Can housing outlook be in the dumps while home sales are up – yes, here’s how


By DON FENLEY

Trends carts at the bottom of this report

Market Edge President Dale Akins’ 2015 housing market outlook for Sullivan County isn’t what some who attended this week’s Kingsport Home Builders Association meeting expected.

Sully PermitsWhile they have been seeing increasing existing home sales, more foot traffic and stronger consumer confidence Akins’ outlook is for fewer new residential permits but more demand based on the assumption that pent-up demand is driving the market and that employment will improve this year. The employment point is critical. While the nation has been adding jobs for a year Tri-Cities employers have been shedding jobs for two years. Wages have also been stagnant in part of the region and declining in another.

The drivers for Akins’ view are driven by the current conditions:

  • The new residential permit trend is negative.
  • The employment trend is negative.
  • The population trend is flat.

“These trends give me more questions than answers. It looks like a commuter effect is driving your market. So, I’m hoping this is happening plus based on pent-up demand, I’m hoping – not predicting – we can get to 180 building permits” next year, Akins said.

That would be 40 fewer permits than 2014. Last year’s total broke a slight improvement in the 2012 and 2013 annual permit performance. Based on the average of the last four years before the recession vs. the 2011-2014 average permit performance is down by 60%.

Akin’s outlook surprised some of the audience because a good year-end housing market sales and price report from the Northeast Tennessee Association of Realtors and a study by the National Association of Counties was fresh on their memory. The NACo study looked at every county in the nation and ranked their recovery status based on four benchmarks: jobs, unemployment, GDP and median home prices. Almost all of the Tri-Cities counties in the report had a “recovered” status in the price category. Sullivan and Washington counties also rated GDP recovery. But none of the local counties were ranked as recovered on the jobs and unemployment benchmarks.

NETAR’s Trends report showed last year’s Sullivan County annual sales 1.6% better than 2013 with a 1.4% average price improvement. Annual sales have slowly improved for the past three years as has the price, which finished 2014 at its highest mark since 2008.

But that’s not what Akins’ outlook or data methodology is about. NETAR’s report is MLS based while Akins looks at the increase or decrease in residential building permits and employment. His observations and outlook based on the E/P ratios are about the overall housing market demand and is not driven by current sales.

Akins’ observation that the at the current county employment situation is negative was spot on. The county has been losing jobs for almost two years and the average private sector wage has been flat.

The employment story – in a nutshell – is Sullivan County entered the recession later than the nation, came out for an employment recovery that was better than the national recovery pace. From the beginning of the recession to the bottom employment in Sullivan County declined by 4,734. During the initial recovery almost all of that was gained back. But when the double dip began county employment declined by 4,636 as of December. The net employment loss since the recession stood at a little over 5,000 in December. A projection by IHS Global Insights for the National Conference of Mayors projects that the Kingsport-Bristol MSA will see 0.80% jobs growth this year. Of course, that’s a four-county area but Sullivan County has the lion’s share of employment. To put the employment situation in context, if that jobs growth was a consistent net growth Sullivan County will be back to pre-recession employment levels in about four years.

The negative population factor is based on a j0.1% decline from 2010 to 2013. The current projection for 2020 is a 2% gain. That’s not bad. If it were spread out evenly until 2020 it would be a population increase of 450 persons a year.

While some in the audience were leery of Akins’ outlook, it parallels the outlook on a regional basis. I think the regional outlook may be a little more accurate because the data it’s based on is larger and the Tri-Cities has a wicked commuter pattern that tends to skew employment, housing and sales tax collections – the three economic data points that can be monitored on something other than an annual basis.

But don’t discount Akins and remember what he’s talking about is overall market decline not existing home sale.  During a recent users’ conference at the State Data Center Director, UT professor William Fox pointed to Akins’ work on housing as some of the best data available. He’s also a frequent speaker for building and banking trade groups.

In the not too distant future Akins should be paying his annual visit to the Johnson City Homebuilders Association for a program on the Washington County outlook.

 

Employment

The shaded are tracks the unadjusted employment levels in Sullivan County through the recession, the region’s double dip to December’s report. December’s totals will be adjusted when the January report is filed. The adjustment in the national report was up. The employment data comes from the Bureau of Labor Statistics household survey used to track unemployment.

Sully

The chart tracking total existing single-family home sales in Sullivan County is abased on data from the Northeast Tennessee Association of Realtors’ Trends Report.

Avg. Sales Price

This chart tracking the Sullivan County annual average existing home sales price is from the Northeast Tennessee Association of Realtors’ Trends Report.

 

 

 

Trackbacks

  1. […] Can housing outlook be in the dumps while home sales are up – yes, here’s how […]

  2. […] Can housing outlook be in the dumps while home sales are up – yes, here’s how […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: