight boost at the start of the spring buying season.
National home construction rose 7.2 percent in March from February to a seasonally adjusted 549,000 units, the Commerce Department said Tuesday. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.
Still, the building pace is far below the 1.2 million units a year that economists consider healthy. And March's improvement came after construction fell in February to its second-lowest level on records dating back more than a half-century.
Millions of foreclosures have forced home prices down. In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. And more foreclosures are expected this year. Tight credit has made mortgage loans tough to get. Many would-be buyers who could qualify for loans are reluctant to shop, fearing that prices will fall even further.
A sign of the battered industry is that the number of new homes finished and ready to sell dropped in March to a seasonally adjusted 509,000 units, the lowest level on records dating back to 1968. And the number of homes now under construction has fallen to a four-decade low.
The increase in home construction activity was felt in most regions of the country. It rose 32.3 percent in the Midwest, 27.6 percent in the West and 5.4 percent in the Northeast. Construction fell 3.3 percent in the South.
Most economists expect home prices—and by extension home sales and construction—to slip even further in 2011 before a modest recovery takes hold.
Homebuilders remain pessimistic about the housing market. The National Association of Home Builders says its index of industry sentiment for April fell back down to 16. It had risen modestly in March to 17, after four straight months at 16. Any reading below 50 indicates negative sentiment about the market. The index hasn't been above that level since April 2006.