Shelby County home building activity cooled in July, with builders pulling fewer permits and selling fewer new homes compared to July 2012.
(Daily News File/Lance Murphey)
Homebuilders pulled 77 permits in July, down 6.1 percent from 82 permits filed in July 2012, according to real estate information company Chandler Reports, www.chandlerreports.com. The average permit in July measured 2,958 square feet and $225,199 compared to 3,080 and $229,633 in July 2012.
Homebuilders also didn’t sell as many homes in July as they did the same month a year ago. Builders sold 38 new homes in July, down 48.6 percent from 74 new homes sold in July 2012. The average sales price of a new house in July was $271,540, up 4.6 percent from $259,540 in July 2012.
Interest rate fluctuations and tighter lending standards likely played a role in buyers possibly sitting on the sidelines in March, April, May and June, when the sales contracts were first entered into, said Keith Grant of Grant Homes.
“Interest rates are higher now than they were six months ago and I know they’ve had an impact,” Grant said. “I had two people approved for houses, rates went up and they couldn’t get approved at my price point.”
Regency Homebuilders LLC was the top builder as tracked by permits in July with 15 averaging 2,958 square feet and $225,199. Regency was followed by Grant Homes (9; 3,166; $238,133) and Kevin Hyneman (6: 2,193; $178,551).
Grant Homes led the way in sales with eight averaging $225,770. Charles Morgan of Vintage Homes sold four homes averaging $152,236 and Hallmark sold three homes averaging $384,592.
A dwindling supply of lots in prime locations also likely contributed to the decline in permits pulled and new homes sold.
“We are quickly working through all the ‘A’ lots and there’s not a lot left,” Grant said. “I think the reality is that inventories on lots are getting low. With inventories getting lower, sales are going to come down.”
According to MarketGraphics, the current lot inventory in the Memphis market – which includes Crittenden County in Arkansas, DeSoto County in Mississippi, and Shelby, Tipton and Fayette counties in Tennessee – is 13,543.
But the total market demand for lots from 2013 to 2018 is 22,530. Of that number, 11,187 lots will be needed in Shelby County alone. To keep pace with demand, 22,962 lots will need to be developed before the end of 2018.
In addition to the shrinking number of lots, lending standards are stricter for builders and buyers.
“The loan business is tough,” said Memphis Area Home Builders Association president Don Caylor of Summerset Homes Inc. “It’s still tough to get banks to give a loan to buy a house or a construction loan.”
Collierville’s Wolf River Ranch subdivision saw the most activity in July, with six permits averaging 3,908 square feet and $374,000. Cordova South’s Rialto Square subdivision was second with five permits averaging 1,858 square feet and $128,000.
Looking at permit activity by ZIP code, Collierville’s 38017 led the way in July with 15 permits averaging 3,508 square feet and $314,343, followed by Arlington’s 38002 (13; 3,377; $216,670).
But while the number of permits issued and sales recorded in July were down from last year, the number of permits and sales year to date are ahead of last year, albeit slightly.
Through July, builders pulled 558 permits for new homes averaging 3,232 square feet and $252,695 compared to 551 new homes averaging 3,187 square feet and $242,541 over the same period last year. Through July, builders sold 462 new homes averaging $258,710, up from 431 new homes averaging $242,233 over the same period last year.
“Overall I think most builders are extremely optimistic,” Caylor said. “This has been a tough market we’ve come through and people are going to be cautious but they’re optimistic.”
Chandler Reports is a division of The Daily News Publishing Co.