Small NE Tenn. counties see new home growth spurt; permits total up, but growth rate takes a hit


New residential permits were 6% better during the first half of this year than last year, and the smaller counties in the region are showing a new home growth spurt.

That’s the good news from The Market Edge’s just released mid-year Building Trends Report.

q2 2016 CHART

CLICKING ON CHART RENDERS A LARGER VERSION

The not so good news is the region’s growth rate is less than half of what it was last year, and what has been the region’s hottest new home market – Washington Co. TN – saw a 15% drop in permit pulls.

That decline warrants a quick examination before we go onto the rest of the report because while it’s accurate, it’s not an apples to apples comparison. Here’s why. During the first half of last year, Washington County saw permit pulls for two town home projects that were rental developments. However, they were permitted as PUDs so each unit counted as a new residential permit. A little balancing of the numbers doesn’t totally change the outcome. Washington County still saw fewer new residential permits (six) than the previous year – just not as much as the percent change shows.

The post-recession history of new home construction in the Tri-Cities region has been one of a rapid decline that bottomed out in 2009, a weak rebound in 2010 followed by three years of slow contraction.  Last year was a pretty good year. New permits were 16.9% better than the first half of 2014. The year ended up with a 17% gain, and The Market Edge’s projection for this year is a little better than that.

As always Washington and Sullivan counties dominated new residential permits, but their share of the region’s total slipped from 69.3% the first half of last year to 62.1% this year.

Carter County led the small county growth spurt, followed by Greene Co.

Scott Co. VA showed a big percentage change, but since its permit total trails the other counties, the unit gain isn’t that great.

Some of the factors behind fewer permits in the larger counties is a slowdown in new home construction in the cities where new annexation laws have put the lid on growth. There’s also been a shift toward rental and multi-family constructions – especially in Sullivan County where several major developments are underway and more are in the planning stages.

Other reasons include slow to negative population growth. Since the region’s death rate is higher than the birth rate the only growth is migration. According to Census reports, almost all of that has gone to the Johnson City metro area for the past two years. The region also a demographic profile that is heavily weighted to folks who are nearing or have moved past the traditional retirement thresholds, but there hasn’t been much new home development targeted to that market.

And, last but not least, the recovery has seen a redistribution of wealth here as it has in other areas. While job creation is increasing the quality of many of the new jobs created for the more service-oriented economy isn’t equal to the jobs lost during the recession.

The recession also put many construction firms out of business and drove some of the new home developers to the sidelines. Tight lending standards have also had an effect because the region is a spec home market. Several developers say the new home level we’re now seeing could be a new normal. Other real estate professional say the lack of more new home inventory is holding back the growth of the local housing market as a whole.

The expansion in the smaller counties dovetails with single-family resales this year. As shallow as it is, the recovery the region that began in the cities is expanding to the smaller communities.

Here’s how the new residential permit pulls looked at mid-year compared to the first six months of last year.

Carter Co. 41, up from 22.

Greene Co 53, up from 43.

Hawkins Co. 10, up from nine.

Sullivan Co. 117, up from 105.

Washington Co. TN  147, down from 173. (Knock off 20 to get a better idea of the situation minus the town homes).

Scott Co. VA 15, up from 11.

Washington Co. VA 42, up from 38.

Region 425, up from 401.

The 6% year-to-date mid-year growth rate for the Tri-Cities trails Knoxville’s 8%. Chattanooga was a mid-year rate increase of 22%.

 

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