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VOL. 128 | NO. 29 | Tuesday, February 12, 2013

Cost Increase

Pricing jumps while homebuilder permit numbers stagnate

By Sarah Baker

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New housing permits were unchanged in January year over year, but pricing saw a healthy increase.

January homebuilding permits in Shelby County averaged 3,010 square feet and $231,805, compared to January 2012 averages of 2,933 square feet and $214,324, respectively, according to Chandler Reports.

(Daily News File Photos: Lance Murphey)

Shelby County homebuilders filed 50 permits last month, the same amount filed in January 2012, according to real estate information company Chandler Reports, www.chandlerreports.com.

January permits averaged 3,010 square feet and $231,805, compared to January 2012 averages of 2,933 square feet and $214,324, respectively.

Don Caylor, president of the Memphis Area Home Builders Association and co-owner of Summerset Homes, said over the past 24 to 30 months, builders have had to continually increase their prices due to material costs. Also projected to escalate home prices this year is a lack of labor for certain jobs.

“Labor hasn’t really started yet because there’s just enough work really to go around to keep everybody somewhat busy,” Caylor said. “But when we start seeing labor shortages, especially skilled labor, I think you’re going to see that added to the material cost.”

Arlington’s 38002 ZIP code and Collierville’s 38017 ZIP code saw the most permit activity in January, with 10 each.

Caylor said the lots that are mainly being built on currently are bank foreclosed lots. And builders are running out of these “choice lots” at a rapid clip.

“As soon as we start running out of these type lots, then there’s going to have to be development,” Caylor said. “But the price of infrastructure has gone up quite a bit. When we start seeing normal priced lots again, there’s where you’re going to see tremendous increase in prices and houses because of lots.”

Builders sold 36 homes in January, averaging $260,449 and totaling $9.4 million. That compares to January 2011’s 44 sales that averaged $215,755 and totaled $9.5 million.

The builder filing the most permits in January was Regency Homebuilders LLC, with 13 averaging 2,919 square feet and $218,624. It was followed by Pro Site, a builder associated with Hope Church for an affordable housing project on Seventh Street, with seven permits averaging 2,340 square feet and $188,892.

An area in North Memphis’ 38107 saw the most activity of all of the subdivisions, due to Pro Site’s work, with nine permits averaging 2,340 square feet and $169,410.

Builders sold 36 homes in January, averaging $260,449 and totaling $9.4 million. That compares to January 2011’s 44 sales that averaged $215,755 and totaled $9.5 million.

In January 2010, builders sold 49 homes averaging $240,770 and totaled $11.8 million.

Caylor said the values of existing homes have gone down considerably compared to levels six years ago. In essence, new home prices are down as well, but as an existing home goes up in value, new home prices will increase at an even faster rate.

“At some point, they’ve got to make a decision as to if it’s a good investment for them to go ahead and buy now,” Caylor said. “I think it is.”

“The price of infrastructure has gone up quite a bit.”

–Don Caylor
President, MAHBA

And he’s not the only one who thinks so. Tennessee is one of only 20 states that have three or more Metropolitan Statistical Areas that are in the National Association of Home Builders’ Improved Market Index. Metrics for that index include positive permit activity, declining foreclosure activity, improving home prices and job growth.

KC Conway, executive managing director of real estate analytics/valuation advisory services for Colliers International, said at last week’s Memphis Area Association of Realtors Commercial Property Forecast Summit that Memphis’ housing recovery, “is very real.”

Chandler Reports is a division of The Daily News Publishing Co. Inc.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 64 296 16,341
MORTGAGES 89 356 21,366
FORECLOSURE NOTICES 6 61 4,251
BUILDING PERMITS 199 701 39,202
BANKRUPTCIES 50 234 15,482
BUSINESS LICENSES 21 78 5,471
UTILITY CONNECTIONS 54 354 23,505
MARRIAGE LICENSES 8 78 5,018

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