Indiana home builders hoping to see light at the end of the tunnel

VanNatter Construction is still around, and still pulling permits. Despite a recession which saw the Indiana Home Builders Association shrink from 7,200 members to around 3,000, the firms that survived are seeing more business.

Right now, VanNatter, who serves as the District 38 state representative when he’s not building houses, said he has 22 houses in various stages of planning or construction in different counties.

“We’re hoping to keep a lot of people busy,” VanNatter said. “We’ve got a lot of subcontractors working, and they’re adding employees. I’ve probably paid somebody’s salary this year, just in permit fees.”

Starting at the end of 2008, Kokomo and Howard County went through a period where almost no new homes were built. There were a total of 11 permits approved for new home construction in the city between 2009 and 2011, and some of those units probably weren’t built.

Construction employment tanked. In 2006, more than 2,500 people were employed in the construction trades in Kokomo and Tipton counties. By mid-2009, that number had been cut in half, with residential housing jobs taking the brunt of the hit.

This year, there have been 26 permits issued for new home construction in Kokomo, up from 17 last year.

While that’s nowhere near the kind of activity seen in the city in 2005, just prior to the start of years of major restructurings and job losses at Kokomo’s two main employers, homebuilders are hoping it’s the start of a return to prosperity.

“I think there’s certainly a light at the end of the tunnel,” said Rick Wajda, president of the Indiana Home Builders Association.

“Is it the glory days of 2000 to 2005? No. Will we get back there? It’s hard to tell. But if we continue to have this kind of measured success, there’s some guarded optimism,” Wajda said.

In central Indiana, builders are starting to look at pieces of ground again, Wajda said, another sign that things are turning around, if ever so slowly.

In the Kokomo area, much of the new construction in the past few years has been rental housing, reflecting a nationwide, post-recession trend.

“I think we’ll look back and say 2012 was a peak year for the rental market in Kokomo,” said George Tikijian, president of Indianapolis real estate market analysis firm Tikijian & Associates, in an August interview. “Vacancy rates are very low, [and 2012] was before the single-family home market had increased very much.”

VanNatter said he didn’t build a single house for nearly a five-year period, and had to rely on small home improvement jobs to stay afloat.

Now, in the wake of the November tornadoes, VanNatter said some of his subcontractors are squeezing in homebuilding jobs in between fixing storm damage.

Wajda said it will take a major upsurge in consumer confidence to spur homebuilding to former levels.

“It’s all predicated on jobs and the economy,” he said.

In the Kokomo area, the economy remains a long way from where it stood prior to the recession.

In September 2007, the average weekly earnings for a private sector job in Howard and Tipton counties was $1,169, according to the U.S. Bureau of Labor Statistics.

Last month, the average stood at $590. Unemployment remains above the statewide average, despite a recent spate of hiring at the resurgent Chrysler Group.

Ball State economist Michael Hicks, director of the school’s Center for Business and Economic Research, said he expects the area of north central Indiana between Lafayette and Kokomo to grow at well above state and national growth expectations in 2014.

Local business owners, from the homebuilders to the cabinet makers, furniture sellers and others whose businesses intersect with the construction sector, hope he’s right.

"We go the way the auto industry goes. We pretty much stick by them," said Mike Ullery, president of the Howard County Home Builders Association.

Ullery said he'd hoped to see a bigger bounce in new home construction this year, particularly since construction costs — including lumber, subcontracted labor and the interest rates available to the home buyer — were substantially lower at the beginning of 2013.

"Every little facet of home construction is higher now than it was nine months ago. I kind of expected to see a run on construction in the fall, and it didn't happen," Ullery said.

Ullery said he's optimistic for 2014, but said he doesn't expect to see a full recovery any time soon.

To give some perspective on numbers, there were 322 permits issued for single-unit construction in Howard and Tipton counties back in 2005.

In 2012, there were 43 such permits issued.

"I don't think we'll ever get to that point we were at back in the early 2000s," Ullery said. "The whole reason we got into the problems we had was because things were too easy back then."