Metro home-building activity sinks again in 2011

New-home construction in the Indianapolis area slid in 2011, marking six straight year-over-year declines in residential building activity.

But some industry experts are expressing optimism that the market could be ready to turn a corner. Last year's 3-percent decrease in building permits filed in the nine-county metropolitan area represented the smallest year-over-year drop since local home-building activity began to decline in 2006.

Steve Lains, CEO of the Builders Association of Greater Indianapolis, said he's more positive about 2012, particularly since last year’s building activity nearly matched that of 2010, when the sector received a huge lift from generous federal tax credits.

“The demand has come back maybe better than we anticipated,” he said. “Moving into 2012, there’s a lot of optimism about the marketplace.”

Still, the number of new homes built in the metro area last year was the smallest since the residential market began slumping six years ago.

In the nine-county area last year, the number of home-construction permits dropped to 3,614, about 62 percent fewer than in 2006 and a whopping 76 percent fewer than the 15,054 posted in 2001, the most active year for local home building in the new century.

The number of building permits filed in Marion County fell 17 percent, to 607 in 2011 from 729 in 2010. June was the most active month, when builders filed 85 permits.

Building in Marion County could increase in 2012, though, if plans by Columbus, Ohio-based M/I Homes to construct more houses in two developments are any indication.

The Metropolitan Development Commission’s division of planning is set on Wednesday afternoon to give the builder the go-ahead to plat 74 lots at the Marlin Meadows subdivision on the city’s southeast side and another 19 lots at the Rosswood subdivision on the far-east side.

M/I Homes is under contract to purchase property in Marlin Meadows on East Thompson Road from Indiana Bank & Trust Co., which repossessed the land from defunct builder Hansen & Horn Group Inc.

Hansen & Horn built 56 homes at the development before it went bankrupt in 2010, and M/I Homes ultimately could build the remainder at the 222-lot subdivision.

“We’re actually looking forward to 2012,” said Mark Connor, M/I Homes’ vice president of land acquisition. “We’re thinking the market is going to stay relatively flat. But we intend to be actively building in more neighborhoods than we did in 2011.”

M/I Homes is building in about 20 developments in the Indianapolis area and hopes to increase its activity by 30 percent to 40 percent from the roughly 200 building permits it filed in the area in 2011.

Lains at BAGI, meanwhile, expects new-home prices to increase in 2012 as builders deplete the inventory of unfinished developments left by bankrupt builders.

“Those discounted lots mostly are all gone,” he said. “Now you have builders developing new lots. Those new lots are going to be at a higher price.”

Overall, home builders were most active last year in Hamilton County, where they filed 1,413 permits, an uptick of 4 percent from 2010.

The number of permits filed in 2011 decreased 8 percent in Hendricks County but increased 7 percent in Johnson County. Boone County registered a slight 1-percent gain.