Building Permits Paint Grim Real Estate Picture
For the past three years, new construction has added more than $100 million each year to the total assessed property valuation of Boone County, but the falling number of building permits registered in the county could signal a change.
“Building permits are down - I would expect nationally and locally - and I expect new construction will be down when we measure in June of ’08,” Boone County Assessor Tom Schauwecker said. “Based on what we’re seeing, there is a decrease in permits from the city and county.”
According to county records, permits for single-family homes rose from 331 in 2002 to a peak of 378 in 2004. By 2006, however, the number had fallen to 232. Mid-year permit numbers are down in the county about 30 percent compared with last year.
City records reflect similar trends, with a peak of 1,239 single-family home permits in 2005 dipping to 675 last year.
Bob Walters, a developer with Virtual Realty, said the drop is about the biggest the industry has seen since the mid 1980s, but it’s “not the end of the world.”
“My biggest take on things is the downturn in taxes that the city is experiencing,” he said. “I’m not an economist, but I think it has to do with the 50 percent reduction in new home construction. It touches so many industries: lumber yards, auto dealerships and so forth.”
Walters also said he has noticed a change in lenders, who are now being more conservative in giving money to developers. “I think … not a lot of people saw it in 2005, but people got an inkling last year that things were hitting the skids,” he said.
Preliminary data for 2007 from the county assessor’s office show the total property value for the county is about $2.2 billion, about a 5 percent increase from last year. The real estate portion of that totals $1.8 billion, an increase of $106.5 million, or 6.4 percent, from 2006.
This year is not a reassessment year, and Schauwecker attributes the growth almost entirely to new construction. The 2007 numbers reflect only the new construction completed as of Jan. 1, he said, so this year’s numbers reflect construction activity in 2006.
Rhonda Carlson, a Realtor and co-owner with her husband of C&C Construction, has been scaling back construction since 2005, when fuel and lumber prices jumped.
Carlson said wishful thinking on the part of some builders might have caused the glut of new construction, leading to overbuilding in some areas of the market.
“They think, ‘Oh, it’s going to turn around,’ but most of the economic information coming up says that’s not going to be the case,” Carlson said.
A member of the city’s affordable housing task force, Carlson said there are too many homes being built in the higher price ranges and not enough affordable housing being made available, whether through construction or rehab. “The lot prices just floor me,” she said. “I’m shocked. … Is that demand out there? I just don’t see it.”
Carlson added that if building permits and construction continue to drop, so will sales tax revenue. “We’re looking at sales tax revenue being off; that’s a big function of building permits,” Carlson said.
Building supply retailers are among the hardest hit by the slowdown in sales, according to an analysis of local sales tax revenue receipts.