2020 a banner year for local builders; new home demand still strong

Despite a record soggy spring and a pandemic, 2020 was the best year for new Tri-Cities home permits since 2008.  And much of that new home surge is carrying over to this year.

All but two of the area counties tracked by The Market Edge posted increases in the number of permits last year. And neither of those in negative territory should be viewed as a flagging new home market. Carter Co. was bumping up against a 2019 permit total that was its best in over a decade, and Scott Co. was only two permits off its 2019 total.

Here’s how the regional total permits and year-over-year gain – or loss – look:

Carter – 84, down 20%.

Greene – 186, up 28.3%.

Hawkins – 17, up 6.3%.

Sullivan – 320, up 15.9%.

Washington TN – 446, up 5.4%.

Scott VA – 12, down 14.3%.

Washington VA – 106, up 66.6%.

Tri-Cities region – 1,171, up 12.3%.

Demand increased so much that some builders began shying away from custom homes during the last two quarters because spec homes were selling faster than they could build them. Some also began qualifying customers to streamline one-on-one inquiries.

It’s also noteworthy that some local governments have a renewed interest in the housing market issues because of the role housing plays in attracting new residents and economic development. The real estate economy has been a top economic performer for several years and accounts for about 15% of the local economy.


The year-over-year growth rate for high-end permits outperformed the rest of the market last year.

The Market Edge defines high-end permits as 4,000 or more square feet or a construction cost of $400,000 or more.  Last year there were 132 of those permits in the seven-county region.

Washington Co. Tenn. was the highest performing high-ender, market; however, Washington Co. VA has the highest year-over-year growth rate.

New permits for high-end homes in 2020 compared to 2019 are:

Carter – 8-5

Greene – 12-14

Hawkins – 0-0

Sullivan – 34-33

Washington TN – 57-38

Scott VA – 0-0

Washington VA – 21 – 7

Tri-Cities – 132-97


Builders ran head-first into strong headwinds in the early months of 2021. The labor shortage stiffened, and the sky seemed the only limit for material costs – especially lumber. Lumber prices have increased 188% since last spring adding $24,000 to the cost of an average new home.

Even so, the local market is still hot, according to Marvin Egan. Egan Construction.

Census reports put the 2021 new home growth rate at 8%. Ali Wolf, chief economist at Zonda and Meyers Research, recently said the growth rate was closed to 35% based on new home orders.

Wolf said her firm’s survey of builders in March showed that most have increased prices, and many were beginning to slow-walk or cap new orders to ensure that they don’t deplete inventory too fast. Egan said the same dynamic is at play in the local market. So are calls for Washington to intervene in the materials cost situation. Some of the lumber cost hikes are rooted in  tariffs, but experts say U.S. lumber industry underestimated the effects of the pandemic and were slow to ramp up to meet the demand.

As builders struggle with material availability and cost, they are also concerned that increased production could be outstripping land availability. Vacant land costs have and continue to increase. Locally vacant land sales were up 48% last year.

Rising affordability issues are also looming this year, particularly increasing building material costs, including lumber, according to Chuck Fowke, chairman of the National Association of Home Builders. Builders are also citing rising regulator issues and appraisal issues due to increased materials costs.

Still builders are getting better at offering homes at affordable prices. In January, 38% of new homes were sold for less than $300,000, compared to 35% in December, according to Holden Lewis, home and mortgage expert at NerdWallet.

Locally a recent market data update by Builder Magazine showed 280 new home closing were in the $151,000 to $280,000 price range. That’s a little more than 28% of last year’s local new home closing.

According to the Department of Housing and Urban Development, rising costs and mortgage rate increases combined with headwinds have taken the edge off new home sales, and construction is slowing down. But even with those struggles, local demand remains strong, and although the market may not be as hot as it was in the last half of 2020, it’s still hot, according to Egan. The question many local builders are wrestling with is how long will it last?

Don Fenley is a seasoned Tri-Cities journalist specializing in housing, economic and demographic trends. The Times-News carries his reports on the Sunday Money Page. He is also a frequent contributor to Business Matters on WETS and the Business Journal of the Tri-Cities’ print and electronic editions. Detailed or specific reports are available by contacting him at djfenley@gmail.com.  

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Categories: REAL ESTATE