New home construction picks ups; Piney Flats sees increased activity

Talk to builders, and they’ll tell you that the Tri-Cities new home industry is booming. The most robust activity can be found in Sullivan and Washington counties. And when you compare new permits pulled in Q1 this year to last year, the Tri outperformed Chattanooga, Knoxville, and Asheville. While the number of permits pulled in those metro areas was higher, the local growth rate was 7% compared to 4% in Chattanooga and Knoxville and a 2% decline in Asheville.

A drill-down on the seven-county Tri-Cities region monitored by The Market Edge in Knoxville shows Sullivan Co. made the largest gain when compared to Q1 last year. Washington Co. TN builders pulled more new home permits, but their total declined from last year.   The number of new permits also declined in Greene and Hawkins counties while Carter Co. and Washington Co. VA made small increases.

Jeff Begley, president of the Kingsport Area Homebuilders Assn., thinks most of the Sullivan Co. activity continues to be in the Piney Flats area.

Matthew Little, in partnership with Carl Little of Carl Little Construction, Johnson City, said they are nearing completion of their Piney Flats development and looking forward to a new project on Highway 138 at Cedar Creek Road in Washington Co. That doesn’t mean there will be a slowdown in the Piney Flats area. Grading is underway in the Range Wood area for a development by a national builder. That would a first for the Tri-Cities region, which as traditionally is a spec home and custom market services by small local firms. That development will reportedly be targeted at the that has been attracting Millennials. One of the trends of this demographic group that has attracted builders’ attention is the preference of some buyers for a forever home instead of a starter home.

Little said the type homes built in his Piney Flats development, which is close to the northern border of Washington Co. is a mixture of patio homes and single-family homes in the $300,000 to $399,000 price range. That fits the general pattern for new home development and some builders position themselves to capture the demand for smaller, single story home while others stay with more convention models.

Travis Patterson, Patterson Homes in Kingsport, say he has basically split his efforts. He’s building patio homes in Chase Meadows and doing some higher-end properties in the Old Island Community. At a recent open house, over 100 people showed up to look at his homes and available lots in Chase Meadows.

Begley said the new home economy is “as strong as I’ve seen it. We’re working hard to keep up, but Kingsport is suffering for the lack of young builders” Many of the older guys haven’t come back since the recession, and the number of younger builders entering the market isn’t as high as it is the Washington Co. market.

Area metro areas saw an increase in new home permits that began in 2015 and lasted until 2017. Permits pulls began a slower growth pattern in 2018 in all the metro areas except Chattanooga. The exception was the Tri-Cities where permit pulls declined. The Tri-Cities new home permit performance in relation to area metro areas is consistent with other major economic components.

While the increase in new home construction is welcome news in an inventory-starved market like the Tri-Cities, a longer look at the permit trend shows the new home sector has made only marginal recovery from the recession and is performing at less than half of its pre-recession capacity.  There were 61% fewer permits pulled last year than they were at the pre-recession high. And while the Q1 permit total was an improvement from the first three months of 2018, it lagged the area’s permit pace in 2017.

That dovetails with the recovery pattern of other components of the region’s economy. When compared to the surrounding metro areas, the Tri-Cities total economic output (GDP), GDP per capita, nonfarm jobs, and population are lagging or stagnant. Much of that can be attributed to the region’s rapidly aging population – it’s older than the rest of the state and nation – the lack of population growth – the region’s death rate is higher than the birth rate – the lingering effects of the reduction in the coal industry and yesteryear’s manufacturing model.

Economic stress flags in housing market. The number of Tri-Cities underwater homes make big increase

March’s existing home sales report from the Northeast Tennessee Association of Realtors is strong. Residential sales were 11.8% higher than last year, the average single-family resale price is up 4.6%.  At the same time, it must be noted that the all-residential sales growth rate for the first four months of the year is the lowest it has been in four years. And then there’s the housing market indicator that’s not part of most sales and price reports.

The number of seriously underwater home in Carter, Greene, Hawkins, Sullivan, Unicoi, Washington Co. TN and Washington Co VA during the past 22 quarters.

Since the local housing market recovery that took off like a rocket four years ago, the number of properties with mortgages that are equity rich has dramatically declined and as of Q1 this year and the number of mortgaged properties seriously underwater has substantially increased.


That sobering bit of news comes from Attom Data Solutions’ Q1 U.S. Home Equity & Underwater Report which shows that at the end of the first quarter local mortgage holders of more than 20,400 homes owned 25% or more than the estimated value of the property.

The number of equity-rich mortgaged properties in Carter, Greene, Hawkins, Sullivan, Unicoi, Washington Co. TN and Washington Co VA during the past 22 quarters.

Attom’s report shows one in 11 U.S. mortgages were seriously underwater during the first three months of this year while better than one in five mortgaged properties in Greene and Hawkins were in the same economic fix. And the situation isn’t much better in five other local counties included in the analysis.

The other side of the analysis is mortgaged properties that are equity rich. That means the owners owe 50% or less on their mortgage than the estimated property value. This is the number that marketers – especially retailers – love because of it a wealth indicator. The only one that’s has a higher spot on the wealth hit parade is the number of homes with no mortgage. Properties with that status in our area have traditionally been almost half of the households. It too is slowly retreating.

Share of mortgaged properties that have a loan to value ratio of 50% or lower in Q1.

Of course, the decline of equity-rich properties is not necessarily negative. Some owners tapped their equity to buy another home. That likely accounts for most of the decline because it overlays the period when existing home sales increased. Other owners used some equity to remodel or upgrade their homes. That’s been a fairly hot part of our market for a couple of years. There are other ways owners have used their equity, and few hard numbers to show who did it and for what.

Share of mortgaged properties with a loan to value ratio of 125% or above in Q1.

There’s hardly anything positive about a mortgaged property that’s underwater.  They are red flags that point to economic stress rather than the conservative stability that has been the hallmark of the local housing market. Attom’s analysis shows the highest share of that stress in Hawkins County – especially in the Church Hill area (24.7% underwater).  

The zip code with the lease share of underwater homes is 37601 in Washington Co. (9.5%). At the same time, the 37601 zip code had the highest share of equity-rich home (25.3%).

Properties that are seriously underwater are under increasing stress in areas where prices are beginning to soften. The easiest way to tack average prices is on NETAR’s web page’s market analytics page That data shows the four-month price growth rate for single-family resales this year for counties in Attom’s analysis Hawkins Co. (down 7.5%) and Washington Co. TN (down 2%). City markets with the weakest price growth rate are Greeneville (down 8.5%) and Johnson City (down 1.7%).

 Year-to-date average price data for townhomes is also listed on the page. Elizabethton has the weakest four-month rate (down 39%) followed by Greeneville (down 32.1%) then Kingsport (down 8.3%).

“With homes prices increasing at a slower pace in 2018 than in previous years, the potential for people to climb out from mortgages that are underwater or advanced into the equity-rich territory, tends to be reduced,” said Todd Teda, Attom’s chief products offices said. “If the latest trend continues, it will raise another clear signal of a market slowdown, which will be good for buyers, but not so good for sellers. But if the pattern of the past few years takes hold – with levels of underwater and equity rich mortgages turning around – it will mean the market remains strong for sellers, with fewer needing to get out from under financial distress.”

NETAR’s April Trend Report shows the fourth-month growth rate for single-family resales is 2.5% and 5.3% for townhomes.

Attom’s Report provides counts of residential properties based on several categories of equity — or loan to value (LTV) — at the state, metro, county and zip code level, along with the percentage of total residential properties with a mortgage that each equity category represents. The equity/LTV is calculated based on record-level loan model estimating position and balance of loans secured by a property and a record-level automated valuation model (AVM) derived from publicly recorded mortgage and deed of trust data collected and licensed by Attom nationwide for more than 150 million U.S. properties.

Index shows Johnson City metro housing market heating up; Kingsport-Bristol cooling off

The local housing market is on the cusp of the prime buying and selling season and markets in the Tri-Cities two metro areas are not in step.’s housing market hotness index shows the Kingsport-Bristol metro area getting cooler while the Johnson City metro market is heating up. That the trend position on’s Market Hotness Index.

The index monitors how local areas are experiencing supply and demand. The analysis breaks down demand and supply dynamics to rank metro areas relative to the rest of the country.

Views of listing are used as a demand indicator while median days on the market are used as a supply indicator.

Here’s how the April indices look for the Tri-Cities market’s two metro areas

Johnson City’s rank moved up to #124 out of 300 metros.  Last month it ranked #127. It’s listed as a warm market that is heating up compared to last month and heating up compared to last year. Median days on market is 73, down from 88 days last month. Inventory is moving 9% slower than last year and 15 days slower than the national average. Last month inventory was moving 24% slower than last year and 23 days slower than the U.S. overall. Properties in the three-county area receive an average number of views 1.7 times higher than the U.S. average.

“Kingsport-Bristol-Bristol is ranked #203 down from #198 last month. says the market is slightly cool and cooling down slightly compared to last month. Compared to last year the market is heating up.  Median days on market is 88 days down from 109 last month. Inventory is moving 1% slower than last year and 30 days slower than the U.S. overall. Properties in the four-county area receive an average number of views 1.2 times higher than the U.S. average. That’s a slight decrease from last month’s 1.3 average.


Johnson City metro area see soft March, Q1 sales tax collection growth; Kingsport-Bristol can’t sustain last year’s performance

March was another soft month for sales tax collections in the Johnson City metro area and the third straight month of negative year-over-year performance in the Kingsport-Bristol area.

Seasonally adjusted year-over-year totals from the MTSU’ s Department of Economics and Finance show the four-county Kingsport-Kingsport Metropolitan Statistical Area (MSA) had the only negative performance among the state’s 10 metro area. Collections in the three-county Johnson City MSA were better than last year but just barely. It had the second-worst year-over-year showing in the state.

Morristown was the only MSA in NE Tennessee with a better March year-over-year rate than the state’s 5.8% growth. Morristown also had the best Q1 year-over-year collections growth followed by the Knoxville MSA then Johnson City. Kingsport-Bristol’s Q1 growth was 4.9% less than what it was last year.

This year’s Q1 market share for the Tri-Cities metro areas was the weakest it has been in nine years. Since 2011 Johnson City’s market share has declined from 14% to 12.9% this year.

Kingsport-Bristol’s strong collections last year was a new benchmark for that area but declined from 18.8% during the first three months of last year to 13.9% this year.

Like Johnson City, Knoxville’s Q1 market share this year was the lowest it has been since 2011 decreasing from 14.6% of the region to 13.9% this year.

Morristown had had an 8% market share this year, which is that metro area’s best performance since 2011.

March’s collections in Kingsport-Bristol were $17.2 million and $15.6 million in the Johnson City MSA. So far this year’s Kingsport-Bristol’s seasonally adjusted collections total $50.6 million and $46.8 million in the Johnson City metro area.

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