Local builders are finally at the front of the housing market. They’re having their best year since 2006. According to The Market Edge, during the first nine months of this year, they have pulled 893 new home permits. That’s a 10% increase from last year. And new homes are selling almost as fast as they’re built.
That’s a far cry from those years when builders took the brunt of the Great Recession. New home permits plummeted from 2,622 in 2006 to 741 in 2012. Things started coming back in 2015 when existing home sales took off. But builders didn’t get much of a coattail ride. There was already a glut of inventory on the market, and many local bankers were tight-fisted with spec home loans.
But that was then, and now is now. This year a top challenge is keeping up with consumer demand, and trying to deal with a crush of pandemic refugees whose resources don’t match their high hopes. But all things considered, those are good problems to have and mute the labor crunch and increasing materials costs.
New home permits
At the end of the third quarter, Tri-Cities area builders were riding a new permit surge 10% greater than the first nine months of 2019. That was second to Knoxville’s 16% increase but well ahead of off years in Chattanooga and Asheville. Chattanooga’s new permit level is down 8%, and Asheville was down 1%.
Greene Co. led the local counties with the best growth rate so far this year. New permits were up 23%. Washington Co. Va. had a 17% growth spurt, and Sullivan Co. was up 13%. Washington Co. Tenn. – the region’s top new home market by volume – had a 6% increase.
New home closings
At the end of July, 495 new home deals had closed in the four-county Kingsport-Bristol Metropolitan Statistical Area (MSA), according to Builder Magazine. The magazine reported 474 closings in the three-county Johnson City MSA at the end of August.
Of those closings, 182 were in the $200,000 – $300,000 price range. Another 67 were in the $301,000 to $400,000 range. There were 60 in the $401,000 and up “high-end” range. Closing on homes in the $200,000 and below price range totaled 649, or 66.9% of all closings.
Rounding out the data review, new home sales in Kingsport-Bristol accounted for 2% of all home sales in the region at the end of November, while their market share in the Johnson City MSA was 4%. Both are down from their October market share – a decline that can be attributed to seasonal slowing.
Builders are optimistic about the conditions for next year. But some are more cautiously optimistic than others. Some see the progress toward vaccines tempering the pandemic as a light at the end of the tunnel. But they acknowledge now is not time say, “problem solved.” Instead, the focus is shifting to other components of the local economy. Jobs and wages are at the top of that list.
The region has clawed back most of the jobs lost in the April crash. But employment and jobs lag last year’s performance. And the jobs market has yet to reach post-Great Recession levels. Employers would have to create 8,500 new jobs during the last two months of this year to boost October’s total jobs to the 2019 annual level. That speaks to the number of permanent job losses. The post-pandemic economy will likely increase those numbers.
Wages are also problematic. So far, they have lagged the increase in home prices.
There’s also the feeling that the region – like the nation – may be on the cusp of new restrictions due to a rapidly increasing number of virus infections and deaths. At the same time, a decision on what Congress will do about an extension to the pandemic stimulus is nearing the day after Christmas stop date.
Many economists say an extension before the first of the year will sustain the economic recovery for a while. But going into the next year with no decision is playing with fire and evokes the specter of a double-dip recession.
The National Association of Home Builders outlook is for a 3% increase in single-family housing growth next year and 2% in 2022. The remodeling outlook is for 4% growth in 2021 and 3% in 2022.
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