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VOL. 125 | NO. 95 | Monday, May 17, 2010

Rebounding Activity

Building permits show signs of recovery

By Eric Smith

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Shelby County homebuilders last month reached triple digits with new home permits for the first time in nearly two years.

But instead of congratulating themselves for the increase in activity, companies are focused now on maintaining momentum and further pulling themselves out of the biggest homebuilding slump in recent memory.

Builders filed 105 new home permits in April, the highest mark since 152 in August 2008. The April total was 156 percent better than 41 permits in April 2009 and 13 percent better than 93 in March, according to real estate information company Chandler Reports, www.chandlerreports.com.

Permits last month averaged 2,522 square feet and $180,806; the April 2009 averages were 2,583 square feet and $175,042, while the March averages were 2,851 square feet and $197,183.

Tommy Byrnes, president of the Memphis Area Home Builders Association, attributed the monthly increase to a basic model of supply and demand: As housing inventory is eliminated, the need for builders to replenish that stock increases.

“It’s nothing but positive – we’ve more than doubled our permits from last year at this time,” said Byrnes, vice president of Byrnes/Ostner Investments. “I think we’re having a recovery that’s steady but not fast, more of a U-shaped graph. It’s starting to show confidence.”

The confidence remains high in certain submarkets that once again led the county in permit activity.

Cordova North’s 38016 ZIP code was the top area for permits with 35 starts averaging 2,120 square feet and $153,627.

It was followed by Arlington/Lakeland’s 38002 (22, 3,122, $184,331); Cordova South’s 38018 (15, 2,358, $161,157); and Southeast Shelby County’s 38125 (13, 3,441, $227,549).

As for individual builders, Regency Homebuilders LLC was first with 19 permits averaging 2,285 square feet and $144,067.

Regency was followed by Charles Morgan (12, 2,793, $193,555); Kevin Hyneman (11, 1,771, $142,455); and Phil Chamberlain (8, 2,281, $127,125).

Sean Carlson, a principal at Regency, said the secret to his company’s success has been adapting to the market demands, whether that means finding a new place or a new way to build.

“It’s trying to find some different subdivisions, keeping things fresh with some new floor plans, try to keep that excitement going,” Carlson said.

A positive trend from the recent data was the number of homebuilders, 27, that started a home last month, especially on the heels of months when only a handful of companies were building anything.

"It's great to drive through a subdivision again and see a lot of activity by multiple builders."

– Sean Carlson, Regency Homebuilders principal

Morgan, owner of Vintage Homes LLC, said it is encouraging to hear that so many builders were active during April, the first full month of the busy spring season.

“It’s good to know that everybody had a good month because until everybody starts doing better, it’s going to be difficult for the whole real estate industry to come back and be of a real service to the community like it always has been,” Morgan said.

Another positive trend from the April data was the high number of subdivisions that saw at least one home start last month. Shelby County had 39 communities with at least some activity.

Franklin Farms and Sutton Place East in Cordova each had 10 permits. Franklin Farms’ homes averaged 2,085 square feet and $148,671, while Sutton Place East’s homes averaged 2,222 square feet (average value was not available).

Other notable subdivisions were Rialto Square (6, 1,903, $135,333) and Gerland Creek (6, 3,071, $185,915).

With the highest building activity in almost two years, builders touted the conditions that created the improvement not only during April but also during March, which saw 93 permits filed.

They cited a boost from the homebuyers tax credit (which expired April 30), the warmer weather, depleted inventory and a rise in consumer confidence.

That said, the industry has a long way to go before it returns to even a fraction of its heyday, when the county churned out thousands of new homes a year.

So even the busiest builders are keenly aware of the need to sustain whatever momentum has been created.

“I don’t think anybody’s breathing easy,” Carlson said. “I think everybody sees a lot of positive signs. ... It’s great to drive through a subdivision again and see a lot of activity by multiple builders. But there’s still a long road to go. You just have to keep pushing.”

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

PROPERTY SALES 62 288 2,619
MORTGAGES 52 197 1,783