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VOL. 128 | NO. 243 | Friday, December 13, 2013

Slow Job Growth Yields Dip in New-Home Permits

By Amos Maki

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Shelby County homebuilding activity continued to cool off in November, with builders filing fewer permits and selling fewer new homes compared to the same month a year ago.

A crew works on cornices and windows on a home at Woodlands of Cordova by Regency Homebuilders. Regency was the top builder in November.

(Daily News File/Lance Murphey)

Homebuilders pulled 58 permits in November, down 23.6 percent from 76 permits filed in November 2012, according to real estate information company Chandler Reports, www.chandlerreports.com.

However, the 58 permits filed in November was up slightly from the 54 permits filed in October. The average permit in November measured 3,159 square feet and averaged $247,254, compared to 3,172 square feet and $254,792 in November 2012.

Year to date, builders have filed 805 permits, which is down 7 percent from 866 for the same 11-month period in 2012.

Builders and economists said tepid job growth in the Memphis area – which is saddled with a 9.4 percent unemployment rate – as a result of the slow recovery from the recession was to blame for the slow pace of homebuilding activity.

“Builders’ confidence is improving about the future but we haven’t gotten to the point where guys are willing to stick their necks out to build in this economy, which is not where it should be,” said Don Caylor of Summerset Homes. “Homebuilding is based on the growth of the economy in the community and we’re just not seeing much of it.”

John Gnuschke, director of the Sparks Bureau of Business and Economic Research at the University of Memphis, said this week that while the homebuilding industry has improved since the dark days following the economic crash the market remains challenging.

“Things are getting better but we’ve got a long way to go,” Gnuschke said at a conference hosted by the Urban Land Institute Memphis. “It’s just a tough market.”

Homebuilders also didn’t sell as many homes in November as they did during the same month a year ago.

Builders sold 57 homes in November, down 24 percent from 75 homes sold in November 2012. However, the 57 homes sold in November was up 9.6 percent from the 52 homes sold in October.

The average sales price of homes sold by builders in November was $498,319, up 67.8 percent from $297,005 last November. Excluding one $13.1 million sale from Barry Duke, the average home price in November was $272,498, which was down 8.25 percent from $297,005 in the same month last year.

Builders have sold more homes through this November than they did over the same 11-month period last year. Builders have sold 775 homes through November, up 5.5 percent over the same period last year.

Regency Homebuilders LLC was the top builder as tracked by permits in November, with 22 averaging 2,896 square feet and $225,271. Regency was followed by Karen Garner of Magnolia Homes (five; 5,246; $439,083) and Grant Homes (four; 2,834; $189,385).

Regency Homebuilders also led the way in sales, with eight averaging $292,304. Grant Homes sold six homes averaging $252,348, and Charles Morgan of Vintage Homes sold three homes averaging $153,810.

The Walker Farms subdivision in Arlington’s 38002 ZIP code saw the most activity in November, with six permits averaging 2,897 square feet and $220,873. The Woodgrove subdivision in Collierville’s 38017 ZIP code also saw six permits, with those averaging 3,120 square feet and $270,833. The Rivercrest subdivision in the 38135 ZIP code recorded four permits averaging 2,834 square feet and $189,385.

The 38002 ZIP code led the way in permits, with 15 averaging 3,328 square feet and $245,850. Collierville’s 38017 had nine permits, averaging 3,633 square feet and $328,333. The 38135 ZIP code also had nine permits, with those averaging 2,632 square feet and $161,949.

Looking ahead, Gnuschke painted a picture of a homebuilding market that could face weak demand as the Memphis area struggles to pull itself into a more robust economic recovery.

“We’re not going to lead the nation out of the recession,” Gnuschke said. “We’re going to follow the nation out of the recession. I don’t see anything out there that is going to cause dramatic growth.”

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

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