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VOL. 126 | NO. 71 | Tuesday, April 12, 2011

Q1 Permits Slip 29 Percent

By Sarah Baker

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For the first time in recent history, homebuilder sales didn’t exceed starts in the first quarter, a sign that demand has caught up with supply.

But both numbers – sales and starts – decreased from the same period a year ago, halting the notion that housing recovery is imminent.

Shelby County homebuilders sold 145 homes and filed 145 new home permits during the first quarter of 2011 (Jan. 1 to March 31), according to data compiled last week from real estate information company Chandler Reports, www.chandlerreports.com.

Last quarter’s sales declined 37 percent from 230 in Q1 2010 and 30.3 percent from 208 in Q1 2009.

Permit totals are also down, 29.3 percent from 205 permits the same quarter last year. New homes in Q1 averaged 3,008 square feet and $209,305 in value.

Charles Morgan, owner of Vintage Homes LLC, said the first quarter numbers were a “little bit troubling.”

“You should have a lot more sales than you do starts when you’re looking at the end of the first quarter because you’re really building your backlog for the year as a home builder, and if your sales and starts are matching each other, that showing that there’s a slow demand out there,” Morgan said.

That’s because there’s no stimulus or assistance in place to motivate buyers such as the homebuyers tax credit that was in effect last year, Morgan said.

“It’s kind of like withdrawal symptoms this year,” he said. “Last year, you got that $8,000 back just for buying a home. It really was giving us that straight line shot of adrenaline up the vein and this year, there’s absolutely nothing pushing it.”

About a year and a half ago, Vintage Homes created a program where homebuyers sign a credit repair plan and an Intent to Purchase agreement and also are enrolled in the company’s Home Buyers Connection.

“When a person doesn’t have that 640 (credit score) magic number or they’ve got some collections they need to get worked out, we’ll help them out and make some adjustments,” Morgan said. “It’s not because the people don’t want the homes, it’s because there are so many more hurdles you’ve got to jump through to get a loan now.”

The number of permits filed last quarter saw rise and fall within the three-month period. January’s total of 24 was followed by February’s 70, which dropped to 51 in March. While March and April are typically associated with a builder’s busiest time, builders attribute the season’s unpredictable weather and catastrophic world events.

“These days, who knows what normal (numbers) are,” said Sean Carlson, principal with Regency Homes LLC. “Why are you going to close a loan to try to start a house in January when you can’t get it started just because of the weather in December and January wasn’t the friendliest?”

Regency Homes filed the most permits in Q1 by a landslide with 34 averaging 2,693 square feet and $194,623. It was followed by Grant Homes, which filed 19 averaging 3,110 and $189,181, and Morgan, which filed 17 averaging 2,693 and $186,231, according to last week’s Chandler Reports data.

To date, Regency has closed on 120 houses. But what Carlson finds even more exciting is the fact that more and more builders are bidding on lots. Although that drives up the cost, it also signals renewed interest in once-stalled developments.

“Despite what you’re hearing nationally, we’re having price increases in subdivisions,” he said. “I think it’s all signs to the positive that things are getting better.”

Gerland Creek’s subdivision in the Southeast Shelby County’s 38125 ZIP code pulled the most permits during the quarter with 13 averaging 2,731 and $189,237. It was trailed by Trinity Park in Oakhaven/Parkway Village’s 38118 with 10 averaging 1,349 and $90,823.

The good news is foreclosures are down about 30 percent year over year, one indicator the market is heading in the right direction, Morgan said. But for builders, the fundamentals are key now more so than ever.

“It’s kind of like Vince Lombardi, when he held that football out and said, ‘Boys, this is a football,’” Morgan said. “It sounded so condescending for him to do that, but to start at that level is what builders are having to do now. Making sales is not the hardest part any more, getting people qualified is the hardest part now, as far as the entry levels go.”

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

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