The central Indiana home construction industry reversed course in October, ending a streak of 15 straight months in which permit filings were greater than the same month in the previous year.
In October of this year, homebuilders filed a total of 375 single-family building permits in the nine-county metro area, the Builders Association of Greater Indianapolis reported Monday. That amounted to a 5-percent decrease from 394 permits filed in October 2012.
The October numbers follow a year-over-year downward trend that started this summer. In July, permits filed were 35 percent higher than in the same month in 2012. In August, permits were 13 percent higher, and then just 8 percent higher in September.
The last time the local market showed a year-over-year decrease was June 2012, when the 419 permits filed were 3-percent lower than the 434 permits filed in June 2011.
Homebuilders nationwide reported a dip in confidence in the market for newly built, single-family homes in October.
“A spike in mortgage interest rates along with the paralysis in Washington that led to the government shutdown and uncertainty regarding the nation’s debt limit have caused builders and consumers to take pause,” said David Crowe, chief economist for the National Association of Home Builders, in October.
The average rate for a 30-year fixed mortgage was 4.23 percent for the week ended Oct. 10, compared with 3.39 percent a year earlier, according to lender Freddie Mac. In August, the rate reached a two-year high of 4.58 percent and held close to that level through mid-September.
For the week ending Nov. 7, the average rate for a 30-year fixed mortgage was 4.16 percent.
Demand should pick up if mortgage rates stay close to current levels, which are not far from historic lows, said Gennadiy Goldberg, U.S. strategist for TD Securities.
“There’s enough momentum in the housing market for the recovery to keep going,” Goldberg said last week. “Slightly higher rates shouldn’t be enough to derail the housing recovery.”
In the Indianapolis area, Hamilton County was the busiest county for homebuilding in October, but also showed the most precipitous drop in permits. Homebuilders filed 156 permits in October, down 16 percent from 186 permits filed in the same month last year.
Marion County filings went the opposite direction, increasing 34 percent to 51. Hendricks County saw a 12 percent loss, to 50 permits.
For the first 10 months of this year, the number of permits filed still outpaced the same period in 2012—up 20 percent to 4,308 permits.
“Although reports indicate a slight decrease in permits from [October], we continue to see a significant increase over last year’s numbers,” said Steve Lains, CEO of BAGI.
“Forecasters believe that we will continue to see steady increases in 2014. A slight decrease from last month was expected because of the time of year, but what’s ultimately important is the year-to-year overall increase which is moving in the right direction in our area,” Lains said.
Recent activity in central Indiana still pales compared to pre-recession numbers. More than 1,220 permits were filed in the area in October 2005.