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VOL. 123 | NO. 224 | Friday, November 14, 2008

Latest Numbers Paint Dreary Homebuilding Picture

By Eric Smith

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TOUGH SELL: Building activity remains strong in subdivisions like LaGrange Pines, off Raleigh-LaGrange Road south of Macon Road, but sales and permits continued their freefall in October. -- PHOTO BY ERIC SMITH

The homebuilding industry suffered another period of slower sales and fewer starts in October, signaling a continued crisis in the housing market.

Shelby County saw just 61 home sales by builders last month, a staggering 61.6 percent decline from the 159 homes sold in October 2007, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com. Last month’s total even marked a 53.1 percent dropoff from the 130 homes builders sold in September.

The average sales price for homes sold by builders in October was $238,072, a 13.1 percent decline from the October 2007 average of $273,936 and a 4 percent decline from the September average of $248,080.

The total sales volume in terms of dollar amount was just $14.5 million in October, a 66.7 percent dropoff from $43.6 million in October 2007 and a 55 percent dropoff from $32.3 million in September.

Greg Bridgers, principal of Oakland-based Southern Serenity Homes LLC, said the softness in the market is bound to improve given that builders have been focused on reducing inventory – albeit to varying degrees of success.

“This thing is fixing to turn from what has been a buyer’s market to a seller’s market because a lot of the builders’ inventory that has been sold has not been replaced,” he said. “When it turns, it’s going to turn quickly.”

On a dime

Year to date, the numbers are equally devastating. Through October, this year has seen just 1,202 home sales in Shelby County by builders, down 40.7 percent from 2,027 home sales in the same period of 2007 and down 62.1 percent from 3,173 home sales in the same period of 2006.

This year’s average sales price of $266,128 is 9 percent shy of 2007’s average of $290,129 but actually 0.3 percent ahead of 2006’s average of $265,401.

The total sales volume for 2008 is a mere $319.9 million, marking a 45.6 percent decline from $588.1 million in 2007 and a 62 percent decline from $842.1 million in 2006.

Not all companies are performing poorly, of course. Southern Serenity Homes was Shelby County’s top seller in October in terms of dollar amount with two sales totaling $989,335.

It was followed by Mark Murphy (one, $844,360); Karen Garner of Magnolia Homes (one, $800,000); Compass Pointe (five, $788,450); and Barry Watson Homes LLC (five, $778,119).

Year to date, Shelby County’s top builder in terms of units sold has been Compass Pointe, with 84 sales averaging $161,285 and totaling $13.5 million.

That company was followed by Barry Watson Homes LLC (82, $178,084, $14.6 million); Phil Chamberlain of Chamberlain & McCreery (57, $227,866, $13 million); Lenox Homes (53, $164,529, $8.7 million); and Charles Morgan of Vintage Homes LLC (45, $199,629, $9 million).

Watching and waiting

But the demise wasn’t just on the sales side. Builders filed just 41 permits in October, a 76.8 percent drop from the 177 they filed in October 2007. Worse, last month’s number marks a 93.3 percent drop from the 614 they filed in October 2006, further proof that builders are scaling back starts to focus on sales.

“We’re just selling. We’re not starting anymore,” said Connie Neal of Affinity Homes LLC. “We started some and we’re finishing those up, but we’re not starting anything. That would be silly in this day and age.”

Doug Collins, president of the Memphis Area Home Builders Association (MAHBA) and owner of the real estate company Prudential Collins-Maury Inc. and building company Sovereign Homes LLC, told The Daily News recently the decline in permits is a simple result of supply and demand.

“Builders don’t create markets; they respond to markets,” Collins said. “There’s no reason to go start a house because the demand isn’t there.

“Builders are going to continue to do that,” he added. “We will respond after the market turns. You won’t see us go out and pull building permits until the market says we’re ready to get active again. And I don’t see that happening before the first of the year.”

Hope ahead

The first of the year always brings new hope for builders, who want to get homes off the books by Dec. 31 – or at least by the early spring.

“I think we’ll see it slowly pick back up,” Bridgers said. “I think March and April we’ll see a pretty good little burst of people getting out and buying houses. And I think June and July will be a good little burst.”

Neal said companies like hers – and others that haven’t laid off employees or shuttered their doors – are able to withstand the downturn because they offer diversified locations and price points, build primarily in their own subdivisions and, most important, were prepared for any kind of climate.

“We’ve been in business for 25 years. We’ve weathered them (bad markets), and we’ve weathered them well,” Neal said. “And we have saved for the rainy days. And that’s the difference.”

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

PROPERTY SALES 124 481 17,865
MORTGAGES 127 530 20,565
BANKRUPTCIES 51 261 11,425