SUNDAY EDITION | Louisville-area home construction industry slowly rebuilds from downturn
Home builders in the Louisville area are putting up new houses at the fastest rate since the housing crash of 2008. But the new construction market is still a far cry from its pre-recession peak.
LOUISVILLE, Ky. (WDRB) -- With their two young daughters sharing a room in a two-bedroom apartment, Tabbatha Wise and her husband had long wanted to buy a house – one with at least four bedrooms and a garage.
They simply lacked the credit and savings for a down-payment, said Wise, a math teacher at Western High School.
That changed this month when the family bought a home in Shepherdsville for about $190,000. And because the home was built for them, they got to pick finishes such as cabinets.
“It was going to be about the same to build and get everything we wanted right off the bat,” Wise said last week as she unpacked boxes with her 8-year-old daughter, Kylie.
Buoyed by the return of buyers like the Wise family, home builders in the Louisville area are putting up new houses at the fastest rate since the housing crash of 2008.
But the new construction market is still a far cry from its pre-recession peak, and industry insiders doubt the pace of building will ever return to the boom days of the early 2000s.
Builders in the Louisville-Southern Indiana metro area took out permits for 3,127 single-family homes last year, according to U.S. Census figures, as the market continued its gradual recovery from the 2008 downturn.
That’s less than half of the 7,592 permits Louisville-area builders pulled in 2004, the peak year for local home construction. During 2011, the worst of the downturn, local home building plunged to 1,737 permits.
Census figures show Louisville’s recovery from the crash has been a bit slower than the nation as a whole. Nationwide, single-family permits were about 45 percent of their 2005 peak last year, compared to 41 percent in the Louisville metro area, according to WDRB’s analysis.
The real estate crash forced more than 200 builders – nearly half of the local industry – to go out of business or into retirement, according to Pat Durham, a former home builder who now heads the Building Industry Association of Greater Louisville, the local home construction trade group.
“That is devastating to an industry,” said Durham, whose own business “barely made it” through the bleak period.
Durham spoke to WDRB last week inside the elaborately finished basement of a $984,000 home built this year in Poplar Woods, a subdivision off U.S. 42 in Oldham County.
The home is one of nine available for public tours until July 30 as part of Homearama, the industry’s annual event in which builders and decorators show off their glitziest new homes.
Durham said seven of the nine Homearama homes – which cost about $1 million each – are sold, a good sign for the high-end portion of the industry.
But even as the market recovers, most of the builders who went out of business haven’t returned. There are about 275 builders in the Louisville association, down from about 475 before the crash, Durham said.
The result? While there is a lot less building today than in the early 2000s, those that remain in the industry are struggling to keep up.
“Those that have survived are as busy as they have been maybe, historically, ever – even pre-recession,” Durham said.
The same is true for legions of subcontractors – bricklayers, framers, electricians – who carry out the builders’ plans, Durham said.
The Wise family bought their Shepherdsville home in a subdivision called Mallard Lake, one of about a dozen communities under development by Dogwood Homes in areas like Mount Washington, Fern Creek, Shelbyville and Eastwood-Fisherville.
Richard Miles, who owns Dogwood Homes, said his company is on track for “by far our best year ever” with more than 250 homes built – eclipsing the 188 that Dogwood built in 2005.
“It’s definitely coming back,” said Mike Prahl, an Elizabethtown contractor who builds outdoor decks for Dogwood and other home builders.
Prahl, owner of Mike’s Decks and Steps LLC, said he had several crews of deck workers before activity slowed to a crawl in 2011, and he dropped down to a single crew of four to survive.
Today, Prahl is looking to expand again because he is “overloaded” with jobs.
“I could work every day and the weekend too if I wanted,” Prahl said.
Lack of building contributes to shortage of homes for sale
The slow recovery of local home building comes as the rest of the local home market soars with rising sales and prices – a fewer choices for buyers.
For the first six months of 2017, homes in the Louisville market are selling at the fastest pace and the highest prices in at least 10 years, according to figures from the Greater Louisville Association of Realtors, whose members work primarily in Jefferson, Oldham and Bullitt counties.
The median sales price for the first half of 2017 was $169,900, up from $139,000 during the comparable period in 2007, just before the downturn. That’s a 4 percent gain when adjusted for inflation.
The big factor driving the market in recent years is the sharp drop in the number of homes for sale compared to historical levels. The current supply of homes for sale is only about half the level agents consider a “balanced” market.
At least some of the shortage, Durham said, has to do with home builders pulling back on “spec” homes – or homes that are built without a buyer lined up in advance, on the “speculation” that one will come along.
Before the downturn, Durham estimates that as many as 40 percent of new homes were on spec, compared to only about 15 percent today, though his association does not officially track the figure.
After the crash, some builders were ruined financially because they had borrowed to build homes they couldn’t sell, Durham said.
Today, even with historically low competition from other homes on the market, builders are reluctant to get caught in a similar situation.
“Many of our members still feel that way and they are not ready to jump in with both feet,” he said.