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3/12/2017 5:56:00 PM
Rebuilding the real estate market in Vanderburgh and Warrick counties

John Martin, Evansville Courier & Press

When the national economy tanked in the late 2000s, local homebuilding went down with it. After reaching a combined 1,200 housing starts in Vanderburgh and Warrick counties in 2004, the number tumbled to fewer than 400 in 2009-12.

Slowly, though, new home construction is climbing again.

While still a far cry from several years ago, 2016 saw robust gains, with 349 starts in Vanderburgh and 235 in Warrick. There are several hot spots, but most are in northern Vanderburgh and in Warrick subdivisions near Newburgh. “It’s not exploding, but it’s going back up,” said Bill Pedtke, executive director of the Southwestern Indiana Builders Association. “You’ll see it’s coming back up in steady way.” Builders such as Scott Jagoe of Jagoe Homes see increased demand for new houses. They point to a strengthening economy and low interest rates.

“There’s a marketing timeframe when we’re building a home, and normally we’re seeing the houses sell during that timeframe,” Jagoe said. “During the downturn, they would last longer, spend more days on the market.” No two buyers are alike, but Jagoe works with several people who are returning to the area after receiving a college degree, and others wanting to upgrade their local home or neighborhood.

For families with young children, the track record of schools is almost always a big factor in choosing where to build, according to local observers. Enrollment in the Warrick County School Corp. reached 10,272 this year (it was less than 9,500 a decade ago). The Evansville Vanderburgh School Corp, is building an elementary school in McCutchanville because of growth there.

Some homebuyers view living close to work as a plus, but observers said that generally, local residents don’t mind commuting a bit if they like the area. “We’re not a heavily trafficked area,” Jagoe said. “You can live in one area and work in another pretty easily.” Prices on homes in Brookstone and Waterstone, Jagoe communities near Newburgh that are under construction, start in the $170,000 range and stretch to above $300,000. Potential buyers are coming to look, said Holly Stallings, a new home consultant with Jagoe.

Also in Warrick, a nearly $55 million with 550 residences will be going up at Victoria National Golf Club, and Driftwood Parke will be built just west of downtown Newbugh. That’s a development with 24 condo units and 54 single-family homes, priced from $250,000 to $400,000.

In northern Vanderburgh County, several subdivisions broke ground last year, F.C. Tucker Emge Realty officials said during the recent State of Real Estate program. One is Clear Creek Estates, converted from a golf course.

“These two counties certainly show aggressive growth (and) we see much of the same across our local market as a whole,” said Ken Newcomb, with F.C. Tucker Emge.

The region since 2011 has seen continuous yearover- year growth in new home starts. During the 2008-11 downturn, a lot of homebuilders were “squeezed out” of the market, said Chris Dickson, general manager of ERA First Advantage Realty. “They went into remodeling and did other things.”

Since then, however, more buyers have been looking to builders. The inventory of existing homes for sale also has dropped in recent years, so more buyers are asking builders to provide what they want.

“They are coming back,” Dickson said of builders. “We’re seeing more starts and more permits. There aren’t as many. 2000-07 was the heyday for builders. They would draw up a $400,000 spec house and it would sell. But confidence is coming back ... builders are building $200,000 and $300,000 homes believing strongly they will sell.”

The news for builders is good, but Jagoe said a few factors will impact the cost of homes coming on the market in 2017.

“We’re seeing price pressures off tariffs, especially Canadian lumber,” he said. “A lot of products come from outside the country or are connected in some fashion. There’s a lot of appliances are made in Mexico. So everybody is anticipating price increases there ... and the labor shortage is tough. Even with our suppliers and trades, just finding workers for what you have to pay them is pushing prices up.”

Mortgage interest rates, while low, also are expected to rise this year, impacting what you pay for a newly constructed home. “They need to get out and get a home and lock a rate in,” Jagoe said.

Housing choices made by millennials will have a lot to say about what happens to homebuilding trends in the future. That remains to be seen, and predictions vary.

Pedtke said that although millennials have a reputation for preferring renting and urban living, “what’s happening is, as soon as they can afford it, they want to move out to a larger lot, too. Now when they are getting jobs and able to pay down debt and afford things, the trend is they’re not staying in the cities.”

Debt is, indeed, a consideration for some millennials. Ashley Huckleberry of Newburgh said she’d like to buy a home eventually “but with the amount of student loans I have, it’s a mortgage payment of its own.”

Millennials who buy new homes are more likely to do so in the $150,000 to $200,000 price range, Dickson said.

Those who buy existing homes often state a preference that they be “move-in ready,” with no major projects that need done, and that’s one reason why several existing homes are staying on the market so long, he added.

“They want everything new,” Dickson said of millennials. “They’re not interested in yard work and painting ... They are becoming one of the biggest market segments, and this has an impact on new construction and builders.”

Pedtke, who has led the local builders association for several years and has seen ups and downs in the market, said communities benefit when home construction increases.

“People use the words urban sprawl to mean something negative, and I don’t think it should be that way,” Pedtke said. “The growth pays for itself. Property taxes, user fees, extensions of water and sewer ... it’s all investment, and it pays its way.”

Vanderburgh County Commissioner Bruce Ungethiem said that he, too, views the growth in new home starts positively, but he distinguished between population expansion and population growth. The most recent U.S. Census estimate available, from 2015, showed Vanderburgh with 181,305 people. In 2010, the figure was 178,298. Warrick’s population growth has been more pronounced, from 58,393 in 2010 to 60,995 in 2015, according to Census estimates.

Ungethiem said the outward expansion of residential properties, without a corresponding increase in tax revenues, stretches public resources.

“We’ve been monitoring that, not only individual homes but actually subdivision developments,” Ungethiem said. “We think it’s a positive thing and we think it will continue as the economy continues to improve ... “What we need to do, and I don’t have a problem with development, is the start of plan, especially in areas where development expanding quickly, so we can plan for roads, fire, police protection, those kinds of things ... Expansion is happening, but population growth is not. It does cause a strain on service.”

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