Permits for high-end homes were up by four during the first half of this year, and for the first time in three years, Sullivan County led other Tri-Cities counties.
The Market Edge classes high-end permits as those with a construction cost of $400,000 or more or 4,000 sq. ft. of space or more. They represent a minority of the new homes being built in the region as resales for the same costs are a minority of total residential resales. For example, new high-end permits were 2.9% of all new residential permits at the mid-year point while resales for the 12-month period ending in June were 4.1% of all resales. But these homes get an outsized amount of public attention and extra notice from civic and government leaders since they are viewed as the top echelon of the housing economy.
During the first half of this year, a total of 15 high-end permits were issued in the Tri-Cities compared to 11 during the first half of 2017.
Six of those permits were issued in Sullivan County; four in Washington Co. TN; and four in Washington Co. VA. One permit was issued in Greene Co. During the past three years, Sullivan trailed Washington Co. TN and Washington Co. VA was host for high-end homes. And last year’s total was the lowest in three years.
The high-end home segment of the existing home market was higher in June than it was last year. There were 426 properties priced at $400,000 or more listed compared to 416 June last year. The Johnson City metro area had the highest number of listing (39) for homes at the pinnacle of the price range ($800,000 to $1 million-plus). There were 21 listings in than range in the Twin Cities; 13 in the Kingsport metro area; and six in Greeneville.
While the upper-end new home and resales get some outsized attention, the new home trend is turning toward smaller homes at a lower price point. Builders and developers are focusing on that segment of the market because it represents what most buyers are looking for even though it doesn’t offer the highest builder profit margin.
The Tri-Cities was the only East Tennessee Metropolitan Statistical Area (MSA) where the number of mid-year high-end permit pulls were higher than last year. The number of new permits in Chattanooga was down by almost half while the decrease Knoxville MSA decrease was only three permits.
That’s the same pattern seen for total new residential permits. The Tri-Cities mid-year total was up 2% while the other area regions declined. One possible explanation is that the new home sectors in the other areas have peaked last year while the Tri-Cities market continued growing. The next two quarters should add some context to that theory. Meanwhile, the local new home sector is still performing at about half of its pre-recession capacity. There are signs that it’s picking up because there been a rash of lot development in the last half-year. Prior to that the uptick in new construction was basically absorbing the existing lot inventory and watching for enough demand to build up for new development.
Last year there were 396 new home sales in the Tri-Cities, according to the Tennessee Housing Development Agency. It was the best sales year since 2009. The best year for new home sales was 2006 when there were 1,201 sales.
Categories: REAL ESTATE