Big is back for new homes in Kingsport


Eric Edinburg 300

Edinburgh was the leading new home developer in Kingsport last year.

Final numbers aren’t in, but a safe bet is 2,600 square foot – maybe a little better – will be the new national average. Compare that to 2,381 sq. ft. in 2010 and 2,497 in 2011.

35 new homes above national avg. size 

Here in Kingsport 35 (39% the total) of the new homes last year were at or above the 2,600 sq. ft. mark. Most were bigger. Only one was 2,600 sq. ft. Six more came in the 2,500 and plus class.

Eric Kistner, director of sales and marketing at Edinburgh Development Co., said one driver of this trend is value. But energy efficiency and pent up demand are also at play.  Edinburgh led Kingsport last year with 20 new homes – 13 of them were larger than 2,600 sq. ft.

Pent up demand is a hot topic in Model City real estate circles.  While new home construction didn’t stop during the recession, that segment of the market has not shared in the recovery like the existing home sales.

Last year was the second straight year new single-family home permits increased. And 2014 promises to be a year it finally establishes a firm recovery foothold. But, during the recession and lack lust post-recession years the Model City’s new home sector wasn’t adding its normal product into the overall inventory. Now that demand is back, builders are struggling to catch up. It’s an uphill battle due to new lending standards and the reluctance of lenders to get back into the spec home market.

When building bigger increases value 

The value increment Kistner talked about is basically this. In certain size ranges the cost per square foot goes down with the larger home because fixed costs – like lot size – don’t increase in proportion to the increase in size. That makes building to the larger size without a better value.

old-island spec 300

This 3,200 sq. ft. $650,000 spec home under construction at Old Island is an example of the higher end market that will be part of this year’s peak selling.

Kistner said $250,000 basically buys you a 2,800 sq. ft. home on a basement in the Kingsport existing home market. There were 107 of them listed on Monday, Jan. 13th. But when you look at homes in the 3,400 sq. ft. range there’s a lot less competition for both sale and resale.

Energy efficient homes a big factor 

And then there’s the energy factor. Many of today’s new homes are built to significantly higher standards than older homes. In a market where most of the homes are at or over the 20-years-old mark that can be a big monthly cost factor. Many buyers (94% in a recent National Home Builders’ Association survey) put a high priority on energy efficiency.  The survey also found 91% of the buyers surveyed wanted an Energy Star rating for the entire home, and 28% of them said it was an essential factor in their buying decision.

The tight lending standards are a double-edge sword. They tend to make bigger homes a selling sweet spot for the new home market because more established buyers have an easier time qualifying. At the same time they have basically capped the flow of new product.

It’s a safe bet that new home permit watching is going to get a lot attention in the next few months.

Trackbacks

  1. […] We covered the part about the number of new homes that are bigger than the new bigger national average HERE. […]

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