New home construction in the Tri-Cities region continued a conservative, slow-growth pattern that was up 7% last year. The increase was driven by activity in the region’s smaller counties as the two major markets struggled to sustain 2015’s growth level.
The number of new residential permits in Sullivan County was 236. That’s a 1.3% increase (three permits) from 2015.
Washington County did not fare as well. Total permits declined by 5.3% – 17 permits – from the 2015 total of 319.
Washington and Sullivan counties accounted for 62% of the 863 new permits issued last year, according to the Market Edge’s year-end Residential Permit Trends Report. In many ways it’s a comfortable spot for builders. The still face many headwinds but supply and demand are working in their favor. But there’s a nagging question about whether or noth there’s enough new home actvity to sustaing the current local housing market as a whole.
Market Edge President Dale Akins projected 9% growth for 2017 during a recent meeting of the Kingsport Homebuilders Association. His firm tracks new residential permits from Carter, Greene, Hawkins, Sullivan and Washington Counties in NE Tenn. and Scott and Washington counties in SW Va.
The Tri-Cities had the lowest year-over-year growth rate among the East Tennessee regions covered by the year-end Market Edge report. Chattanooga saw the most growth, 26%, while Knoxville saw a 12% increase in permits.
The two local counties with the biggest 2016 year-over-year growth were Carter, up 75.5%, and Washington Co. Va., up 23.5%. Those two counties were at the bottom of the growth trend chart in 2015. This year they are the only two counties with a trend increasing trend line. While other counties did show year-over-year increases, their trend line was lower because the 2016 growth was less than it was in 2015.
New permits in Carter totaled 93 moving it into fourth place in the region and only slightly behind Greene County’s 108 total.
Permit activity in the region has been in the 800-plus range for three of the past four years. The outlier was 2014 when they dipped to 688.
Last year’s permits lagged the 2006 pre-recession high of 2,265 new permits by 67%.
From a trends perspective, residential permits began a steep decline path in 2007 that bottomed out in 2010 after a 72% decline. There were signs that new home market was beginning to claw its way out of the black hole of the Great Recession in 2011. Permit activity inched higher after that despite builders’ difficulties experienced getting loans from local and regional lenders.
Their ability to get financing has improved as has the local labor market and the overall economy. But new home activity has not increased as quickly as other parts of the real estate economy. T
During the recession, some builders shut down and have not returned – nor have many of the construction workers who found other jobs or moved out of the area.
The bottom line is there a stable demand for new homes for sale, which makes builders confident, the economy is improving and there’s hope for improvement under Trump. But they’re not kicking construction into high gear for some simple reasons. They are still hamstrung by new regulations, they face a big labor shortage that may get even worse, the cost of land and materials area rising and there are not enough finished lots in places where people want to live. And then there’s the obvious. By building fewer homes amid high demand with a tight supply of existing homes means they can command a higher price.
If the local economy continues its current pace a 9% growth this year would fit the current conservative, slow-growth pattern. The primary foreseeable increase demand on the not-too-far-off horizon is for more senior and senior-friendly housing. That’s being driven by the region’s rapidly aging population. Current population projections are for a slow growth rate since there is not local natural population growth. For every 10 live births in the region there are 13 deaths, so attracting new residents is the growth model.