Demand for high-end homes in Tri-Cities increase during Q3

Demand for high-end housing increased during the third quarter and Washington County VA led the Tri-Cities area in the construction of those homes – but only by two permits.

High-end homes are defined by Market Edge in its Resident Building Permits Trend Report as a home with 4,000 square feet – or more – of space or $400,000 or more in construction costs.

So far, this year 23 the high-enders have been permitted in Washington Co. VA. Ten were permitted in Q3.

Washington County TN saw eight new high-end permits in Q3 for a year-to-date total of 22.

Sullivan Co. had six new permits for a total of 13 high-end homes during the first nine months of the year.

Greene Co. was the only other area county with Q3 high-end permits. It had three permits.

Twenty-seven high-end permits were issued across the Tri-Cities in Q3. That’s 10 more than the same period last year. So far this year 62 of these type permits have been issued in the Tri-Cities region, up from 51 during the first nine months of last year.

 

New home construction slows in Sullivan, Washington counties; smaller counties picking up the pace

The Tri-Cities new home industry posted modest growth during the third quarter marked by a slowdown major markets slowdown balanced by growth in smaller county markets.

Permit pulls for new residential residences was 2.7% better than Q3 last year. Year to date, new permits are a 4.8% improvement over the first three quarters of last year, according to The Market Edge’s Residential Building Permit Trend Report.

Year-to-date permit totals show growth in Hawkins, Sullivan and Washington counties slowing when compared to the same period last year. At the same time, new home construction gains in the smaller counties and Washington County VA was enough to pick up the slack.

Despite a 9.5% drop in permits, Washington Co. TN led the Tri-Cities in the number of new home permits.

Sullivan Co.’s year-to-date total was 7.6% off last year’s pace.

Although the number of permits is smaller, Carter Co. is the year-to-date growth county. So far, this year it has permitted 66 new homes compared to 30 during the first nine months of last year.

Here’s a snapshot of region’s year-to-date permits compared to the same period last year:

Carter – 66, up 120%

Greene – 81, up 17.4%

Hawkins – 14, down 6.7%

Sullivan – 170, down 7.6%

Washington Co. TN – 228, down 9.5%

Scott Co. VA – 21, up 40%

Washington Co. VA 72, up 25.3%.

Unlike other housing market components, new homes have not recovered to pre-recession numbers. The Q3 performance was down 49% from the first three quarters of 2008. But that doesn’t weigh heavily with some builders. They’re more focused on today’s market realities. And from that perspective, the market seems to be comfortably pacing new home demand.

At mid-year Metrostudy analytics for Builder Magazine show the sales price and mortgage for new homes increased in both Tri-Cities Metropolitan Statistical Areas.

June’s average sales price in the three-county Johnson City MSA was $267,572, up from $248,100 a year ago. The average mortgage for those new homes was $225,681 compared to $197,866 a year ago.

New home buyers in the four-county Kingsport-Bristol MSA paid an average price of $215,877 in June and increase from $159,845 a year earlier. The average mortgage size was $193,959, up from $156,439 June last year.

Drive-by observations show quite a bit of new home construction across the region.

For example, Michael Garland launched a new phase to Garland Farms Estates earlier this year, and it’s making noticeable progress as are some the other hot spots in Washington County and Gray.

Erick Kistner, Principle Broker at Bridgepoint Realty and Auction and president-elect at the Northeast Tennessee Association of Realtors, is all smiles when asked about the Edinburgh Community. He cited 45 closed sales since January 2015, 26 homes under construction and grading for Edinburgh South is almost complete with 12 lots pre-sold to builders. He also said there’s five new home under construction at Polo Fields with seven new lots coming on line soon.

But while the new homes sector – like single-family resales and job creation – continues growing the rate of growth is slowing. The new home sector also still faces headwinds like tight financing, a labor shortage, and increasing building material costs. Another reason there’s less construction is there are fewer builders than there were before the recession.

The new home industry’s recovery is also coping with the region’s demographic and population issues. Washington and Carter counties are attracting most of the in-migration population, and the region’s population is rapidly aging. But most of the new home business isn’t oriented to the aging population any more than it is to new comers.

 

Tri-Cities job creation continues, but it’s slowing down; private sector wages continue making gains

Tri-Cities job creation increased for the 17th straight month in October. While that’s welcome news, don’t overlook the trend.

October’s growth rate continued a seven-month slowing, and the three-month moving average dropped below 1% for the first time this year in October.

oct-jobs-v-employment

Tri-Cities job creation continues but the growth rate is trending lower. Until October the employment growth rate was trending higher. The rule of thumb is when the employment and jobs numbers aren’t telling the same story go with the jobs numbers. CLICKING ON THE CHART RENDERS A LARGER VERSION

That begs the question: Are we near a new normal? In October, the pointer was in the “yes” column, but the presidential election injected a new unknown with President-elect Trump’s and the GOP’s plans to give economic growth a booster shot. Expect a boost in growth, a bump in inflation, higher interest rates, and volatile markets. All the while the local labor market is getting tighter and “now hiring” signs are abundant. The rub is the quality of many of those jobs and a labor force to meet what businesses want and need on a wide variety of levels.

Preliminary, non-adjusted Bureau of Labor Statistics numbers from the payroll survey show there were 900 more nonfarm jobs than October last year. But the growth is not distributed evenly.  The three-county Johnson City Metropolitan Statistical Area outperformed Kingsport-Bristol for the second straight month.

There were 800 more jobs last month in the Johnson City MSA and 100 more in Kingsport-Bristol. The trend line puts Johnson City’s growth rate about a point higher than Kingsport-Bristol.

The average Tri-Cities weekly private sector wage was also higher in October. And, Johnson City’s growth rate outperformed Kingsport-Bristol for the 8th straight month. But Johnson City wages still have not recovered from the 36-month decline that began in 2012 and ended spring last year. During that period wages in Kingsport-Bristol made slow gains. The combined effect of slow growth in Kingsport-Bristol and contraction in Johnson City moved Kingsport-Bristol into the top wage spot for the Tri-Cities.

However, the current growth hasn’t improved the region’s or either MSAs’ statewide wage standing.  Johnson City had the second lowest weekly wage in October while Kingsport-Bristol was the fourth lowest in the state. Both Tri-Cities MSAs lag the Knoxville weekly average by more than $250 a week. Knoxville has the highest weekly average wage in the state. The other NE Tenn. MSA – Morristown – was fifth – almost a $100 a week higher than Kingsport-Bristol.

The least reliable local monthly labor market indicator –  employment and unemployment rate from Household Survey – were also favorable in October. The unemployment rate was down 0.1% in the region, 0.2% in the Johnson City MSA and flat in Kingsport-Bristol.

oct-pay-change

Private sector wages in both Tri-Cities MSAs are increasing. They are increasing faster in the Johnson City MSA following a protracted decline. CLICKING ON THE CHART RENDERS A LARGER VERSION.

Dr. William Fox, UT economics professor and director of the Boyd Center for Business & Economics Research, told the audience this month at a State Data Center conference everyone would be better off if they stopped paying so much attention to the unemployment rate and focus on wages and job growth. It’s a message heard more and more often. Dr. Steb Hipple at ETSU has offered similar advice. In one of his local labor market commentaries he once called the unemployment rate the most worthless piece of data developed by the federal government – especially at the local level.

With that said, the 5.4% October Tri-Cities unemployment rate is about a point higher than what as the norm before the recession. And it could be the new normal. A rapidly aging population is a big factor. It has cut the area labor participation force to new lows. According to 2015 Census data, 54.3% of Tri-Cities men age 18 and over are in the labor force. For women, the rate is 50.5%. In 2005 60.8% of area men and 54.3% of women were in the labor force

Here’s a capsule view October’s year-over-year changes for jobs and unemployment and the unemployment rates for the region, MSAs and major cities.

TRI-CITIES

Nonfarm jobs, up 0.4% from October last year.

Unemployment rate 5.4%, down 0.1%.

Employment, up 2.4% from last year.

JOHNSON CITY MSA

Nonfarm jobs, up 1%

Unemployment rate 5.3%, down 0.2%

Employment, up 3.8%

Avg. weekly private sector wage $631, up 4.3%.

KINGSPORT-BRISTOL MSA

Nonfarm jobs, up 0.1%

Unemployment rate 5.3%,  unchanged

Employment, up 1.5%

Avg. weekly private sector wage, $667, up 3%.

BRISTOL

Employment, up 3.7%.

Unemployment rate 5.8%, down 0.3%

JOHNSON CITY

Employment, up 3.8%

Unemployment rate 4.9, down 0.1%

KINGSPORT

Employment, up 2.7%

Unemployment rate 5.6%, down 0.2%.

 

Kingport’s goal is to grow its population by 500 people a year

Kingsport has marshaled its efforts for a new growth goal.

The Model City is turning up the heat under efforts to make it a destination city as a growth model. If the truth is known, Bristol and Johnson City likely have or soon will have similar efforts underway, but Kingsport is a lot more transparent about its efforts.

2015-co-population

CLICKING ON IMAGE RENDERS A LARGER VERSION

During his State of the City comments earlier this month, Mayor John Clark said the city’s goal is to grow Kingsport’s population by 1% per year. That works out to a little more than 500 new residents a year, and that’s a heavy lift considering local population growth patterns.

Kingsport did have the best Tri-Cities 2010-2015 growth. It was up 10% compared to 4.6% in Johnson City and a 0.1% loss in Bristol. But now that the state Legislature has driven a stake through the heart of annexation as a growth model it’s time for something new.

It will be a couple of weeks before the city-level Census population data is available, but the county-level data doesn’t offer an encouraging pattern for Kingsport’s efforts because most of the new residents are locating in Washington and Carter counties. That’s what Kingsport is focused on changing.

According to the American Community Survey data Washington and Carter, counties saw all the Tri-Cities growth in 2015. Together they saw an estimated population increase of 568. Sullivan and Hawkins lost population. Between the two they were down 97 people.

The basic regional problem is the local death rate is higher than the birth rate. The latest data shows Sullivan County has a rate of 10 births per 1,000 population and a death rate of 12.9 per 1,000.

Washington County’s numbers are not much better.  There were 10.3 live births and 10.7 deaths per 1,000 population.

That means the only population growth is attracting new comers. It’s important because Kingsport’s research shows each new resident means about $25,000 a year in retail sales and service consumption. That number is in the ballpark of some larger academic studies.

That’s a big deal because sales tax collections are a major factor in paying for city services, so it’s no wonder local city and county governments are beginning to ramp up attracting and retaining their human capital.

Watch this space for next month’s city-level Census numbers to see how they compare with the county-level population tracking.

 

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