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VOL. 126 | NO. 243 | Wednesday, December 14, 2011

Permit Increase Implies ‘False Hope’

By Sarah Baker

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Local homebuilders filed 75 percent more new home permits during November compared to the same month last year, but there are several underlying factors in those artificially high year-over-year totals.

Shelby County homebuilders filed 77 permits last month, an impressive boost from 44 in November 2010, according to real estate information company Chandler Reports, www.chandlerreports.com.

The average November permit measured 2,893 square feet and $212,630, down from 3,086 square feet and $219,581 in November 2010.

“To say there’s 75 percent increase in permits does imply a false hope,” said Charles Morgan of Vintage Homes LLC. “That means either builders have started a bunch of spec homes or pre-sales have really taken off.”

For Shelby County, the latter seems to be true.

Skewing November’s totals was Alpena, Mich.-based Devere Construction Co. Inc., which filed 17 permits for non-market-rate homes averaging 1,703 square feet and $118,018, all in the Windsor View subdivision in Westwood’s 38109 ZIP code.

The vacant land is not tax-exempt, according to the Memphis Light, Gas and Water Division plat, but it is being funded by the city of Memphis, which would indicate some sort of public housing project, confirmed Don Glays, executive director of the Memphis Area Home Builders Association.

Devere filed 67 new home permits in October, also in Windsor View.

Devere, along with Regency Homebuilders LLC, led the county in November with the most permits.

Regency filed 17 permits for market-rate homes averaging 3,070 square feet and $228,351. Next came Morgan, who filed 10 averaging 2,684 square feet and $186,015.

Other notable builders include Karen Garner of Magnolia Homes (eight; 3,638; $277,325) and Grant Homes (five; 2,735; $171,590).

Morgan said it’s difficult for builders to compete in a market plagued by foreclosures.

“A bank can basically wipe a person out and sell it for pennies on the dollar,” Morgan said. “Then we’ve got to come in and buy it full price. I’m just amazed that any of us (homebuilders) are still standing.”

Devere’s Windsor View was the subdivision with the most activity last month, with 17. It was followed by Vintage Homes’ Gerland Creek subdivision in Southeast Shelby County’s 38125 ZIP code (eight; 2,648; $183,489) and Grant Homes' Kensington subdivision in Arlington’s 38002 ZIP code (six; 2,751; $175,679).

Besides Westwood’s 38109, the highest-performing ZIP codes in November were Collierville’s 38017 (19; 3,492; $280,644) and Arlington’s 38002 (12; 3,028; $193,213).

Although permits are up year-over-year, homebuilder sales are down as compared to the two previous years. Builders sold just 50 homes last month, a 14 percent drop off from 64 in November 2010, and a 50 percent decrease from 100 sold during November 2009.

Jimmy Moore, 2012 president of MAHBA, said the slowdown in builder sales is directly correlated to pricing.

“If people were able to sell the house that they’re in at a profit, I think we would probably have close to that many people who would be ready to buy a new home,” Moore said.

Moore remembers a time when advertising wasn’t necessary to be successful, when simply building a model home and staffing it with agents was the norm to stimulate activity. These days, he advertises through MAHBA’s website, his own personal site and in print publications for his business, which has shifted to remodels during the housing slump.

“Back then, for years, people would get out and drive around, they would find the new subdivisions, and as a builder, we didn’t have to advertise that much of where we were,” Moore said. “Now you just have to try to make your presence known and advertise. It doesn’t just come to you anymore.”

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

PROPERTY SALES 124 481 17,865
MORTGAGES 127 530 20,565
BUILDING PERMITS 195 891 36,836
BANKRUPTCIES 52 262 11,426