New home permits holding their own against bad Jan.-Feb. weather


E/P ratios for the Johnson City and Kingsport-Bristol MSAs. Zero is considered an indicator of flat new home demand while 3 is considered a strong market. Data sources: Census Bureau and Bureau of Labor Statistics.

There’s no doubt persistently bad weather took a toll on Tri-Cities new home construction during the first two months of this year. But permit pulls were actually a little better during than they were last year.

According to the latest Census Bureau data, 50 new single-family homes were permitted in the three-county Johnson City MSA during the first two month of the year. The four-county Kingsport-Bristol MSA saw 39 new permits.

That adds up to a year-to-date total a little better than the first two months of 2013, but there’s more to the story.

During the last four months 170 new residential permits have been issued in the Tri-Cities. That total doesn’t include apartment units. So, there are quite a few homes in some phase of construction as we near the peak season. While there’s no public count of how many of these homes will be on the market not all of them are custom homes that are already owned by individuals.

Last year was the best year since 2010 for new residential construction in the Tri-Cities. Johnson City stood out as the hottest market followed by Kingsport. At the same time new home construction is also picking up in Bristol and in the counties.

National Association of Home Builders’ Chief Economist David Crowe says that the builder trade group is still optimistic that 2014 will be a strong year for housing, despite the recent slowdown over the winter months.

“The first-two-month average of 2014 is exactly in line with where 2013 left off,” Crowe says. “If not for the unusual weather, we would easily be ahead of last year’s pace. We also continue to see household formations and pent-up demand driving sales forward.”

That assessment of national conditions is a loose fit for the local new home market. While builders expect a better year there are some nagging questions that hold back optimist for a strong year. The two biggest are the availability of financing and employment.

When new residential permits are used with employment data for employment/permit ratios to gauge market demand we see Johnson City continue its trend upward while it’s declining in Kingsport-Bristol. Zero is a flat market and 3.0 and above is considered a strong market.

On that metric new home demand in January was slightly above a flat market in the Johnson City MSA while demand is still moderate to strong in Kingsport-Bristol.

The ratios are not measures of what the housing market is doing, but an indicator of demand. On that metric the demand and actual market activity in the Johnson City MSA are in opposition. That’s an indication that the market is absorbing inventory faster than its being replaced.

Although Kingsport-Bristol has seen better employment conditions and has stronger demand the actual market is lagging since much of the demand was not met due to a lack of new home inventory.

In the market as measured by sales, the Johnson City MSA was the better position because it had more new home inventory.

New home construction in all three of the major cities should continue doing better as spring and summer approaches. The caveat is jobs. Employment improved a little in January but not enough to turn the three-month moving averages for either MSA or the region.

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