Tri-Cities home builders say they’re ‘busting it’ despite permit declines


By DON FENLEY

Ask a Tri-Cities builder how things are going and you’ll get a response from most that they “busting it.” Several will add that they’re at a point where they only way to increase capacity would mean expansion.

Q1 new residentialA quick drive around of local development sites affirms new homes are coming out of the ground and there’s a lot of activity. But new single-family permit pulls show another side of the story.

The Market Edge Q1 new residential permits shows the Tri-Cities slowed by 12 permits from Q4 last year and was down slightly lower than Q1 of last year.

When you break the numbers down by counties three counties (Sullivan, Carter and Washington, VA) were down on the year-to-year and quarter-to-quarter comparisons.

AREA

The numbers in red are declines.

At the same time permit pulls in Washington Co. TN increased by 15 permits from Q4 last year and were one shy of the Q1 2014 pace.

The two largest markets (Sullivan and Washington TN) had been tracking the same year-to-year Q1 comparisons since 2011 by headed in opposite directions after the first three months of this year.

Sales of newly built, single-family homes fell 11.4 percent in March to a seasonally adjusted annual rate of 481,000 units from an upwardly revised February reading, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“After two robust months of new home sales, some readjustment is inevitable,” said David Crowe, chief economist of the National Association of Home Builders (NAHB). “This is the best first quarter since 2008, and attractive mortgage rates and pent-up demand should keep the market moving in the right direction.”

“Our surveys show that builders remain optimistic about the housing market,” said NAHB Chairman Tom Woods. “We expect this spring to be a better buying season than we’ve seen in recent years.”

Data on local new home sales for the quarter are not available yet, but Builder.com reports for the 12 months ending in December showed the two regions ended 2014 with a difference of once closing – Johnson City had 60 and Kingsport-Bristol had 59.

Builder’s report also showed the share of sales in the Johnson MSA was also down to 4% of all sales, down from a 7% share, while Kingsport-Bristol’s share was 3% of all sales, which was up from 1% during the previous 12 month reporting period.

Buyers in the Johnson City MSA carried an average mortgage of $192,287 – up 4.6% from the same period the previous year – compared to $223,573 in Kingsport-Bristol, up 41.6%.

The average sale per sq. ft. number for Kingsport-Bristol was $73, down from $101, and $85 in Johnson City, up from $83.

The question that local market watchers are asking is: what’s the new normal for new home construction in the Tri-Cities?

Permits have declined across the region every year since 2005. Last year’s total was 74% lower than the region’s 2006 high, and that number pretty tells the story for comparisons on the county level.  Sullivan County was the exception in the major markets. The eight year decline was 68% there.

Market Edge President Dale Akins told local builders during presentations in Johnson City and Kingsport that he isn’t looking for much of a permit gain in 2015.

But local builders aren’t spending much time fretting about projects or the numbers.  They’re focused and getting the most out of current market conditions, not what the market used to be before the Great Recession.

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