Home building on the decline; Recent boom partly to blame

Between 2001 and 2003, records were set for housing starts in Central Ohio. But now the number of housing permits is declining, and quite drastically. And a local expert says spec homes built during the recent housing boon are partly to blame.

Nationally, homebuilding activity dropped 14 percent during October of last year. Then it gained 7 percent in November. National analysts were expecting to see a decline for December. But housing starts actually rose four-and-a-half percent across the nation.

Here in Central Ohio, the news has not been as good. From November to December Franklin County saw a one percent increase in its residential housing permits. But Delaware and Licking Counties experienced 35 and 10 percent declines, respectively.

Delaware County has seen the worst declines. Fred Fowler is Delaware County code compliance department supervisor. Fowler says in his 16 years in the department he has never seen such declines.

“The trend seems to be throughout Central Ohio. In talking to other building departments throughout Central Ohio, and also customers that we have here, builders that work in other jurisdictions that trend, maybe not specifically that percentage drop in Delaware County, but the trend is down throughout Central Ohio,” Fowler said.

Ken Danter, president of the Danter Company, a real estate research group, said the 2001 – 2003 housing boom is partly to blame. Danter said in the late 1990s and early 2000, prices of entry level homes were about $170,000. But a year later, some Central Ohio building companies began selling starter homes for about $145,000. He said that allowed people who may not have been able to buy a home until 2009 or 2010 to own one. So housing permits jumped from about 5,000 per year to 11,000.

“The homebuilders are looking at this huge increase in sales and knowing they needed inventories they had to get ahead of the curve. They bought land, they developed land, and they built spec homes. And suddenly though they ran out of market, because, again, they took the cream out of the market. And the market had to settle back to normally where it would be. And at that point sales started to decline,” Danter said.

In 2006, Licking County issued 500 housing permits, a 31 percent decline from the year before. Danter would not speculate if or when housing permits will start to increase again.

“If we were getting people in the market sooner than they would have come in, then the question is how much of that do you have to pay back. And I don’t that we know the answer to that yet. Quite frankly, if you just look at the numbers on that assumption that we have to pay back what we borrowed, then I’m surprised the market isn’t worse than it really is. In fact, I’m really surprised at how good the market is considering we borrowed from the future,” Danter said.