Tri-Cities job growth rate slows; Johnson City MSA continues losing jobs

A recent Kingsport-Times News report citied complaints from Phipps Bend manufacturers that they were having problems getting workers who are committed to show up on time, be there every day and work a 40-hour week.

The annual seasonal labor market slump has arrived in the Tri-Cities, but only one of the region’s two metro areas had fewer jobs than June last year.  The Johnson City Metropolitan Statistical Area (MSA) kept the dubious distinction of being the only MSA in the state that has consistently lost jobs this year. Overall the region gained 600 nonfarm jobs due to Kingsport-Bristol MSA growth, according to preliminary non-seasonally adjusted Bureau of Labor Statistics (BLS) numbers.

At the same time, the region’s unemployment rate increased to 4.3%, but there were 1,036 more people with jobs than there were June Last year. The jobless rate increase was created by the seasonal labor force decline.

The Johnson City MSA began the year with 100 more jobs than it had in January 2017. But the wheels fell off in February. Since then it has lost jobs at the average rate of 70 a month. The loss is not coming in the private sector. There were 100 more private sector jobs in June than June last year. It’s coming in the government sector according to the BLS. The only silver lining on the government jobs trend outlook is the rate of loss improved in May and June.

Employers are adding nonfarm jobs at a slower rate across the region this year. Technically, the region is at full employment, but there are complaints that finding and retaining employees is becoming more difficult. This comes are the same time of a couple of big layoffs in the manufacturing sector and a notice from Bristol Compressor that is would be closing – a loss of 470 jobs.

A rising jobless rate when the labor force is increasing is a good sign because the employment situation is pulling more people into the market. When the unemployment rate falls because of participation, it’s usually a bad sign.

A recent Kingsport-Times News report cited complaints from Phipps Bend manufacturers that they were having problems getting workers who are committed to show up on time, be there every day and work a 40-hour week. The report quoted Hawkins County Industrial Development Board Chairman Larry Elkins saying, employers are having a difficult time “even at $15 per hour getting people to come to work.”

The average private sector wages for the Kingsport-Bristol MSA was not available in the June BLS report and monthly data for this year has been retracted. No explanation is offered on the BLS website.

Johnson City’s average weekly private sector wage was $706 in June, up $39.56 from last year. Private sector workers in that metro area have seen their average wage increase every month for the 35 months. However, private sector wages in both of the Tri-Cities metro areas are among the lowest in the state of Tennessee.

UNEMPLOYMENT RATES

Here’s how June’s unemployment rates looked in the cities above 25,000 population and counties that make up the Tri-Cities region.

Carter – 4.8%

Greene – 5.3%

Tri-Cities jobs trend

Hawkins – 4.6%

Johnson – 3.9%

Sullivan – 4.4%

Unicoi – 5.7%

Washington County 4.3%

Bristol – 4.7%

Johnson City – 4.3%

Kingsport – 4.2%

Tennessee – 4.1%

United State – 4.2

U6 rate – 7.8%.

The U6 unemployment rate counts not only people without work seeking full-time employment, but also counts marginally attached workers and those working part-time for economic reasons. Some of these part-time workers counted as employed by U3 report could be working as little as an hour a week. U6 also counts marginally attached workers include those who have gotten discouraged and stopped looking, but still, want to work. The U6 rate calculated on the national level only.

 

Kingsport new home market brisk despite headwinds

Kingsport new home activity increased during the first half of this year, and unlike what’s being reported about the national new home market there’s no sign of a sales decline. But there’re some differences from what was being built last year.

If you look at the median market value and the living space, there’s a slight move toward smaller, less-expensive homes. Averages show a bigger shift distributed across the market. And when you look at the share of new homes by price range, there’s a big shift the $200,000 and below tier. It doubled from last year. At the same time, the market share of new high-end homes – those with a $400,000 and above market value – didn’t change. The middle tier’s share declined.

New single-family residential permits Jan-June.

There was a 35% increase in the number of new single-family home permits issued during the first six months of this year compared to last year. It would have been higher if the weatherman had cooperated. Builders don’t pull permits when it’s too wet to work. Still, the mid-year increase is much stronger than the 7% growth projection for the region.

Permits share by price tier

Nationally, new home sales fell to their slowest pace in eight months in June, and the median selling price dropped to its lowest point in more than a year, according to government reports. One of the largest declines was a 7.7% drop in the South, which has been a strong growth region.

Kingsport existing home inventory for sale by price tier

Lawrence Yun, chief economist at the National Association of Realtors (NAR), said part of the decline can be seen in a 9% drop in construction. Less new construction means fewer new home sales, he said on Linkedin. “We need to assure barriers to home construction, such as big lot sizes and high impact fees are lessened.”

Rising material and labor costs are big concerns for local developers. Soft lumber alone has added about $5,000 to the cost of a new home, and since framing typically accounts for about 18% of the construction costs, the soft lumber tariffs on Canadian imports are a big deal. Tariffs increasing the price of aluminum and steel building materials is also an issue. And then there’s the shortage of truckers. One builder said getting the lumber when he needs it delivered is almost as big an issue as cost.

Kingsport market resales in the 12 months ending in June by price tier

Despite the headwinds, Travis Patterson, Patterson Homes, says his business is doing very well. We’re a custom home builder, and the demand for custom homes is really good, he said. “I get five or six calls every week, and we’re getting a high percentage of them (as customers).”

Patterson Homes led Kingsport’s new home construction market during the first half of the year, and Patterson looks for business to pick up in late summer and early fall.

Eric Kistner, Bridge Point Realty, tells a similar story. A new phase at Edinburgh and a development at Riverwatch across from Rotherwood in the Hawkins County portion of Kingsport are prime examples. He says smaller homes line up with the national trend. It’s a combination of what consumers want meshing with market forces that are pushing costs higher, he added.

Higher development costs are a segue to Kistner’s views about the future of new home development. A core issue he – and other developers – cite is the lack of lots and the costs behind that shortage.  The way we build roads puts the cost on the developer, and the high standards those roads are held to sets up a risk-reward standard that is a disincentive for developers, he said.

He thinks it’s ironic that city and county leaders will jump at incentives to get a new restaurant – for example – but back away from incentivizing infrastructure that will lead to new single-family housing. New housing equals new population and each new resident added to the population has a dependable, long-term positive economic impact, he said.

Kistner likes to invoke Ronald Regan when he talks about this issue.  “If you want more of something, subsidize it; if you want less of something you tax it.” He also likes to cite Adam Smith’s assertion in the Wealth of Nations that building infrastructure is among the core functions of government.

He and others think government partnering with developers on infrastructure to open areas for new single-family home expansion would be a better model for economic development than the current system. The idea dovetails with something Federal Reserve Chair Jerome Powell said during a hearing before the House Committee on Financial Services in July. Responding to a question about housing and its effect on current monetary policy, Powell said that while still important to the American Dream housing isn’t the economic driver it once was. He said that factors holding back the housing market are more labor market and supply-side issues than monetary policy.

Meanwhile, business in Kingsport’s new home market is brisk. But there’s a looming issue. Much of Kingsport’s housing stock is old, inventory of that housing for resale is tight,  and now that the area is beginning to see some population growth development of single-family housing will become an increasing challenge.  Currently, some of that housing challenge is being met with apartment developments developed with government incentives, which begs another question: Is Kingsport moving away from being a dominantly home-owner community.

 

 

 

Sullivan Co. leads region in home sales, new foreclosures; looser lending standards cited in foreclosure flare-up

Looser lending standards are being blamed for an increase in foreclosures in half of the counties in Northeast Tennessee during the first half of 2018.

Sullivan County, which has the strongest home sales so far this year is also the leading the region in new foreclosures. Most are in Kingsport’s 37660 zip code followed by those in 37620 in Bristol.

According to the June Northeast Tennessee Association of Realtors (NETAR) Trends Report, Sullivan County had 972 single-family home resales closings during the first half of this year. That’s 10.6% better than last year. During the same period, there were 165 new foreclosures, up 33.1% from the same period in 2017. Sullivan is also the only county where the year-to-date market share for resales has exceed the county’s 2017 annual market share every month.

ATTOM Data Solutions’ Mid-year Foreclosure Report shows U.S. foreclosures during the first six months of this year were down 15% from last year and 78% lower than a peak during the first six months of 2010. At the same time, the report shows local new foreclosure flare-ups in 26 of the 219 metropolitan statistical areas (MSA) analyzed. Locally the number of new foreclosures were up 10% in the Kingsport-Bristol MSA and slightly below last year’s activity in the Johnson City MSA.

New foreclosures NE Tenn.

The foreclosure status takes on additional clarity in a drill-down to the county level.

A total of 444 Tri-Cities area properties in NE Tenn. started the foreclosure process during the first six months of 2018, up 10.2% last year and down 49% from the first half of 2011. Nationwide new foreclosures, down 8% from the first half of last year and down 82% from the 2009 peak. Another way of looking at it is there were almost six existing home sales every day between Jan. and June and one new foreclosure filing every day.

New foreclosures SW Va.

“Localized foreclosure flare-ups in the first half of 2018 can no longer be blamed on legacy distress left over from the last housing bubble given that nearly half of all active foreclosures are now tied to loans originated in 2009 or later and given that the average time to foreclose plummeted in the first two quarters of the year,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Instead these local foreclosure increases are typically the result of more recent distress triggers in those markets.

We’re also seeing early evidence of gradually loosening lending standards starting in 2014, specifically for FHA-backed loans,” Blomquist added. “The foreclosure rate on FHA loans originated in 2014 and 2015 has now jumped above the average FHA foreclosure rate for all loan vintages — the only two post-recession vintages with foreclosure rates above that overall average.”

Carter, Hawkins, and Washington counties are the only NE Tenn. counties that didn’t see more foreclosures during the first half of this year.

None of the SW Va. counties in the Tri-Cities region had more foreclosures this year than last year.

EARLIER REPORTS

Tri-Cities foreclosures up 61% in housing market with tight inventory, high demand

Local foreclosures filings returned to recession levels during 2016 

 

Kingsport-Bristol sales tax collection stumble in May – growth rate still leads region

May was a down month for sales tax collections in Tennessee. Only two metro areas managed a year-over-year gain – Clarksville, and Knoxville. Statewide seasonally adjusted collections were 0.4% better than May last year.

Year-to-date market share

Here in Northeast Tennessee Kingsport-Bristol’s collections were down 3.1%. That wasn’t the worst performance statewide – Cleveland was down 5.3%, but Kingsport-Bristol was next to last.

May was also the first negative year-over-year collections month since February when the four-county metro area led the state in year-over-year gains. The metric where Kingsport-Bristol continues to stand out is the year-to-date market share compared to last year. It is the only metro area in the region that has performed at or above its annual 2017 market share. It also leads the region in the year-to-date collections growth rate compared to the first five months of last year.

Broken black line benchmarks Northeast Tennessee performance.

The three-county Johnson City Metropolitan Statistical Area saw collections of 0.5% less than May last year. The year-to-date market share for that metro area has been increasing by a tenth of a point every month this year. That’s a positive gain, but the actual year-to-date market share is still below the 2017 benchmark.

Here’s how May’s year-over-year collections looked in the region according to the Middle Tennessee State University report.

  • Knoxville, up 0.1%
  • Johnson City, down 0.5%
  • Morristown, down 2.5%
  • Kingsport-Bristol, down 3.1%

From a trends perspective only, Kingsport-Bristol and Knoxville have better sales tax collections performance than they did during the first five months of last year. And, although the dollar amount is far smaller, Kingsport-Bristol has almost twice the growth rate of Knoxville. Some of the shine of this year’s performance comes off when you look at annual share performance. Kingsport Bristol was down in 2017 while both Knoxville and Morristown were up.

The overall share has not appreciably changed since 2011. Knoxville has a 64% plus share of the region’s total collections while Kingsport-Bristol is just above 14%. The Johnson City metro share is a little over 13%, and Morristown has an almost 8% share.

 

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