Central Indiana homebuilding slump reaches seven months

Applications for home construction fell 13% in central Indiana in June, marking the seventh straight month of declining permit filings.

The year-over-year drop followed May’s decrease of 1 percent, April’s drop of 9% and March’s decline of 23%.

Builders filed 595 single-family construction permits in the nine-county area last month, compared with 683 permits in June 2018, according to the Builders Association of Greater Indianapolis. It was the least-active June for permit filings since 2016.

On a year-to-date basis, permit filings are down 13%, to 3,409, compared to 3,793 during the first six months of 2018.

Steve Lains, CEO of BAGI, said the situation is better than it appears. He cited a housing study that determined central Indiana builders were under-building by 1,750 homes per year.

“Current permit reporting is not reflective of the greater Indianapolis market’s existing demand for new homes,” he said. “Various BAGI builders have reported increases in sales and pre-sales in new communities or sections the past few months but have been unable to pull permits and deliver lots due to development delays caused by inclement weather. Additionally, as more affordable communities are selling out, it has become increasingly difficult for builders to get affordable replacements approved and developed in an efficient manner to meet the consumer demand.”

County numbers

Hamilton County saw permit filings fall 9% in June, from 229 to 208. Filings are down 20 percent in the county through the first half of the year.

Marion County filings rose 11% last month, to 108, and are down 12 percent this year.

Hendricks County’s number were flat in June, at 75.

Johnson County filings decreased 48%, to 57.

Hancock County saw permits sink 22%, to 60.

Filings jumped 69% in Boone County, to 54.

Filings dropped 48% in Morgan County, to 11, and rose from seven to 18 in Madison County. They fell from 11 to 4 in Shelby County.

National numbers

U.S. home construction slipped last month as an uptick in the building of single-family homes was offset by a big drop in apartment construction.

The Commerce Department said Wednesday that construction was started at a seasonally adjusted annual rate of 1.25 million in June, down 0.9% from 1.27 million in May. Construction of single-family homes rose 3.5%, but apartment building skidded 9.4%.

Applications for building permits, an indication of future construction, fell 6.1% last month, to 1.22 million, the lowest since May 2017.

Falling mortgage rates are expected to spur home construction, overriding other concerns such as shortages of building lots and construction workers. The average rate on a 30-year, fixed-rate home loan last week stood at 3.75%, down from 4.53% a year ago.

“Still, pullback in building permits in June suggests further weakness could be in the pipeline,” Shernette McLeod, economist at TD Economics, said in a research note. “Rising costs, lack of land and labor shortages continue to pose challenges to builders, impeding their ability to fully take advantage lower borrowing rates to construct more in demand entry-level units.”

Home construction overall was up 6.2% last month from June 2018. Single-family construction slid 0.8% and apartment building jumped 25.3% from a year earlier.

Housing starts rose 31.3% from May to June in the Northeast and 27.1% in the Midwest but fell 9.2% in the South and 4.9% in the West.