New home permits surge; Canada a new supply chain gotcha

2-minute, 18-second read
The new home surge is on the way. Builders pulled 35 new home permits in Johnson City and Kingsport during January. That’s a little more than double the number during the first month of last year. It’s also representative of more new home activity in the region’s two largest cities as builders scramble to keep up with demand despite labor and supply chain headwinds.

Most of last month’s permits (26) were in Johnson City. The average area size was just under 1,600 sq. ft. The average estimated market price should be in the mid-$300,000 range. D.R. Horton accounted for half of the permits in both cities.

January’s Bristol report was not available when this story was filed. There was also no information on new home permit activity in the Greeneville market.

Construction in both cities plus planning and zoning activity for new developments has picked up in both cities. That’s generated a lot of excitement from consumers and real estate professionals because the current inventory of homes for sale is at an all-time low. But more construction hasn’t been smooth sailing.

Some media and the trade press are currently beginning to report on a new kink in the supply chain that threatens to slow-walk the hoped-for surge. According to one such report in the Columbus Dispatch, Upper Cumberland Electric has ordered transformers, but it’s unknown when they will arrive. And it looks like Columbus isn’t an isolated incident. There are reports that American Electrical Power faces a shortage of transforms. That’s a big headache for builders who must have transformers to open subdivisions.

A report from S&P Global’s Research and Insights sums up the situation this way. The United States lacks sufficient capacity to produce transformer cores and laminations which are key components in transformers. US manufacturers rely on foreign sources (especially Canada and Mexico) for these critical components to meet over 75% of (non-captive) demand.” That makes the Canadian protest and trucker blockade over vaccination requirement one more gotcha for builders trying to meet housing demand.

Kingsport officials have reported that the city has 2,500 lots in one form or another of development, and several new John City developments have been approved or are working their way through the approval process.

There are several outliers in January’s permits from the average size and estimated market price. Four of the nine Kingsport permits are for new townhomes. There is also some ongoing townhome development in Johnson City. Just for the record, the market for townhomes and condominiums is tighter than it is for existing and new homes.

And three of the Johnson City permits are for high-end homes that range in size from almost 4,000 square feet to a little over 6,000 square feet. The estimated market price ranges from $890,142 to $1.2 million.

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