Talk to builders, and they’ll tell you that the Tri-Cities new home industry is booming. The most robust activity can be found in Sullivan and Washington counties. And when you compare new permits pulled in Q1 this year to last year, the Tri outperformed Chattanooga, Knoxville, and Asheville. While the number of permits pulled in those metro areas was higher, the local growth rate was 7% compared to 4% in Chattanooga and Knoxville and a 2% decline in Asheville.
A drill-down on the seven-county Tri-Cities region monitored by The Market Edge in Knoxville shows Sullivan Co. made the largest gain when compared to Q1 last year. Washington Co. TN builders pulled more new home permits, but their total declined from last year. The number of new permits also declined in Greene and Hawkins counties while Carter Co. and Washington Co. VA made small increases.
Matthew Little, in partnership with Carl Little of Carl Little Construction, Johnson City, said they are nearing completion of their Piney Flats development and looking forward to a new project on Highway 138 at Cedar Creek Road in Washington Co. That doesn’t mean there will be a slowdown in the Piney Flats area. Grading is underway in the Range Wood area for a development by a national builder. That would a first for the Tri-Cities region, which as traditionally is a spec home and custom market services by small local firms. That development will reportedly be targeted at the that has been attracting Millennials. One of the trends of this demographic group that has attracted builders’ attention is the preference of some buyers for a forever home instead of a starter home.
Little said the type homes built in his Piney Flats development, which is close to the northern border of Washington Co. is a mixture of patio homes and single-family homes in the $300,000 to $399,000 price range. That fits the general pattern for new home development and some builders position themselves to capture the demand for smaller, single story home while others stay with more convention models.
Travis Patterson, Patterson Homes in Kingsport, say he has basically split his efforts. He’s building patio homes in Chase Meadows and doing some higher-end properties in the Old Island Community. At a recent open house, over 100 people showed up to look at his homes and available lots in Chase Meadows.
Begley said the new home economy is “as strong as I’ve seen it. We’re working hard to keep up, but Kingsport is suffering for the lack of young builders” Many of the older guys haven’t come back since the recession, and the number of younger builders entering the market isn’t as high as it is the Washington Co. market.
While the increase in new home construction is welcome news in an inventory-starved market like the Tri-Cities, a longer look at the permit trend shows the new home sector has made only marginal recovery from the recession and is performing at less than half of its pre-recession capacity. There were 61% fewer permits pulled last year than they were at the pre-recession high. And while the Q1 permit total was an improvement from the first three months of 2018, it lagged the area’s permit pace in 2017.
That dovetails with the recovery pattern of other components of the region’s economy. When compared to the surrounding metro areas, the Tri-Cities total economic output (GDP), GDP per capita, nonfarm jobs, and population are lagging or stagnant. Much of that can be attributed to the region’s rapidly aging population – it’s older than the rest of the state and nation – the lack of population growth – the region’s death rate is higher than the birth rate – the lingering effects of the reduction in the coal industry and yesteryear’s manufacturing model.