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Home building suffers another bad year, locally and nationally

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Home construction remained mired in a historic slump in central Indiana in 2010, showing only slight improvement over 2009, according to the latest permit data from the Builders Association of Greater Indianapolis.

Building permits filed for new homes in the nine-county Indianapolis area rose just 2.6 percent in 2010, to 3,720. That’s just 95 more homes than in 2009—the worst year for local home construction in more than a quarter century.

Home construction has fallen dramatically since the first part of the decade, when area permits topped 13,000 annually from 2000 to 2005, including a peak of 15,054 permits filed in 2001.

Despite optimism for a recovery, last year ended on a down note, with area permits falling 5 percent, from 279 in December 2009 to 265 in December 2010.

Overall in 2010, Marion County saw permits fall 6 percent, from 772 to 729. That's a stagggering drop from 2005, when more than 3,600 building permits were filed in the county.

Hamilton County, the area’s hottest area for new homes over most of the last decade, saw permits fall 1 percent in 2010, to 1,354.

The local trend was mirrored nationally, with builders beginning work last year on the second fewest number of homes in more than a half-century, as the weak economy kept people from buying houses.

Builders broke ground on a total of 587,600 homes nationally in 2010, just barely better than the 554,000 started in 2009. Those are the two worst years on record dating back to 1959.

In a healthy economy, builders start about one million units a year. They built twice as many in 2005, at the height of the housing boom. Since then the market has been in decline.

One positive sign is that builders appear to be planning more projects in 2011. Building permits, considered a good barometer for future activity, rose 16.7 percent in December to a seasonally adjusted annual rate of 635,000, the best pace since March.

But builders likely pulled more permits in California, New York and Pennsylvania ahead of code changes in 2011 — a factor that likely influenced the spike.
"Some builders went ahead in December with projects to beat the change," said Jennifer Lee, an analyst at BMO Capital Markets. Lee points out that the biggest gains were in the Northeast, which was up 80.6 percent, and the West, up 43.9 percent.

People are buying fewer single-family homes, which represent nearly 80 percent of the market. Demand fell 9 percent, to an annual rate of 417,000 units. Apartment building increased 17.9 percent, to an annual rate of 112,000 units.

Housing construction fell in all parts of the country in December except the West where activity surged 45.8 percent. Construction dropped 38.4 percent in the Midwest and was down 24.7 percent in the Northeast and 2.2 percent in the South. Severe winter weather likely affected activity in the Northeast and Midwest.
The collapse of the housing market helped push the country into a deep recession. More than a year after the recession officially ended, housing is still struggling.

Unemployment remains high. Record numbers of foreclosures have forced home prices down and tight credit has made mortgages tough to come by.
 

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  • Garbage homes
    As long as Beazer Homes is building junk houses and putting them up in a matter of a couple of weeks, home values will continue to decrease across the board. Their company stinks, their product stinks and they're helping cause the issues in the housing market. Hopefully they will just file BK again and go away. WE ARE OVER BUILDING HOMES IN INDIANAPOLIS!
  • Construction = Destruction
    Very briefly, it boggles my mind that the prospect of new housing construction can be considered anything but another nail aimed at the coffin of the Hoosier economy. I see the signs, the lots being cleared, the new houses getting built by the score; but, I also see the for sale signs in front of many homes reducing the original asking prices to give the homeowner even a modest prayer of getting out of breaking even if and when they are lucky to get out from under these homes. You at IBJ can have the audacity to write such an artical at such an unfortunate time and expect that your comments can be taken at face value. I invite the reporter to take a little drive with me in and around Noblesville. I will show you the sights and then will listen with eager attention as he or she can explain how the health of our economy will be aided with Beazer, Ryland and Arbor building homes starting out in the 110s. You can reach me at 317-379-6090. Shame on you for writing such an article, and pity on you if you truthfully believe its content.
    Tim Kwitny
  • Agree
    Family in construction & real estate in IL and generally agree with Guy Pahud. One point missed is years of changing birth rates and aging population who bought big in the 1980s and now trying to down-size to condo or senior living.
  • The New Normal
    The current home-building slump is an unavoidable result of many years of over-building fueled by self-fulfilling expectations of value increases and public policy that threw money (ours, as it turns out)at what turned out to be an unwise extrapolation on the valid basic concept that home ownership is good for society. Even though Central Indiana has been spared the radical boom-bust cycles that have occurred in warmer places, it will take years to absorb the glut of residences that exist here today. Over-building created the problem,to the benefit and delight of those who were paid to do it. It would be great if someone could put those folks to work building something other than homes, because new homes will be a very tough sell for the next few years or longer.

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