New home permits down, remodeling up

Wednesday, March 31, 2010

Construction season arrived with spring and while there are signs of growth, figures from construction permit sales show how hard the recession hit homes here.

New home construction permit sales at the Marshall County Courthouse Annex are down dramatically, but with several months left in the fiscal year, the number of construction permits for additions and remodeling has already equaled the number sold last year.

That's interpreted as people are moving in with each other, or children aren't leaving home as much as they had, according to local comments and national reports. Meanwhile, permits for mobile homes exceeded the number sold by the county last year.

"With remodeling and addition permits increasing, I think most Realtors will tell you the house hit the hardest is the one valued at $200,000 to $250,000 because people are still building the small houses," says Don Nelson who leads the county codes office.

Smaller homes, fewer new homes, more additions and remodeling have another effect. It hurts the Marshall County Board of Public Utilities. It receives adequate facilities taxes paid on new home construction.

"But when you have an addition or remodeling," Nelson said, "you're not adding a new residence so there's no adequate facilities tax to be paid."

So-called mother-in-law apartments are treated on a case-by-case basis. Nelson said, "If it's a separate structure, similar to a detached garage, then it's a new residence."

There's been a steady decline in adequate facilities tax collection since 2005 when it peaked at $374,467. In fiscal years 2006 and '07, it declined from $330,153 to $255,530. Last year, that revenue dropped to $141,958. In the first eight months this year it's at $77,200.

Revenue for the county from all kinds of construction permits peaked in 2007 at $173,061. It dropped to $112,410 last year and, after eight months of fiscal year 2009-10, it has brought in $64,831.

The number of new home construction permits has been declining: from a peak of 203 in 2005; to 188 in 2006; down to 169 in 2007; and 131 in 2008. So far, during July through February in fiscal year 2009-10, only 51 new home permits were sold.

Permit sales don't always mean there's a home built for each permit. "When the economy was booming, contractors would come from Bedford County and buy 10 building permits at a time," Nelson said.

It was a heady time. "People were leaving the (mortgage) closing with money," Nelson said. "They were doing 120 percent financing... It was nationwide.

It was based on an assumption that home values would continue to increase. They didn't.

People in Nelson's office saw it coming, he said, "and most of the people in the business will tell you the same thing... We just didn't think it would be this bad."

The trend was reported last year when county leaders anticipated a 40 percent decline in revenues from the adequate facilities tax. One projection said the tax on each square foot of new construction would generate $150,682. The final figure was a bit less than $142,000.

In January, Nelson's office pointed out a few big projects kept some construction workers employed.

The biggest construction project is new hangars at Ellington Airport. It's valued at $947,000, and 90 percent of that is from a federal grant. The city is paying only 10 percent of the cost.

Weather has delayed that construction project as well as that of Momma's Country, the project by Betty Prince to rebuild the Columbia Highway nightspot that burned in January 2009. The permit issued for that job, also slowed by weather, was for a $946,000 building.

Another big project permitted by the county is renovation of the state transportation garage on Fayetteville highway. PBG Builders has the job. It's for $738,000.

Those are big business-type projects.

New home construction has repeatedly been seen as an economic indicator, trending before other economic activity that follows such as appliances and other durable goods.

While analysis by economists was not immediately available for this report, three real estate business people have seen some signs of life in that quadrant of the economy and some weaknesses.

"It's better than it was," said Shirley Lowe, a real estate agent with Grover Collins Real Estate and Auction. "It's always better in the spring. When it's pretty outside, people look.

Furthermore, Marshal County may have been sheltered by its very nature, Lowe said. "We were not so over-priced as others before the bubble burst."

Hardships since that burst have been seen by Marshal County Commissioner Seth Warf whose job with Duck River Electric Corp. includes a sad duty. He removes power meters when bills are way overdue.

His conclusion is that people are moving from the county.

"There's been quite a bit of shifting around for a while," said Mary Ann Roberts of Roberts Properties. "A number have moved back in with their parents. Some have moved out of the county, but we've had new ones to come in."

Jason Jent of David Jent Realty was also asked about people migrating from the county.

"I haven't seen it," Jent said. "I sold a house last week and they moved here from out-of-state." He estimated the couple was about 50-60 years old.

Still, he agreed: "You will have some move in with each other and you'll have some who were foreclosed on and who will have to rent."

Most folks can't move to a neighboring county and find a lower cost of living, he said.