Maybe it came in with the Super Bowl XLVI crowd, or maybe it was already there, latent and ready to bloom with the spring selling season, but Indianapolis home builders are virtually bursting with optimism that a housing rebound is taking root.
You can’t see a rebound brewing in single-family permits issued yet, said Steve Lains, CEO of the Builders Association of Greater Indianapolis, but it is clearly visible in model center traffic and sales contracts of members.
“Those permits are down in January, but I have consistently heard across the board, from both the national builders and the smaller custom builders, that January was a great sales month and it’s continued on into February,” said Lains. “Builders have had more blueprints printed in the last three or four months than they have in the last three to five years.” Suppliers to builders also report sizable increases in business, he added.
“All this anecdotal evidence is beginning to show a trend line,” said Lains. “When I get good anecdotal information across the board from all nine (of the top locally operating) national builders and the custom builders I can feel pretty confident that we had a great January, and February is looking just as good.”
While the greater Indianapolis area tends to be a steadier market than places like Florida and Arizona, and the upward trajectory of home sales numbers and prices wasn’t as vertical as the more volatile markets, the area still saw a pronounced downturn that drove a lot of area builders out of business. Davis Homes, Gunstra Builders, C.P. Morgan Homes, Pasquinelli/Portrait Homes, Scott Homes, Hansen & Horn, and The Estridge Group have all shut their doors since 2008.
New-home permits in the area plunged from 9,649 in 2006 to a low of 4,774 in 2011, according to Hanley Wood Market Intelligence. And with the market's fall, membership at the local home builders association declined from 1,250 to 400, and the staff dropped from 15 to four and a half.
But for the builders who have remained, the loss of competition has helped them gain market share. Ryland Homes' sales began improving in 2010, even as the permits continued to fall. In the first two months of 2012 Ryland saw sales grow by 25% year-over-year, its backlog is up about 35%, and the national builder now owns 10% of the market, says Alan Goldsticker, Ryland's local president.
“So things are good,” said Goldsticker. “They are not crazy. We are still talking about a 3,500-permit market or so. You are not going to see crazy things here. We are not going down any more, and we are going up at a nice, slow pace. If you don’t get too arrogant and don’t get too greedy you will do well.”
The poor market has given Ryland, which focuses on first- and second-move-up buyers, a chance to buy finished or nearly finished lots at a discount. “And we are starting to develop again now, or having things developed for us,” said Goldsticker.
Arbor Homes, a large, regionally owned builder has also claimed more market share. “Our sales have been fabulous,” said owner Curtis Rector. The company closed 433 homes. “And we are going into this year with backlog up. Sales for January and February were up about 20% from last year. I expect us to be up another 20% to 30% this year.” At the market's peak Arbor, which sells predominantly to first-time buyers, closed about 800 homes.
“In talking to other builders I think their traffic is up too,” said Rector. “The attitudes of people are looking better. There is more optimism here.”
Rector told of a local Realtor who recently sold three listings that had been on the market for six months or longer and immediately after that sold two others that had been on the market less than 30 days.
“Buyer confidence is better. We are creating jobs,” said Rector. And having the Super Bowl in town didn’t hurt either. “There were tons of people coming to town saying a lot of great things about Indianapolis, and I think that contributed to the [positive] psychology.”
The home sales challenge for Indianapolis, as well as the rest of the country, remains the mortgage appraisal system, said Rector. “We are having more fall-out today than we have ever had because of the mortgage process. The appraisal process is just flat broken, and that’s one of the great barriers.”
Teresa Burney is a senior editor for Builder magazine.
Learn more about markets featured in this article: Indianapolis, IN.