Thursday, April 17, 2014

Where’s all the construction?

By ABBY ECKEL, Herald Staff Writer | 1/8/2014

A slow residential building market forced Bruce Whitacre’s custom home building business to become more resourceful, he said.

Whitacre’s business, Custom Home Design Inc., started with a focus on custom home designs, but now offers room additions, remodels, deck building and other things, Whitacre said.

A slow residential building market forced Bruce Whitacre’s custom home building business to become more resourceful, he said.

Whitacre’s business, Custom Home Design Inc., started with a focus on custom home designs, but now offers room additions, remodels, deck building and other things, Whitacre said.

“We’re pretty versatile with more than just home building, and we have to be because the building market around here is pretty flat,” the lifelong Ottawan said. “Basically, as far as building any new homes lately, it’s been several years since we’ve done anything.”

The lack of growth in the area has diverted his business from trying to build speculative homes, he said, to a focus on custom building, remodels and other jobs. Speculative homes are projects that already are built and ready to buy with no custom work available, Whitacre added.

“I decided I wasn’t going to stick my neck across the chopping block to go out and build spec houses when the market’s pretty flat, is what it boils down to,” he said. “You let yourself be a little vulnerable and say ‘If you’re going to change windows out in your house, we’ll do it.’ You’re making yourself available for whatever’s out there to survive, to get through this period.”

NO BUILDING ACTIVITY

Thirty-five new residential building permits were issued last year in Franklin County — down one from 36 permits in 2012, according to the Franklin County building and codes department. Of those 35 permits, eight were either for a manufactured home or a moved home, according to the list of permits.

But just because permits were issued, that doesn’t mean new homes were built.

Out of the permits issued in Franklin County, 11 had Ottawa addresses, six had Rantoul addresses, six had Wellsville addresses, four were Pomona addresses, four were Princeton addresses, one was an Osawatomie address, one was a Quenemo address, one was a Richmond address and one was a Williamsburg address, according to the list.

A sluggish economy appears to have slowed new home construction in Ottawa as well. The City of Ottawa issued only five new housing permits in 2013 and seven in 2012, Wynndee Lee, the city’s director of planning and codes, said.

In 2013, the city issued five single-family units, which included “two stick-built home constructions, one manufactured home in a park, one on a lot, and one residential design [on a permanent foundation] on a lot as well,” Lee said in an email.

The city in 2012 issued seven permits, which included “one stick-built and one manufactured home in a park, and five on single-family tracts,” Lee said.

Though 35 county and five city permits were issued in 2013, Brett Chartier said he hasn’t seen new development in years.

“As you can see by the subdivisions we have, there hasn’t been any activity in those in the last two years basically,” Chartier, a sales associate with Crown Realty, 336 S. Main St., Ottawa, said. “The main reason for that is that the [speculative housing] market that was occurring has basically been eliminated and that has to do with financing primarily.”

Getting loans through the banks to build a house that isn’t guaranteed to sell is just part of the problem, he said, while the other part has to do with the home selling market.

“The other source is that people build their own home,” he said. “That is the reason [custom homes] haven’t been built is because they can buy cheaper than they can build in some instances. They may not always get what they want, but they’re spending fewer dollars because they can buy more square footage in an existing home.”

The housing market is on its way to recovery, Realtors said previously. Until all the homes on the market are sold, demand for new custom and speculative houses will continue to be low, Chartier said.

“It becomes a supply and demand issue, and once these homes out there priced under market — when that supply is diminished — then the other housing will come around,” he said. “It will have to.”

NEW COMMERCIAL GROWTH MEANS NEW HOUSING

Tighter bank regulations on loans taken out by builders are adding to the hardship many builders already face, Jason Dials said.

“It’s a little tougher getting loans now because the banks have cracked down on what they’re lending and to who,” Dials, owner of Dials Construction, said. “If you have perfect credit, I assume you can go out and get [a loan], but I know there’s some banks giving business owners grief.”

Like Whitacre, Dials’ business offers more than just home building, he said, and even if he could get a loan to build a speculative house, he’s not sure he would.

“I’m like everybody else, I don’t know if I’d want to bite off that much and bank on whether they’re going to sell or not,” he said. “I haven’t seen the new house market come up yet.”

Besides supply and demand evening out, Whitacre said, more business development in Franklin County is needed to breathe life back into the home building market.

“I think for what this community offers — for good paying jobs for somebody to settle and build a house ­— is what it will take to get out of [the rut],” Whitacre said. “For somebody to build their dream house so to speak, I think it boils down to the community as a whole of jobs available. I believe there’s not enough good-paying jobs to bring [in new housing] and I feel like what might happen is this [BNSF Railway] intermodal up in the Edgerton area is going to help boost things around here because it will probably bring a lot of people to that.”

New business and industrial development likely would spur new home building in the area, Jeff Seymour, executive director of the Franklin County Development Council, said.

“We anticipate that the things we’re discussing in other conversations about industrial development and the intermodal — as we develop new land for industrial space that it will have a direct correlation on new housing and new commercial growth as well,” Seymour said. “Housing is a good way to see if people outside are looking to put money up and how confident people are in the market in general.”

How much and when Franklin County could see the effects of the intermodal kick in might still be years away, Seymour said, but it’s only a matter of time before the county starts to reap the benefits.

“I think it’s a trickle-down effect,” Seymour said. “It will be busy right around the areas [of the intermodal] for awhile and then trickle out to Franklin County. It may be several years until will feel the impact, but we’ll definitely feel it.”

Herald senior writer Doug Carder contributed to this article.

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