Construction permits down in first quarter, but signs indicate possible improvement
Residential and commercial permit activity dropped again during the
first quarter of the year. However, there are small signs the
construction slowdown, which began in 2006, finally may have
bottomed out, according to area developers, builders and real estate
brokers.
RESIDENTIAL
According to figures compiled by the Volusia County Division of Economic Development from the county and city building permit
offices, 124 residential building permits were issued in Volusia
County in the first quarter. This is down from 185 permits issued
the previous quarter and 291 permits issued in the first three
months of last year.
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The combined value of the residential permits in the first
three months of 2009 was $34 million, down from $45 million
in the fourth quarter of 2008 and $69 million in the first
quarter of last year.
Mori Hosseini, chairman and CEO of Daytona Beach-based ICI
Homes, the area’s largest homebuilding company, recently
appeared on CNBC’s “MadMoney” cable television show where he
told host Jim Cramer that April was the best month for sales
his company has had in three years.
“We are cautiously optimistic we are coming out of the
downturn and the worst is behind us,” said Hosseini, who
noted customer traffic to his company’s sales centers has
increased noticeably in recent weeks. |
| Construction of a
new house at the Enclave of DeLand community in west
Volusia County. |
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Phil
Ehlinger, Director of the county’s Division of Economic Development, said he’s not surprised by the first-quarter decline in
residential permits because of the glut of existing homes and
foreclosure properties on the market.
“Everywhere you go, all you see are for sale signs,” he said.
Demand
for new homes is not going to increase significantly until the
inventory of existing homes on the market shrinks.
“The
good news is that we’re seeing some statistics that resales are
starting to pick up,” Ehlinger continued. “There will always be some
who only want to buy a new house.”
COMMERCIAL
On the
commercial side, 19 permits were issued in the county during the
first quarter, down from 29 permits in the fourth quarter of last
year and 85 permits in the first quarter of 2008.
The
combined value of the commercial projects issued in the first
quarter was $27 million, down from $61 million in the fourth quarter
of last year and $94 million in the first quarter of 2008.
Dwight
Selby, a commercial broker who heads Selby Realty in Ormond Beach,
said
developers and companies are “being very cautious” about proceeding
with projects to
build new commercial buildings because of uncertainty over how
severe the recession will get and how long it will last. Securing
financing also has been a challenge.
| Florida Health Care
Plans is renovating its outpatient facility on Clyde
Morris Boulevard in Daytona Beach. |
|
But the
number of permits issued is not necessarily an accurate measure of
the state of the local commercial real estate market, said Selby.
That’s because those figures don’t include permits issued for
projects to remodel and/or expand existing buildings, which some
businesses are opting to do instead of building a new facility from
scratch.
Building
commercial buildings on speculation doesn’t seem to be happening
much
these days: “Pretty much no one’s putting up spec offices or retail
buildings anymore,” said John Wanamaker, a West Volusia real estate
developer and broker who heads Coldwell Banker Commercial AI Group,
Orange City.
While
Wanamaker said he isn’t surprised by the drop in commercial permits
issued in
the first quarter, he isn’t overly alarmed either.
“Going
forward into the second quarter, we’re actually starting to see more
development activity,” said Wanamaker. He believes the reasons are
that interest rates are at an all-time low, construction costs have
gone down and the inflated real estate prices of three years ago are
down to where they should have been.
The
recent change in the U.S. Small Business Administration’s guidelines
for loans to
small businesses also could spur an uptick in commercial projects in
the coming months, said Wanamaker. Those changes include allowing
businesses to refinance existing loans and a lowering of SBA fees on
such loans.
Economic Growth charts
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