Homebuilders across the Tri-Cities are the busiest they have been since the recession. New residential permits were up 12% last year in the seven counties monitored by The Market Edge and the outlook for this year is 7% growth. New residential permits have increased for past three years, but permit performance is 61% less than what it was at the pre-recession peak.
Travis Patterson, Patterson Homes in Kingsport, like other local builders was watching the weather the last week of February. He said he was ready to start on 15 spec and custom homes as soon as it’s dry enough start site preparation. That’s just one example of the pace of new home building as the region enters the New Year.
The Market Edge’s annual report shows new permit growth in every NE Tenn. county except Carter, Hawkins and Washington Co. Va. But since the annual permit report is a lagging indicator, it doesn’t always reflect current market conditions. For instance, Hawkins Co. is seeing new home growth and local governments are looking at offering additional incentives to builders to pick up the pace. That’s being driven by job creation at Phipps Bend. And according to the Tennessee State Data Center, Hawkins is among the counties in the region where the population is expected to grow this year.
- Carter – 89, down 4.
- Greene – 111, up 3.
- Hawkins – 25, down 43
- Sullivan 269 – up 33.
- Washington Co. Tenn. – 425, up 123.
- Scott Co. Va. – 30, up 9.
- Washington Co. Va. – 72, down 12.
- Region – 1021, up 109.
Last year’s new permit growth was the slowest annual growth rate since 2015 when year-over-year permits increased by 17% (138 permits). The 2016 growth was 13% (106 permits) and last year’s growth dropped to 12% (109 permits).
Compared to the other metro areas in East Tennessee, last year’s local new permit performance lagged Knoxville by 5%. Since permit growth in Chattanooga was flat the Tri-Cities’ 12% growth looked strong. But even with a flat year-over-year performance, Chattanooga had a little more than twice the number of new permits than the Tri-Cities.
There are several drivers of the increased local new home demand.
- Two years of record tight inventory in the existing home market has made the new home market more attractive to buyers.
- Good economic reports are increasing consumer confidence which continues to release some pent-up demand.
- There’s more new home for buyers in 55-years-old and older market being built.
Patterson says his firm is seeing some good results in that market niche. He said he’s having a lot of success with two and three-bedroom one-level spec homes in Chase Meadows. Eastern Eight is also progressing on its new homes targeted to first-time and low-income buyers. That squares with reports from the National Homebuilders’ Assn. that builders are turning their attention to the demand for first-time buyers more affordable housing.
There was also an increase in high-end homes last year.
The Market Edge defines high-end homes as those that are 4,000 sq. ft. or more or have a construction cost of $400,000 and up. Washington Co. Tenn. still dominates that part of the new home market. Here’s how those permits looked last year compared to the 2016 totals.
- Carter – 5, up 3.
- Greene – 5, unchanged from 2016.
- Hawkins – 0, unchanged from 2016.
- Sullivan – 19, down from 2.
- Washington Co. Tenn. – 36, up 13.
- Scott Co. Va. – 2, up from 0 in 2016.
- Washington Co. Va. – 22, down 4.
- Region – 89, up 12.
Dale Akins, president, and CEO of the Market Edge, projected 7% new Tri-Cities permit growth during a meeting with Kingsport Home Builders Association earlier this year. Akins is considered the best resource for building permit information in the region and his projects have been spot on for the past several years. The takeaways from his presentation were employment is up, but still below pre-recession levels, population growth is slow that increased apartment construction slows housing market demand.
The State Data Center’s population projections for this year is for slow growth – up almost 1,400 – led by Washington Co. Tenn. Projections for this year are:
Washington Co. up 1,288.
Greene Co. up 254.
Unicoi Co. up 24.
Hawkins Co. up 20.
Johnson Co. up 3.
Sullivan Co. down 7.
Carter Co. down 140.
The Census Bureau’s population projections, which include the number of deaths, births and migration won’t be available until mid-year.