Positive disrupters  are on the horizon for Tri-Cities new home industry, permits up 2%

Sometimes real estate market cycles produce weird results. The first half of 2019 is a local example.

Tri-Cities new home permits were only 2% better than the first half of last year. Normally that would be ho-hum news. But it was the best mid-year growth rate among 20 housing markets tracked by The Market Edge. In fact, it was the only positive growth rate. Those other markets include Asheville, Knoxville, Chattanooga, Charleston, Myrtle Beach, Charlotte, and Boone, to name a few.

That factoid and $4 will buy you a caffe latte, but it and preparation for entry of the nation’s largest builder into the local market point to some interesting conditions on the horizon.

The most likely explanation for the new permits situation is the local new home market is peaking while many of the neighboring markets have already peaked and are now adjusting to their hyper-local conditions and the uncertainty increasingly focused on the 2020 elections. It also follows the local adage that the local economy trails national conditions by six months. That rule of thumb looks good in this instance even if it’s not a reliable metric in all cases.


For the first time since before the Great Recession all components of the local housing market are looking pretty solid. Existing home sales and prices are at record levels; townhome and condo resales are gaining market creds; and despite a few soft spots the rental market – both single-family and apartments – are doing well. New residential permits are up and after a long dry spell so is lot development. Some builders continue focusing on the mid-price range market while there’s increased competition at the lower price points from both stick-built and modular homes.

“The big difference between this year and last year is we are finally having some lot inventory coming online,” said Kelley Wolfe, Wolfe Development. “We were building out our old lots inventory until last year, but there was very little in the pipeline.” As that old lot inventory was exhausted and the employers continue adding jobs more new home demand increased.

One example is Wolfe said his firm platted a development in Jonesborough in January and have sold 28 lots to builders, developers, and owners so far. When he looks at the local housing industry these days “not one sector is weak.” There are ample other examples – especially in Washington County.


  • Carter – 52, no change.
  • Greene – 85, up 21.
  • Hawkins – 12 – up 1.
  • Sullivan – 143 – up 9.
  • Washington TN – down 13.
  • Scott – down 5.
  • Washington VA – down 2.

Here’s how that it looked in selected regional metro areas:

  • Tri-Cities – 517, up 2%.
  • Knoxville – 1,823, down 9%.
  • Chattanooga – 1,131, down 5%.
  • Asheville – 1,243, down 13%.
  • Boone – 204, down1%.
  • Hickory – 509 – down 1%.


The Arlington, Texas-based firm is creating a stir in the local housing market. It’s the first time a national builder has entered the Tri-Cities market.

“Obviously, when the biggest kid on the block comes to town someone sees an opportunity,” Wolfe said. “The jury is still out on just how D.R. Horton will impact the local building market, but Wolfe’s not sure it will disrupt other builders.

Horton is the largest homebuilder in the United States. It is racking up big successes since moving into submarkets. The firm is on track to closings about 57,000 new home deals this year. It’s looking to do the same next year, and some of it will be next to Boone Lake in Piney Flats.

In a recent Bloomberg article, Paige Shipp, the Dallas-Ft. Worth director of research for Metrostudy was quoted saying Horton did a great job of concentrating on entry-level products while other builders were focused on the higher-priced products. In 2014 Horton launched its Express Homes focused on lower-priced buyers. The firm quickly saw it was attracting downsizing seniors, so it introduced Freedom Homes to accommodate the baby boomer buyers.

The reception was so good Horton began moving into submarkets like the Tri-Cities. It owns or controls or owns 300,000 lots and now operates in 87 markets in 29 states, according to Bloomberg Intelligence.

The Johnson City Press recently wrote that Thomas Construction is developing a 200-lot, single-family subdivision in Piney Flats near Boone Lake where Horton will begin building homes in the $200,000 to $225,000 price range when site prep is completed.  The contractor expects the first phase of the development will be completed in September or October. He told the Press, Horton has a four-year timeline to having the development sold-out.


Work is underway in several new developments in Washington County. Work is also progressing toward the back fence at Edinburgh in Kingsport. Patterson Homes continues to build both patio homes and higher-end custom homes at Old Island. Jerry Petzoldt, TCI Lifestyle Investments, has seen gains at Old Island but at the same time he says he still has inventory sitting and not enough demand. “It’s all about the price point,” he said


While there’s ample reason for optimism about the local new home industry there’s still some overtones of caution about the longer-term.

“It’s a fuzzy picture. You want one thing, but the numbers don’t always bear it out. There’s a stark difference between counties. The one seeing the greatest growth are also seeing population growth,” Petzoldt said.

Wolfe said he’s watching “with a healthy degree of concern” about what happens in the 2020 elections. He’s not alone. “What you see is two parties with diametrically opposing economic strategies and plans for the country.” But until then, “we’re making hay while the sun shines,” he said.

There are several plus-side forces that are working for an optimistic outlook.

Interest rates are low and heading lower.

The Industry is shifting to lower-priced, smaller new homes.

The economy is at full employment and still slowly growing.

On the caution side of the equation there’s supply constraints and labor issues. At the same time capital lending continues to add to costs faster than household earning can keep pace. That’s a local and national concern as is the labor force participation rate.



Categories: REAL ESTATE