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Residential building activity levels off after surge

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The number of building permits issued in the nine-county Indianapolis area in the first five months of 2010 has risen 35 percent from the same period last year, but activity has slowed significantly in the past two months.

New-home permits in May totaled 349, just a 2-percent increase from May 2009, according to the Builders Association of Greater Indianapolis. The number was a slight improvement over the previous month of 328 and unchanged from April 2009.

By comparison, permits in January climbed 119 percent from the same time last year, and February and March saw increases of 51 percent and 62 percent, respectively.

The drop off in the past two months can be traced to the expiration of a federal tax credit that rewarded both new homebuyers and existing owners.

Federal law provided an $8,000 tax credit for first-time buyers for homes purchased or under contract through April 30. It also created a $6,500 tax break for existing homeowners who had lived in their current residence for at least five years.

A new home under contract by April 30 needs to be closed on by June 30 to take advantage of the credits, providing extra motivation for builders to construct homes on a speculative basis.

“For the most part, builders had to pull a permit in March to make June,” said Bruce Craig, Indianapolis division president of Atlanta-based Beazer Homes USA. “A lot of the demand you see was due to the tax credit.”

Craig is cautiously optimistic the new-housing market is beginning to rebound this year, particularly because permit numbers haven’t fallen below previous-year levels.

Figures from BAGI show the number of building permits filed in the nine-county area last year fell 21 percent from 2008.

“The fact that we’re flat (in April and May), I view that as pretty encouraging,” Craig said.

In Marion County, 364 permits were filed this year through May, a 27-percent increase compared with the year-ago period.

Hendricks County saw a 36-percent increase through the first five months, while Hamilton County experienced a 21-percent jump. Hamilton County recorded 664 permits through May, the most in the nine-county metropolitan area.
 

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