Construction Market Sees Mixed Quarter

Permit filings down; builders expect summer pickup

LANCE ALLAN

The Daily News

Shelby County building activity was up in the second quarter compared to the first three months of 2004, but permits issued were down from the same period last year, according to The Daily News Public Records Database, www.memphisdailynews.com.

During the three-month period ended June 30, 3,083 building permits were filed with Shelby County Code Enforcement, compared with 3,318 in the same period last year. During the first quarter, 2,913 permits were filed.

The number of permits filed includes both residential and commercial properties.

Commercial market. The drop in filings coincides with what one local engineer called an unstable commercial building environment.

Its been baffling to me how there have been several times in the past couple of years where it looked like it was really going to pick up, then it drops back down again, said Dave Lloyd, senior project manager in the mechanical department at Askew Hargraves Harcourt & Associates. Right now, its definitely up for us. How long it will stay up, I dont know.

Lloyd pointed to two contractors affected differently by the market.

I had one contractor from Jackson, Tenn., tell me hes swamped with requests for bids, Lloyd said. I know of another of pretty good size that was slow at the moment. So I dont think there is proof yet that its really going up.

Residential boom. The residential sector is a different story. Thanks in large part to low mortgage interest rates, new home construction has been booming in Memphis in the past couple of years.

David Miller, owner of Perennial Building Group, said his firm is on track to easily top the number of new homes it built in 2003.

Through the end of June, we pulled 161 building permits, and in all of last year, I think we built 190 houses, he said. We closed 34 houses in the month of May. Weve never closed that many houses in one month. I know for some of the larger builders, thats nothing. But it was major to us.

He does expect business to slow, but for Perennial, activity tends to decelerate during the second half of the year anyway.

Weve seen it slow slightly, Miller said. We sell more houses in the first quarter than any other three months of the year. We write a lot of contracts in the spring, but so far, we havent been able to tell a difference between spring and summer, it has been so good.

Eddy Scruggs, a general partner and affiliate broker with Traditional Properties, the sales arm of Matthews Brothers Home Builders, agreed that the new home market is still looking good across the board.

Every builder Ive talked to is having a great year, he said. I just think the market in general is strong. I dont know how long it can keep this way, but I dont see anything that can slow it down.

Meeting demand. One factor that could, at least for some builders, is a lack of lots ready for home starts. An ideal supply, according to Memphis Area Association of Realtors president Bob Turner, is 15 to 20 months. Currently, the market has a six-month supply.

Right now, there are people who would buy lots but they cant buy them, he said. There are none to be bought. Were sold out in three of our four subdivisions, waiting on lots to be developed so we can start building.

Right now, new home demand is outweighing supply.

The traffic in the subdivisions is still strong, and when you get as much traffic through as we are, that tells you the demand to buy new homes isnt even close to being met, Miller said.

Looking outward. One reason for the drop in Shelby County building permits from second quarter 2003 is that development, both residential and commercial, is beginning to head to other counties, including Fayette and DeSoto.

There is a lot of activity in Olive Branch, said Chris Woods, president of Chris Woods Construction Co., a firm with commercial projects in both DeSoto and Shelby counties.

Taking on projects in DeSoto County is just one way Chris Woods Construction has kept business steady in an unstable commercial and industrial market.

We got into the church market, which was very good, and were doing large cotton warehouses, so thats really helped us, Woods said. Weve been very fortunate in that weve never slowed down. There is a segment of the construction industry that really never slowed down over the last two or three years.

Summer pickup. According to The Daily News database, building permits filed in Shelby County rose from 774 in January to 1,243 in March before declining to 1,122 in April and 953 in May. June saw a slight increase to 1,008.

Woods expects building activity to remain healthy over the next few months, if for no other reason than the potential for dry weather.

This time of year is when we try to make hay while the sun shines, he said. Our construction is a lot greater than in the winter months because we have more work days available.

Weve been busy. Weve seen a big increase in inquiries and estimating, and theyve turned into several jobs.