VOL. 124 | NO. 231 | Tuesday, November 24, 2009
Housing Slump Makes Self Known In October
By Eric Smith
TOUCHSTONE: Franklin Farms in the Cordova North ZIP code 38016 led Shelby County with eight building permits last month. Overall, October saw a decline from the previous month, according to the latest numbers from www.chandlerreports.com. -- PHOTO COURTESY OF REGENCY HOMEBUILDERS LLC
Shelby County homebuilders continue to feel the brunt of the housing slowdown, as October saw builder sales plummet and housing starts reach a seven-month low.
Homebuilders filed just 38 permits for new homes last month, the worst period for starts since the March total of 30. That marked a 9.5 percent decline from 42 starts in October 2008 and a 33.3 percent decline from 57 starts in September, according to the latest from real estate information company Chandler Reports, www.chandlerreports.com.
On the sales front, builders sold just 82 homes in October, down 4.7 percent from 86 in October 2008 and down 43.1 percent from 144 in September.
Despite the downward trends, good tidings arrived for builders with the news that the federal $8,000 first-time homebuyers tax credit program is extended until April 30. Congress also expanded on that by raising income limits and introducing a $6,500 tax credit for people who have been in their homes consecutively for five of the previous eight years.
While the bill may not directly affect homebuilders, Stephen Hodgkins, president of the Memphis Area Home Builders Association and owner of Oaktree Homes LLC, said the tax credit’s extension was imperative for the industry to dig itself out of the current hole because it improves all real estate.
“I don’t think there’s any question it’s a positive thing,” Hodgkins said. “What we really have to look at now is beyond new home starts and new home sales – it’s the overall market.
“New home sales are not going to turn around until the foreclosures are gone and the existing homes pick back up. I think the first-time homebuyers tax credit helps tremendously.”
Beyond the numbers
Countywide, new homes averaged 3,133 square feet and $207,679 in October. The top builder last month in terms of number of permits was Charles Morgan of Vintage Homes LLC, which notched 10 permits averaging 2,819 square feet and $183,309.
Vintage Homes was followed by Regency Homebuilders LLC, which finished with six permits averaging 2,439 square feet and $160,657. Eight builders had two permits apiece.
The top ZIP code for housing starts last month was Cordova North’s 38016 with 14 permits averaging 2,043 square feet and $145,494. It was followed by Arlington/Lakeland’s 38002 with 12 permits averaging 3,469 square feet and $214,150, and Bartlett/Ellendale’s 38135 with five permits averaging $168,250 (square footage not available).
The top subdivision for housing starts in October was Franklin Farms in Cordova North’s 38016 ZIP with eight permits averaging 2,216 square feet and $153,487. It was followed by Rivercrest in Bartlett/Ellendale’s 38135 with five permits averaging $168,250 (square footage not available).
Hodgkins said he hopes to see more starts in the spring, even foreseeing a potential “dramatic” upswing in permits because so few homes have been built this year. But, at the same time, he understands “it’s not going to be anywhere like it was in the past,” he said.
Still, as values level off and therefore have nowhere to go but up, the housing market could be poised for a rebound.
“People understand that the market has bottomed out and is starting to improve,” Hodgkins said. “Psychologically, if their investment is going to be more expensive next month, that creates a sense of urgency to buy this month.”
Never lose that agility
Morgan, who routinely holds the top spot for Shelby County builders, has steered his company into one of the most prolific in town. Part of the reason for his success is an ability to adapt to the changing marketplace.
“We continue to say that we’re never going to die,” Morgan said. “We’re not burying our head in the sand. We keep trying and trying new stuff, and it seems to me like the players that are still out there are trying are getting some sales, and I know we are.”
Morgan said the lower end of the price range is where the company is finding the most success. That tack has been especially successful in light of the first-time homebuyers tax credit.
“It is real good at our price point,” Morgan said. “At our price point, you take a $100,000 home – we do have $100,000 homes; as a matter of fact we have $85,000 homes now – that represents 8 percent of the sales price. That’s huge.”
Morgan is now able to continue marketing the tax credit, which the company refers to as a “stimulus check” to avoid confusion about the program. Being able to promote the tax credit and offer it to buyers is important to Vintage Homes because 60 percent of its market is first-time buyers – and most of them qualify for the $8,000 check.
“It’s almost every sale in that 60 percent group that we market to,” Morgan said.
Morgan not only was the top builder last month in terms of starts, be he also led the county in sales activity with nine sales averaging $180,074 and totaling $1.6 million. He was followed by Regency with eight sales averaging $173,881 and totaling $1.4 million, and Jeff Sweeney with four sales averaging $271,750 and totaling $1.1 million.