4th quarter 2011           

Construction activity sluggish at best, not recovering as officials had hoped

A Paytas Home under construction at Promenade Park at Venetian Bay in New Smyrna Beach.

Third quarter new building permit activity across Volusia County continued at a slow pace with the number the residential and commercial permits and values close to record lows, but that may turn around by catching September’s national wave of increased apartment and condominium construction.

“Just look at the economy; it’s discouraging,” said Sandy Bishop, executive officer for the Volusia Building Industry Association, in reference to the local third quarter permit
numbers.

According to data collected by Volusia County Economic Development from the county and city building permit offices, the county and Volusia’s municipalities in the third quarter issued 117 residential permits valued at $30 million. During the same July-September period, there were 22 commercial permits issued valued at $13 million.

“The numbers are not unexpected,” said Phil Ehlinger, Volusia County economic development director. “Things are about where I thought they would be. The building market here has struggled since the first quarter of 2009.”

RESIDENTIAL

The 117 residential building permit total in the third quarter is down 17.6 percent from the 142 permits issued in the second quarter of 2011. It’s also down 34.3 percent from the 214 residential permits issued during last year’s third quarter, which partially was inflated by homebuyers who took advantage of signing building contracts for the federal first time homebuyer tax credit before the program expired in July 2010.

Residential building numbers slowly increased through the quarter from 35 in July, to 39 in August, and then 43 in September.

“There is still an unknown shadow inventory of possible foreclosures out there that is causing some hesitation,” Ehlinger said. “Buyers do not want to see what they buy fall in value. Many builders have been smart and reduced the size of the homes and lowered the prices to compete.”

Construction crews build a new 17,000-square-foot Davita Orange City Dialysis center on
South Volusia Avenue less than a mile from Florida Hospital Fish Memorial.

Daytona Beach set the residential building permit pace for the third quarter with 22 permits issued worth about $5.8 million. Port Orange issued 20 permits worth $4.9 million.

DeLand and Volusia County each issued 19 permits, valued at $5.6 million and $5.1 million respectively.

Seven cities, including New Smyrna Beach, issued no residential building permits in the third quarter.

The 117 residential permits issued in the third quarter is the second lowest total since the housing boom that crashed in late 2007. Only the 104 permits issued in the first quarter of this year was lower. The $30 million value ties for the second lowest recent value with the first quarter of this year. It’s only surpassed by the $29 million value of the 120 permits issued in the fourth quarter of 2010.

At the current home construction pace, less than 500 new homes will be built this year in Volusia County. That compares to 734 last year, 694 in 2009, 1,157 in 2008 and 1,938 in 2007.

Volusia County is not different than elsewhere. Across the nation, building permits declined 5 percent in September to an annual rate of 594,000. Single-family permits fell .2 percent, according to the U.S. Commerce Department.

Area home builders are having to compete with a large inventory of foreclosed homes and short sales that are being sold at discounted prices, Bishop said.

“A lot of builders have gotten into the remodel business because many of the foreclosures have maintenance issues,” Bishop said.

Another reason for the slow place of local home building is the slow pace of home sales elsewhere in the country, especially the north, Bishop said.

“If people can’t sell their homes up north, they’re not retiring here and building new
homes like they used to,” Bishop said. “Retirees are a big percentage of our residents and they don’t feel comfortable buying right now. They no longer are buying or building a second home in the area and then waiting a couple years to sell the one up north to move here full time. That has passed.”

What may provide a boost are recently approved moratoriums on residential construction impact fees by Volusia County and DeLand that will lower home costs, Bishop said. The building industry association is working with other cities in the county to get them to drop impact fees until the economy recovers.

The U.S. Commerce Department recently reported a 15 percent hike in housing starts in September around the country to a 658,000 annual pace, the highest since April 2010. An increased demand for rental properties drove the increase. Starts of multi-family buildings of five or more units increased 53 percent while single-family starts rose a modest 1.7 percent.

COMMERCIAL

The commercial building permit picture in Volusia County is a mixed bag.
The 22 commercial permits issued in the third quarter is up 44.6 percent from the 15
issued last quarter, and up more than 57 percent from the 14 issued in the third quarter of 2010.

The value of $13 million in the third quarter is up 30 percent from the $10 million value in the third quarter last year, but is down more then 47 percent from the $23 million value of permits in the previous quarter.

“There was no one or two projects that stand out this quarter,” Ehlinger said. “There were many in the $1.2 and $1.3 million range. Unlike the first quarter that was out of whack where we had one very large project.”

In the first quarter, permits for the Andros Isle apartment complex were issued in Daytona Beach, accounting for a heavy majority of the quarter’s 30 permits valued at $57 million.

Deltona led the third quarter commercial permit board with four permits, but with a total value of less than $1.2 million. Daytona Beach, DeLand and Port Orange each issued three commercial building permits in the third quarter with values of $2.6 million, 1.4 million and $1 million.

Orange City was tops in total value with two permits valued close to $2.7 million, including a 17,000-square-foot medical building.

Commercial permit activity started at a good pace with 11 in July, but then shrank through the quarter with eight in August and then three in September. Eight jurisdictions reported no commercial building permit activity in the third quarter.

“We’re bumping along the bottom,” said Ehlinger. “I’m still optimistic about a recovery, but more guarded now. The impact will be much further along than I thought. The recovery will be like a gravy boat, with a long shallow recovery.”