Residential Real Estate and Homebuilders and Home Sales and Housing Starts and Development/Redevelopment and Construction and Real Estate & Retail

Area home-construction permit filings flatten out

June 17, 2014

Permit filings for home construction in central Indiana were flat in May—really flat.

Homebuilders filed 530 single-family building permits in the nine-county metro area in May, the Builders Association of Greater Indianapolis said Tuesday. That’s exactly the same number of permits that were filed in May 2013.

Filings had shown small year-over-year increases the previous three months after falling 1 percent in January.

Hamilton County led the area with 178 permits filed in May, a 5-percent drop from May 2013. Marion County saw 78 filings, up 4 percent.

Johnson County saw a 16-percent decrease, with 58 filings. Permits were up 48 percent in Hancock County, to 46.

 Filings were down 7 percent in Hendricks County, to 84, and flat in Boone County, at 49.

Through the first five months of the year, 2,189 permits have been filed in central Indiana, an increase of 3 percent over the same period of 2013.

Local construction numbers were better than national figures.

The pace of U.S home construction slipped in May with many Americans still struggling to afford new houses.

Builders started work at a seasonally adjusted annual rate on 1.01 million homes last month, the Commerce Department said Tuesday. That was down 6.5 percent, from 1.07 million, in April.

Construction firms began work on fewer single-family houses, condominiums and apartments nationally last month.

Home construction has struggled to gain much traction this year, limiting its ability to contribute as much to broader economic growth as it has in the past. Many would-be buyers face higher mortgage rates than at this time last year, while builders are selling fewer new homes but charging more for them.

That has reduced the number of possible buyers and the number of construction jobs. Builders employ 1.49 million fewer workers than they did at the start of the Great Recession in December 2007, a loss of roughly 20 percent.

In May, construction tailed off in the Northeast, Midwest and West. Only the South experienced greater building activity in May.

Housing starts have risen 9.4 percent during the past 12 months. But apartments account for most of the gains, suggesting that more Americans will be renting instead of owning homes.

The growth in apartment buildings points to an economy in which more Americans are renting, rather than buying homes. Following the housing bust and recession, Americans have had to deal with relatively flat wages and job insecurity, both obstacles to saving for a down payment. The home ownership rate was 64.8 percent at the start of the year, down from a peak of 69.2 percent in 2004.

Applications for building permits, a gauge of future activity, fell 6.4 percent in May to an annual rate of 991,000.

Now that the spring and summer buying season is in full swing, homebuilding appears to be struggling.

Builder confidence has improved slightly but remains pessimistic.

The National Association of Home Builders/Wells Fargo builder sentiment index rose to 49 in June, up from 45 in May. A reading below 50 indicates that builders consider the conditions for new construction to be poor. The index had been above 50 from June through January.

Sales of new homes rose 6.4 percent in April to a seasonally adjusted annual rate of 433,000, according to a separate Commerce Department report. That comes after sales declined 6.9 percent in March to an annual pace of 407,000, while buying slipped 4.4 percent in February.

Median prices on new homes are $275,800, a 10-percent increase since the beginning of 2013.

All of this comes amid a broader real estate slowdown after significant sales and price gains in the first half of 2013. Both prices and borrowing costs are higher.

Average rates on a 30-year, fixed-rate mortgage are at 4.2 percent, up from a low of 3.93 percent during the past year, according to Freddie Mac.


 

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